What are administration charges?
Administration charges are defined in Paragraph 1 of Part 1 of Schedule 11 of the Commonhold and Leasehold Reform Act 2002 as:
"an amount payable by a tenant of a dwelling as part of or in addition to rent which is payable, directly or indirectly –
(a) for or in connection with the grant of approvals under his lease, or applications for such approvals;
(b) for or in connection with the provision of information or documents by or on behalf of the landlord or a person who is party to his lease otherwise than as landlord or tenant;
(c) in respect of a failure by the tenant to make a payment by the due date to the landlord or a person who is party to his lease otherwise than as landlord or tenant; or
(d) in connection with a breach (or alleged breach) of a covenant or condition in his lease."
An example of a grant of approval or application is where landlord’s consent is granted in relation to a sale, where such a requirement is stated in the lease.
Importance of reasonableness
Administration charges must be reasonable.
Where the administration charge is variable and the tenant believes the amount to be unreasonable, the tenant can dispute an administration charge by applying to the Leasehold Valuation Tribunal in the first instance. If this charge is either fixed in the lease or the lease includes a formula to calculate the administration charge, and the tenant believes the administration charge to be unreasonable, then the tenant can apply to the Leasehold Valuation Tribunal to vary the lease.
A tenant is not able to dispute an administration charge where:
- a matter has been agreed to or admitted by the tenant;
- a matter has been, or is to be, referred to arbitration or has been determined by arbitration and the tenant agreed to go to arbitration after the disagreement about the administration charge arose; or
- a matter has been decided by a court.
What should accompany an administration charge demand?
When issuing a demand for administration charges, a tenant must be provided with a summary that briefly sets out the tenant’s rights and obligations in relation to administration charges. Unless this summary is sent to a tenant with a demand, the tenant may withhold an administration charge.
There is a prescribed form of demand that must be used, see prescribed content for summary of tenants’ rights and obligations- administration charges. It “must be legible in a typewritten or printed form of at least 10 point” (Regulation 2 of The Administration Charges (Summary of Rights and Obligations) (Wales) Regulations 2007).A demand for an administration charge must also include the landlord’s address in accordance with section 47 of the Landlord and Tenant Act 1987.
A tenant with an Assured Shorthold Tenancy in the private rented sector will be regulated by the Renting Homes (Fees etc.) (Wales) Act 2019 and certain payments to the landlord will be prohibited.