LTA 1985 s.18-22: service charge definition, reasonableness, major works consultation, summary and inspection of accounts
Reserve fund contributions are service charges subject to LTA 1985 reasonableness, major works consultation, and summary and inspection rights.
- LTA 1985 s.18: reserve fund contributions are service charges � must be demanded by written demand with landlord's name and address (s.47-48)
- LTA 1985 s.19: reasonableness � only payable if reasonably incurred and of a reasonable standard; FTT can assess at any time (before or after payment)
- LTA 1985 s.20: major works consultation � �250/tenant threshold triggers Stage 1 (notice of intention; 30 days); Stage 2 (notice of estimates; at least 2 quotes; 30 days); failure limits recovery to �250/tenant unless FTT grants dispensation (s.20ZA)
- LTA 1985 s.21: summary of relevant costs � tenant may request; landlord must provide within 1 month (or 6 months after year end); certified accounts required if expenditure exceeds �75,000
- LTA 1985 s.22: inspection of accounts and receipts � landlord must allow inspection within 21 days; refusal is a criminal offence (maximum fine �2,500)
LTA 1987 s.42 trust status, FTT challenge (s.27A), RICS 2019 Statement and Reserve Fund Adequacy Reports
The statutory trust under LTA 1987 s.42 protects leaseholders' reserve fund contributions from the managing agent's insolvency � but only if the funds are properly held in a designated separate trust account.
- LTA 1987 s.42 trust: reserve fund monies held on statutory trust for contributing leaseholders; designated separate bank trust account required; interest belongs to the trust; protected in managing agent insolvency (only if properly segregated)
- FTT challenge (LTA 1985 s.27A): apply before or after paying; FTT determines whether charge is payable and whether amount is reasonable; each party bears own costs; s.20C LTA 1985 can exclude landlord's litigation costs from future service charges
- RICS Professional Statement (November 2019): mandatory for RICS members � separate trust account; RFAR every 5 years (25-year planned maintenance schedule); accountant certification if total service charge income exceeds �150,000/year
- Reserve Fund Adequacy Report (RFAR): 25-year planned maintenance schedule; estimated costs in current prices uplifted for inflation; recommended annual contribution per unit; cost approximately �1,500-�5,000 for a medium residential block; lenders may require RFAR evidence for BTL mortgage on a leasehold flat
- Special levies: if reserve fund is inadequate, major works demand served at short notice; leaseholders can challenge at FTT; forfeiture for non-payment requires FTT determination that amount is payable (s.168 CLRA 2002) and s.81 Housing Act 1996 process