A recent case reminds landlords that they cannot ignore Section 19(1) of the Landlord & Tenant Act 1985 which provides that any costs forming part of a service charge charged to residential tenants are only payable to the extent that they have been “reasonably incurred”.

In Cos Services Limited –v- Nicholson & Willans [2017] the landlord put in place a block insurance policy, covering the whole of its property portfolio. The premium was then divided between the various properties (and then by the number of apartments in each property).

When the level of the premium was challenged by one of the tenants the Upper Tribunal held that the burden was on the landlord to satisfy it that the costs had been “reasonably incurred” and in doing so adopted a two stage process which considered:-

i. Whether the landlord had acted rationally in its decision making process; and

ii. Whether the sum being charged was, in all of the circumstances, a reasonable charge.

The landlord should be able to explain the process by which a particular policy and premium had been selected. In this case the premium was £12,000, but the tenant had produced evidence of comparable policies with an annual cost of between £2,000 and £3,000. On the evidence submitted it was a “mystery” to the Tribunal why the landlord’s premium remained so high.

Of course a landlord need not choose the cheapest cover but it must be able to give evidence of the steps taken to consider the market if challenged. It simply can no longer automatically renew an existing policy.

If you have any queries in relation to leasehold matters, please do not hesitate to contact Debbie Whiteley on or at dfw@nexussolicitors.co.uk.