An Upper Tribunal (Lands Chamber) case provides a useful reminder for residential landlords (and managing agents) that they hold service charges on trust and must give effect to the terms of the lease.
In this case, the leases of a residential block provided that repair costs "shall first be met out of the specially designated trust fund to the extent of the amount standing to the credit of such trust fund". However, the landlord failed to establish a specially designated trust fund for service charge monies.
The tribunal held that, as the landlord had failed to set up the trust fund, the residential landlord was required to use the service charge reserve fund to defray repair costs.
For more information, please contact a member of our Dispute Resolution team.