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TPI Level 3 Associate Exam in Leasehold Management study materials
TPI Level 3 Associate Exam in Leasehold Management study resources

TPI Level 3 Associate Exam in Leasehold Management practice questions

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Question 1Leasehold law, leases and legal framework

Which feature is essential if an occupier is to hold under a lease rather than a licence?

  1. Payment of a regular sum for the right to occupy
  2. Occupation shared with the owner of the property
  3. A written agreement signed by both parties
  4. Exclusive possession of the premises for a defined term Correct answer.

Explanation

A lease arises where the occupier is granted exclusive possession of defined premises for a fixed or periodic term; a licence is merely permission to be on the land and gives no interest in it. Rent, writing and shared occupation are not decisive indicators of a lease.

Question 2Leasehold law, leases and legal framework

Under section 11 of the Landlord and Tenant Act 1985, which matter falls within the landlord's implied repairing covenant in a lease of a dwelling?

  1. The tenant's own furniture and appliances
  2. Cleaning of the tenant's windows and curtains
  3. The structure and exterior of the dwelling Correct answer.
  4. Internal decoration of the flat and floor coverings

Explanation

Section 11 implies a covenant by the landlord to keep in repair the structure and exterior of the dwelling and the installations for water, gas, electricity, sanitation, heating and hot water. Decoration of the interior and the tenant's belongings fall outside that covenant.

Question 3Leasehold law, leases and legal framework

On a statutory lease extension of a flat, how many years are added to the existing unexpired term?

  1. 50 years
  2. 999 years
  3. 90 years Correct answer.
  4. 125 years

Explanation

A qualifying flat leaseholder is entitled to a new lease comprising the unexpired residue of the existing term plus 90 years, at a peppercorn ground rent. The 90 years is fixed by statute and is not negotiated.

Question 4Leasehold law, leases and legal framework

For qualifying works, consultation under section 20 of the Landlord and Tenant Act 1985 is required where a tenant's contribution to the cost would exceed which amount?

  1. £1,000
  2. £250 Correct answer.
  3. £500
  4. £100

Explanation

Section 20 requires the landlord to consult contributing tenants before carrying out qualifying works where any tenant's contribution would exceed £250. Failure to consult properly limits the amount recoverable from each tenant to that threshold.

Question 5Leasehold law, leases and legal framework

Under the Commonhold and Leasehold Reform Act 2002, what must qualifying tenants establish in order to acquire the right to manage?

  1. That the statutory qualifying conditions are met Correct answer.
  2. That the current service charges are unreasonable
  3. That the landlord has breached a lease covenant
  4. That the landlord has consented in writing

Explanation

The right to manage is a no-fault right: qualifying tenants who satisfy the statutory conditions can take over management without proving any default by the landlord. This distinguishes it from applications to appoint a manager, where fault-based grounds must be shown.

Question 6Leasehold law, leases and legal framework

What must accompany a demand for service charges under section 21 of the Landlord and Tenant Act 1985?

  1. A copy of the current buildings insurance policy
  2. A summary of tenants' rights and obligations in relation to service charges Correct answer.
  3. A certificate from an independent accountant
  4. A certified copy of the lease documents

Explanation

Section 21 requires demands for service charges to be accompanied by a written summary of tenants' rights and obligations relating to service charges. Where the requirement is not met, the amount demanded is treated as not due until it is complied with.

Question 7Leasehold law, leases and legal framework

Under the Leasehold Reform (Ground Rent) Act 2022, what ground rent may be charged under a new qualifying lease of a dwelling granted after 30 June 2022?

  1. A peppercorn, so no financial rent is payable Correct answer.
  2. £1,000 a year in Greater London
  3. £250 a year outside Greater London
  4. One tenth of one per cent of the property value

Explanation

The 2022 Act applies to new leases of dwellings granted on or after 30 June 2022 and permits only a peppercorn ground rent, which means no financial ground rent can be charged. Charging more is an offence enforced by trading standards.

Question 8Leasehold law, leases and legal framework

Before forfeiting a lease for breach of a covenant other than non-payment of rent, what must the landlord serve under section 146 of the Law of Property Act 1925?

  1. A notice of assignment served on the mortgagee
  2. A demand for the arrears of rent and costs
  3. A notice specifying the breach and requiring remedy Correct answer.
  4. A notice to quit served on the leaseholder

Explanation

Section 146 requires a notice specifying the breach, requiring it to be remedied if capable of remedy, and requiring compensation for the breach. Forfeiture proceedings cannot normally be started until a reasonable time after service.

Question 9Leasehold law, leases and legal framework

A landlord incurred costs on external decorations in March 2022 and first demanded the service charge contribution in October 2024. How does section 20B of the Landlord and Tenant Act 1985 affect recovery?

  1. The costs are not recoverable unless the tenant was notified in writing within 18 months that the costs had been incurred Correct answer.
  2. The costs remain recoverable because they were reasonably incurred
  3. The costs are recoverable only if the tenant agrees in writing to pay them
  4. The costs are recoverable because the lease permits retrospective demands

Explanation

Section 20B prevents recovery of costs incurred more than 18 months before a demand, unless within that 18-month period the tenant was given written notice that the costs had been incurred and that they would be liable to contribute. Reasonableness under section 19 does not cure a failure under section 20B.

Question 10Leasehold law, leases and legal framework

Section 19 of the Landlord and Tenant Act 1985 limits service charges to which costs?

  1. All costs actually incurred by the landlord, whatever their amount
  2. The level of costs approved by the managing agent
  3. Costs reasonably incurred and for services or works of a reasonable standard Correct answer.
  4. Costs limited to the amount shown in the previous year's budget

Explanation

Section 19 provides that service charges are payable only to the extent that costs have been reasonably incurred and that the works or services are of a reasonable standard. A leaseholder may challenge both the amount and the quality before the First-tier Tribunal.

Question 11Leasehold law, leases and legal framework

Under section 30A of the Landlord and Tenant Act 1985, what may a tenant who pays insurance rent require from the landlord, and within what period?

  1. A valuation report, within 28 days
  2. A certificate of insurance, within 3 months
  3. The full insurance policy, within 7 days
  4. A written summary of the insurance cover, within 21 days Correct answer.

Explanation

Section 30A entitles a tenant who is or may be liable to pay insurance rent to request a written summary of the insurance cover, which the landlord must supply within 21 days. The landlord must also notify the tenant of changes to the policy or insurer.

Question 12Leasehold law, leases and legal framework

A lease of a flat is granted for a term of 15 years. How must that lease normally be dealt with?

  1. Registered only if the tenant requests it
  2. Registered at HM Land Registry with its own title Correct answer.
  3. Protected by a caution against first registration
  4. Noted against the landlord's title rather than registered

Explanation

A lease granted for a term of more than seven years out of a registered estate must be registered with its own title under the Land Registration Act 2002. Failure to register means the legal lease does not take effect at law.

Question 13Leasehold law, leases and legal framework

On what basis may the First-tier Tribunal vary a lease under section 35 of the Landlord and Tenant Act 1987?

  1. Where the lease fails to make satisfactory provision for repair or maintenance Correct answer.
  2. Where the landlord and the leaseholders both agree to the change
  3. Where the lease has been in existence for more than 50 years
  4. Where the leaseholder considers the terms to be generally unfair

Explanation

Section 35 allows variation where the lease fails to make satisfactory provision for repair, maintenance, insurance, the provision of services or other management matters. The jurisdiction is directed at drafting defects that impair management, not at general unfairness.

Question 14Leasehold law, leases and legal framework

Which of the following is a ground on which the First-tier Tribunal may appoint a manager under section 24 of the Landlord and Tenant Act 1987?

  1. The landlord is in breach of an obligation relating to management Correct answer.
  2. The landlord's mortgage is in arrears
  3. The flat is currently vacant
  4. The leaseholder wishes to buy the freehold

Explanation

Section 24 sets out grounds including bad management, unreasonable service charges, breach of an obligation relating to management, and any other circumstance making appointment just and equitable. Vacancy, enfranchisement wishes and the landlord's mortgage position are not grounds.

Question 15Leasehold law, leases and legal framework

For the purposes of the Leasehold Reform, Housing and Urban Development Act 1993, a qualifying tenant of a flat holds under a long lease, meaning a lease originally granted for what term and rent?

  1. A rent exceeding £1,000 a year
  2. An unexpired term of more than 80 years
  3. Any term, provided it was granted after 1993
  4. A term exceeding 21 years at a low rent Correct answer.

Explanation

A long lease for these purposes is one originally granted for a term exceeding 21 years at a low rent, subject to the statutory exclusions. The 21-year and low-rent tests determine whether the tenant has enfranchisement and extension rights.

Question 16Leasehold law, leases and legal framework

When does marriage value form part of the premium payable for a statutory lease extension of a flat?

  1. Only where the landlord agrees to include it
  2. In every lease extension claim
  3. Only where the unexpired term is 80 years or less Correct answer.
  4. Whenever the lease has more than 90 years unexpired

Explanation

Marriage value reflects the additional value created by combining the freehold and leasehold interests, and it is payable only where the unexpired term is 80 years or less. Above that threshold, the premium is based on the diminution in the landlord's interest plus costs.

Question 17Leasehold law, leases and legal framework

A landlord carried out qualifying works without proper consultation. How can the landlord seek to recover the full cost from the leaseholders?

  1. Recover the shortfall from the reserve fund
  2. Apply to the First-tier Tribunal for dispensation from the consultation requirements Correct answer.
  3. Apply to the local authority for a waiver certificate
  4. Re-issue the demands with a covering letter of apology

Explanation

Section 20ZA allows the First-tier Tribunal to dispense with some or all of the consultation requirements where it is reasonable to do so. Without an order, the landlord's recoverable contribution is capped at £250 per tenant.

Question 18Leasehold law, leases and legal framework

Under Part 1 of the Landlord and Tenant Act 1987, what must a landlord do before disposing of its interest in premises containing flats?

  1. Serve a section 146 notice on each leaseholder
  2. Offer the interest to the qualifying tenants on the same terms Correct answer.
  3. Obtain the consent of the local housing authority
  4. Offer the interest to the local housing authority

Explanation

Part 1 gives qualifying tenants a right of first refusal, so the landlord must first offer the interest to them on the terms on which it proposes to dispose of it. Disposal without a proper offer exposes the landlord to enforcement by the tenants or the local authority.

Question 19Leasehold law, leases and legal framework

How does the Building Safety Act 2022 protect leaseholders in relevant buildings?

  1. By requiring leaseholders to fund remediation directly
  2. By transferring all building safety costs to the tenant
  3. By limiting recovery of building safety costs from qualifying leaseholders Correct answer.
  4. By abolishing service charges in buildings over 18 metres

Explanation

The Act restricts the extent to which landlords can recover the cost of remedying historic building safety defects from qualifying leaseholders through the service charge. It also imposes duties on accountable persons and requires key building information to be provided.

Question 20Leasehold law, leases and legal framework

What must a written notification contain to satisfy section 20B(2) of the Landlord and Tenant Act 1985?

  1. Written notice that costs have been incurred and the tenant must contribute Correct answer.
  2. A demand for payment within 28 days of the notice
  3. A copy of the audited service charge accounts for the year
  4. A statement of the works done and the contractor's invoice reference

Explanation

To preserve recovery beyond 18 months, the landlord must give the tenant written notice within that period stating that the relevant costs have been incurred and that the tenant is liable to contribute to them. A demand for payment is not necessary at that stage.

Question 21Leasehold law, leases and legal framework

A leaseholder asks to see the invoices behind the last service charge account. What does section 22 of the Landlord and Tenant Act 1985 require of the landlord?

  1. Supply a summary of the documents prepared by the auditor
  2. Provide copies free of charge within 7 days
  3. Provide copies only if the First-tier Tribunal orders it
  4. Allow inspection of the documents and supply copies on payment of reasonable copying costs Correct answer.

Explanation

Section 22 requires the landlord to allow the tenant to inspect the documents supporting the summary of costs, and to supply copies on payment of a reasonable fee, where the request is made within six months of the demand. The right supports the tenant's ability to test reasonableness.

Question 22Leasehold law, leases and legal framework

After a landlord forfeits a lease for breach of covenant, what step may a subtenant or a mortgagee of the lease take?

  1. Take no action, since only the original leaseholder may apply
  2. Require the landlord to grant a new lease on identical terms
  3. Apply to the court for relief from forfeiture Correct answer.
  4. Appeal against the forfeiture to the First-tier Tribunal

Explanation

Section 146(4) of the Law of Property Act 1925 allows a subtenant, mortgagee or other person with an interest in the lease to apply to the court for relief from forfeiture. The court may grant relief on such terms as it thinks fit.

Question 23Leasehold law, leases and legal framework

For a collective enfranchisement claim, which condition must a self-contained building normally satisfy?

  1. At least one-quarter of the flats must be held by qualifying tenants
  2. Every flat in the building must be let to a qualifying tenant
  3. At least two-thirds of the flats must be held by qualifying tenants Correct answer.
  4. The freeholder must have consented to the sale in writing

Explanation

A collective claim requires that at least two-thirds of the flats in the building are held by qualifying tenants, that the building contains at least two flats, and that the non-residential floor area does not exceed 25 per cent. Consent from the freeholder is not required.

Question 24Leasehold law, leases and legal framework

A landlord seeks forfeiture solely because of arrears of ground rent. Which statement is correct?

  1. A section 146 notice must be served in every case
  2. The leaseholder's lender must be asked for consent first
  3. Forfeiture is never available for rent arrears
  4. No section 146 notice is needed, but the proviso for re-entry must apply Correct answer.

Explanation

Section 146 expressly excludes non-payment of rent, so no notice under that section is required where forfeiture is sought for rent arrears alone. The landlord must still be able to rely on a proviso for re-entry in the lease and, for residential premises, will normally need court proceedings.

Question 25Leasehold law, leases and legal framework

For section 20 purposes, an agreement is a qualifying long-term agreement where it is made for a term of more than 12 months and a tenant's contribution exceeds which amount in any accounting period?

  1. £100 Correct answer.
  2. £250
  3. £1,000
  4. £500

Explanation

A qualifying long-term agreement is one entered into by or on behalf of the landlord for a term of more than 12 months where the contribution of any tenant exceeds £100 in any accounting period. Consultation is required before entering into such an agreement.

Question 26Leasehold law, leases and legal framework

Which feature generally distinguishes a lease from a licence?

  1. Exclusive possession for a term Correct answer.
  2. Permission revocable at any time
  3. Payment of a regular rent
  4. Sharing occupation with the owner

Explanation

A lease grants exclusive possession for a defined term, whereas a licence is a personal permission to occupy. Payment and sharing can be relevant facts but do not by themselves decide the legal character of the arrangement.

Question 27Leasehold law, leases and legal framework

A lease contains a covenant for quiet enjoyment. What does that covenant principally protect?

  1. Quiet enjoyment of the property Correct answer.
  2. Repairs paid by the landlord
  3. A fixed rent for the entire term
  4. Automatic consent to assignment

Explanation

The covenant for quiet enjoyment protects the tenant's lawful possession against interference by the landlord or those claiming under the landlord. It does not fix rent, grant automatic consent to assign, or shift repairing liability.

Question 28Leasehold law, leases and legal framework

Which term describes the landlord's right to re-enter and terminate a lease because of a breach of covenant?

  1. Forfeiture Correct answer.
  2. Surrender
  3. Subletting
  4. Assignment

Explanation

Forfeiture is the landlord's remedy of re-entry and termination for breach of covenant. Surrender is a voluntary ending by the tenant, while assignment and subletting transfer interests rather than terminate the lease.

Question 29Leasehold law, leases and legal framework

What is the name of the statutory right of a leasehold house owner to buy the freehold?

  1. Escheat of the freehold
  2. Enfranchisement Correct answer.
  3. Subrogation of rights
  4. Assignment of the lease

Explanation

Enfranchisement is the statutory right of a qualifying leasehold house owner to acquire the freehold. Escheat, assignment and subrogation concern different legal concepts and do not describe that right.

Question 30Leasehold law, leases and legal framework

A tenant makes a written request to the landlord for the landlord's name and address. Under section 1 of the Landlord and Tenant Act 1985, what must the landlord do?

  1. Refuse if the tenant is in arrears
  2. Provide it only if the tenant pays a fee
  3. Apply to the tribunal for permission
  4. Supply it within a reasonable time Correct answer.

Explanation

Section 1 requires the landlord, on written request, to supply the landlord's name and address within a reasonable time. The duty is not conditional on payment, rent arrears or tribunal permission.

Question 31Leasehold law, leases and legal framework

Under section 47 of the Landlord and Tenant Act 1987, what must a demand for service charges contain?

  1. The landlord's name and address Correct answer.
  2. The lease's registered title number
  3. The tenant's mortgage details
  4. The builder's warranty details

Explanation

Section 47 requires a demand for rent or service charges to contain the landlord's name and address. The other details are not required by that provision.

Question 32Leasehold law, leases and legal framework

A lease requires the tenant to obtain the landlord's consent before assigning. Under section 19(1) of the Landlord and Tenant Act 1927, which condition is implied?

  1. Consent must not be unreasonably withheld Correct answer.
  2. Consent is not required for a private sale
  3. Consent may be refused for any reason
  4. Consent must be given within seven days

Explanation

Section 19(1) implies a condition that consent to assignment must not be unreasonably withheld, subject to the tenant paying reasonable costs. It does not allow arbitrary refusal or impose a seven-day deadline.

Question 33Leasehold law, leases and legal framework

A developer grants a new lease of a flat for 125 years out of a registered freehold. What must happen for the lease to be a legal lease and fully protected?

  1. It must be stamped by the tenant's solicitor
  2. It must be registered at HM Land Registry Correct answer.
  3. It must be recorded in the landlord's accounts
  4. It must be approved by the local authority

Explanation

A lease for more than seven years out of registered land is a registrable disposition and must be registered at HM Land Registry to take effect as a legal lease. Local authority approval, solicitor stamping and accounting records do not provide that protection.

Question 34Leasehold law, leases and legal framework

Which statement about the right to manage under the Commonhold and Leasehold Reform Act 2002 is correct?

  1. Application only to houses
  2. Control of management without a premium Correct answer.
  3. Use only with the landlord's consent
  4. Purchase of the freehold by leaseholders

Explanation

The right to manage allows qualifying leaseholders to form an RTM company and take over management functions without paying a premium. It is not a freehold purchase, does not require the landlord's consent and is not limited to houses.

Question 35Leasehold law, leases and legal framework

Under section 11 of the Landlord and Tenant Act 1985, which obligation is implied into a qualifying short lease of a dwelling?

  1. Pay all service charges
  2. Insure the building
  3. Repair structure and exterior Correct answer.
  4. Rebuild the property after a fire

Explanation

Section 11 implies a landlord's obligation to keep the structure and exterior, and certain installations, in repair in qualifying short leases. It does not make the landlord liable to pay all service charges or insure the building under that section.

Question 36Leasehold law, leases and legal framework

Under Schedule 11 to the Commonhold and Leasehold Reform Act 2002, what is the position on administration charges?

  1. They can be imposed without any lease provision
  2. They must be reasonable and supported by a demand notice Correct answer.
  3. They are payable only if approved by the local authority
  4. They are automatically valid if mentioned in the lease

Explanation

Administration charges are payable only to the extent they are reasonable and are subject to statutory notice requirements. A lease provision alone does not make an unreasonable charge automatically valid, and local authority approval is not required.

Question 37Leasehold law, leases and legal framework

Under the Homes (Fitness for Human Habitation) Act 2018, what covenant is implied into certain residential leases?

  1. The landlord will keep it fit for habitation Correct answer.
  2. The tenant will pay rent quarterly in advance
  3. The tenant will redecorate every five years
  4. The landlord will provide a concierge service

Explanation

The 2018 Act implies a covenant that the dwelling will be fit for human habitation in specified residential leases. It does not impose decoration, concierge or rent payment terms.

Question 38Leasehold law, leases and legal framework

A landlord claims damages for breach of a repairing covenant at the end of a lease. Under section 18 of the Landlord and Tenant Act 1927, how are damages normally measured?

  1. Three times the annual rent
  2. Full cost of repairs, uncapped
  3. Fall in value of the reversion Correct answer.
  4. The tenant's original deposit

Explanation

Section 18 limits damages for breach of a repairing covenant to the diminution in the value of the landlord's reversion. The cost of repairs may be evidence, but it is not the statutory measure, and no multiple of rent applies.

Question 39Leasehold law, leases and legal framework

A leaseholder successfully challenges a service charge at the First-tier Tribunal. What order may the tribunal make under section 20C of the Landlord and Tenant Act 1985?

  1. All future service charges are cancelled
  2. Costs not recoverable via service charge Correct answer.
  3. Landlord must sell the freehold to the tenant
  4. Lease automatically extended by 90 years

Explanation

Section 20C allows the tribunal to order that the landlord's costs of the proceedings are not recoverable through the service charge. It does not extend the lease, force a freehold sale or cancel all future service charges.

Question 40Leasehold law, leases and legal framework

Before forfeiting a lease for non-payment of service charges, what must a landlord generally establish under section 167 of the Commonhold and Leasehold Reform Act 2002?

  1. Agreed, admitted or determined sum Correct answer.
  2. Five years of unpaid arrears
  3. Twenty-one years of registered title
  4. Planning permission for the building

Explanation

Section 167 restricts forfeiture for unpaid service charges unless the amount is agreed or admitted by the tenant, or has been determined by a court or tribunal. Long arrears, planning permission or registration age do not replace that requirement.

Question 41Service charges, budgeting and accounts

Under section 20 of the Landlord and Tenant Act 1985, consultation is required before qualifying works are carried out where a tenant's contribution would exceed which amount?

  1. £100
  2. £1,000
  3. £500
  4. £250 Correct answer.

Explanation

Section 20 requires landlords to consult leaseholders before carrying out qualifying works where any one tenant would contribute more than £250. The £100 figure applies to qualifying long-term agreements, not to one-off works.

Question 42Service charges, budgeting and accounts

For the purposes of section 20 of the Landlord and Tenant Act 1985, a qualifying long-term agreement is one entered into for a term of more than how long?

  1. Three years
  2. One year Correct answer.
  3. Five years
  4. Two years

Explanation

A qualifying long-term agreement is an agreement for a term of more than 12 months, other than an excluded agreement. Consultation is triggered where any tenant's annual contribution under it exceeds £100.

Question 43Service charges, budgeting and accounts

Which document must accompany a written demand for service charges under section 21B of the Landlord and Tenant Act 1985?

  1. Audited accounts for the last three years
  2. A summary of the tenant's rights Correct answer.
  3. A copy of the current insurance policy
  4. A schedule of the landlord's outgoings

Explanation

Section 21B requires a written demand to be accompanied by a summary of the leaseholder's rights and obligations in relation to service charges, including the right to challenge reasonableness before the tribunal.

Question 44Service charges, budgeting and accounts

When deciding whether qualifying works trigger section 20 consultation, how is the relevant amount for each tenant calculated?

  1. The landlord's total budget for the year
  2. The total cost divided by the number of units
  3. The balance held in the reserve fund
  4. That tenant's estimated share of the works Correct answer.

Explanation

The test is whether the amount estimated as payable by any one tenant towards those works exceeds £250. That figure is the tenant's own share calculated on the lease apportionment, not an average or a block total.

Question 45Service charges, budgeting and accounts

Under section 19 of the Landlord and Tenant Act 1985, relevant costs are recoverable through a service charge only to the extent that they are...

  1. Actually paid and properly invoiced
  2. Competitively tendered and certified
  3. Agreed in advance with the tenant
  4. Reasonable in amount and in standard Correct answer.

Explanation

Section 19 limits recoverable costs to those reasonably incurred and, where services or works are involved, to services or works of a reasonable standard. This is the core statutory test applied by the tribunal.

Question 46Service charges, budgeting and accounts

A leaseholder believes the service charge for the past year is unreasonable and wants an independent determination. Which body has jurisdiction to decide the amount payable?

  1. The county court
  2. The local housing authority
  3. The First-tier Tribunal Correct answer.
  4. The Housing Ombudsman

Explanation

Under section 27A of the Landlord and Tenant Act 1985 the First-tier Tribunal (Property Chamber) determines whether a service charge is payable and, if so, in what amount. Other bodies may handle related complaints but do not determine payability.

Question 47Service charges, budgeting and accounts

Under section 21 of the Landlord and Tenant Act 1985, within what period must a landlord provide a summary of costs after receiving a tenant's written request?

  1. Two months
  2. Six months
  3. Twenty-one days
  4. One month Correct answer.

Explanation

Section 21 requires the landlord to supply a written summary of the relevant costs for the last accounting period within one month of the request. Facilities to inspect the supporting documents must also be offered.

Question 48Service charges, budgeting and accounts

How must a landlord or managing agent hold money paid by leaseholders towards service charges?

  1. On trust in a designated account Correct answer.
  2. In an escrow account held by a solicitor
  3. In the landlord's general business account
  4. As a trading receipt of the landlord

Explanation

Section 42 of the Landlord and Tenant Act 1987 requires service charge payments to be held on trust in a designated account, separate from the landlord's own money. The funds do not form part of the landlord's general assets if the landlord becomes insolvent.

Question 49Service charges, budgeting and accounts

Under Schedule 11 to the Commonhold and Leasehold Reform Act 2002, an administration charge is payable only to the extent that it is...

  1. Specified in the lease
  2. Approved by the tribunal
  3. Reasonable Correct answer.
  4. Supported by an invoice

Explanation

Schedule 11 makes administration charges payable only to the extent that they are reasonable, and the tribunal may determine reasonableness on application. A charge expressly permitted by the lease must still satisfy the reasonableness test.

Question 50Service charges, budgeting and accounts

When preparing the annual service charge budget, the amount demanded from each leaseholder should be...

  1. The maximum amount permitted by the lease
  2. The reserve fund balance divided by units
  3. A fixed percentage of the previous year's demand
  4. A reasonable estimate of likely costs Correct answer.

Explanation

The estimate demanded on account should reflect a realistic forecast of the costs for the coming year, apportioned in accordance with the lease. It should cover expected expenditure without creating an unreasonable surplus.