Category: Commercial and Chancery

Denmark to Pioneer Offshore Energy Island

The Danish wind turbine industry is one of the world’s largest – accounting for up to 38% of the world’s market share. In June 2020, following more and more countries looking to build a greener future, Denmark revealed plans to build one of the world’s first offshore energy islands. Curious? We have researched what the island could look like, it’s global strategy, and potential location.

Backed by Denmark’s politicians, the energy island is expected to be 120,000sq m with room for 200 offshore wind turbines. As part of the country’s Climate Act, the island will serve around 3 million households with sustainable, renewable sources of energy. The move is radical but looks set to help Denmark on its mission to reduce greenhouse gas emissions by 70% in 2033 and its goal of becoming CO2 neutral by 2050. Partly owned by the state and partly held by private investors, the island amounts to a whopping £24bn with added maintenance costs on a regular basis. It is for this reason, as well as the amount of infrastructure needed, that the island is only expected to be completed by 2033. The announcement has been heralded as positive news across the country with Denmark’s Energy Minister, Dan Jorgensen, hinting at the far-reaching effects the island will have on the wind turbine industry. “It’s the next big step for the Danish wind turbine industry. We were leading on land, then we took the step offshore and now we are taking the step with energy islands, so it’ll keep the Danish industry in a pioneering position.”[1] The island is to be built in the North Sea, approximately 80km from the town of Thorsminde. In close proximity to countries such as Germany, Switzerland, and England the energy island could not only provide renewable energy sources to Denmark but also to its neighbouring countries, thus providing good reason for its selected location. It is part of a much larger global strategy to help implement greener energy practices and Denmark seems to be one of the world’s leading pioneers.

However, though many are positive about the announcement, there is scepticism about the expected completion date. Dansk Energy, a famous green group in Denmark, heralded the move as a significant step towards a greener future but warned that 2033 was unlikely to be the completion date. Despite this, Danish politicians have given the project the go-ahead and the project is starting to become a reality.

[1] https://www.bbc.co.uk/news/world-europe-55931873

Excessive service charges and what to do about them

Background

Service charges are fees that homeowners often commit to pay under the terms of the lease they enter into when they purchase their homes.[1] They are increasingly common in share-of-freehold properties, and commonly include the costs of insurance, lighting, maintenance, cleaning and the repair of common parts such as lifts and gyms, as well as fees for the purchase, sale, sublet or alteration of a flat. They can also effect the purchase of some freehold properties.

In recent years, such charges have spiralled and are often excessive, both in their amount and in exchange for the quality of service received. Research by Direct Line for Business indicates that a third of management companies hiked service charges in the years 2014 to 2016, pushing the average charge up to £1,863, which is over twice the average monthly rent.[2]

At the time of writing, service charges are unregulated. As such, they are often exploitative and homeowners may be left footing unexpected bills of between £1,000 and £3,000 per year.

What to do about service charges

There are a number of steps that can be taken by homeowners to challenge excessive or unreasonable service charges.

Short of buying the freehold of the property outright, the first step is always to complain directly to the managing agent or freeholder. Homeowners should write to the agent or freeholder, setting out in detail why they think the fees charged are unreasonable. Even if this yields no reduction, it is a useful step in narrowing down the issues and is in compliance with paragraphs 6 and 8 of the Practice Direction on Pre-Action Conduct and Protocols.[3]

If the agent or freeholder is unresponsive to negotiation, the matter may be referred to the First Tier Tribunal (Property Chamber).[4] This can be done in one of two ways.[5]

First, homeowners can make a Right to Manage application under the Commonhold and Leasehold Reform Act 2002 to acquire the right to manage the residential block.[6]Homeowners can either set up their own company to oversee the management or, more often than not, employ a different property management firm under more favourable terms.

Secondly, one can apply to the Tribunal to decide whether the amount charged is reasonable.[7] Under section 20 of the Landlord and Tenant Act 1985, service charges are limited to a reasonable amount. If the Tribunal determines that a sum claimed is unreasonable, it can be significantly reduced and homeowners may even have returned to them part of the sums already paid.

Reform

The Government is currently analysing responses to a major consultation, entitled “Tackling unfair practices in the leasehold market”, which ran from 25 July to 19 September 2017.[8] The consultation followed the announcement by Communities Secretary Sajid Javid of plans to cut out unfair abuses of leaseholders, including stamping out unreasonable service charges.

The Law Commission has also recently proposed the introduction of a new framework to regulate the charging of “event fees”, whereby owners of retirement homes are charged fees on certain events including sale, sub-letting or change of occupancy.

Chambers’ Commercial and Chancery Team is able to provide expert advice on the challenging of unreasonable service charges, as well as leasehold disputes generally.

[1] Section 18(1) of the Landlord and Tenant Act 1985 defines a service charge as “an amount payable by a tenant of a dwelling as part of or in addition to the rent–(a) which is payable, directly or indirectly, for services, repairs, maintenance, improvements or insurance or the landlord’s costs of management, and (b) the whole or part of which varies or may vary according to the relevant costs”.

[2] https://www.directlinegroup.com/media/news/brand/2016/property_pain_service_charges_increasing_ rapidly_14_mar_2016.aspx.
[3] https://www.justice.gov.uk/courts/procedure-rules/civil/rules/pd_pre-action_conduct.
[4] If the management agent is registered with the Association of Residential Managing Agents, (“ARMA”), homeowners also have the right to complain to an independent ombudsman.
[5] Despite repeated lobbying by ARMA, freeholders cannot refer cases to the First Tier Tribunal (Property Chamber) in the same way as leaseholders.
[6] https://www.lease-advice.org/documents/form-rtm-eng.doc.
[7] https://www.lease-advice.org/files/2016/08/leasehold3-eng.doc.
[8] https://www.gov.uk/government/consultations/tackling-unfair-practices-in-the-leasehold-market.

Maxwell Myers
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