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I never received an invoice for a major works service charge, but was sent a copy 4 years later. Am I still liable to pay?

Reader’s E-mail:

What is proof of a service charge “demand”? My landlord claims I am in arrears for Major Works, but I have never received an invoice for the arrears claimed. I have asked for and received a copy of the invoice they say I owe 4 years after it was raised. Do they have to prove the amount was demanded? This is the first communication I have received since the date of the invoice.

Reply from Service Charge Dispute Guide

1. There is no general rule in law that a landlord must prove that they sent a invoice, or indeed any notice, as a precondition of demanding the payment of a service charge.

2. If the matter came to a court or tribunal the general rule of thumb is that a leaseholder would be required to provide a convincing case that they had not received the invoice in question before the ‘burden of proof’ is placed on a landlord to prove that the correspondence they claim to have sent was actually sent.

3. A leading legal authority on this point is Schilling v Canary Riverside Development Ltd LRX/26/2005.

4. Each such case would assessed entirely on its own merits and in particular the evidence that each party produced. It is not possible, therefore, to give an accurate prediction of how a defence of ‘I never received the demand’ would hold up in a tribunal or court if the case got that far.

5. Moreover, it would not be possible to predict with any accuracy how a court or tribunal would assess the different types of evidence a leaseholder might produce to support such a defence.

6. If the only real evidence either side can produce is the copy of the invoice the landlord claims they sent, then in all likelihood a court or tribunal would have to conclude (on the ‘balance of probabilities’) that the demand was in fact sent at the time the landlord claims.

7. Any kind of litigation runs risks for the parties to the case, particularly leaseholders as many leases give a landlord a contractual right to claim their legal costs from the leaseholders involved, possibly even if they lose.

8. Therefore, our advice to any leaseholder in this situation is not to dispute their liability on the basis of non-receipt of correspondence unless they have some convincing evidence, or alternatively other points upon which they might rely as a basis for disputing their charge. Towards the end of this e-mail we identify one such alternative point which you should consider.

9. In considering whether you might have evidence to support your contention that the demand was never sent here are some things which you may benefit from considering:

i. Your lease

a) Leases sometimes require that correspondence is sent in a particular way, such as being hand delivered or sent by recorded delivery. This point is sometimes stated by requiring landlords to meet the requirements of section 196 of the Law of Property Act 1925.

b) If your lease says something along these lines, an argument might be made that the landlord should be able to produce the recorded delivery receipt or some kind of sign-off sheet from the person doing the hand delivery.

ii. The experience of other leaseholders in the same building

a) Speak to your neighbours. If they also did not receive the demand at the time the landlord says they sent it, they could provide a statement confirming this supporting your case.

b) If they all agreed that they did not receive the demand either then this something a court or tribunal should take into account.

iii. Scrutinise the copy of the invoice you have received

a) Supposing your landlord made an administrative error and did not send the demand, or they sent the demand and they did not keep a copy, then what has been sent to you may be something they created after you complained.

b) In order to spot a fake demand, and prove it, you need to have a clear idea of what a real demand would look like.

c) There are two routes you might follow to do this. Firstly, if your neighbours did receive the demand then does it look the same as the one you received? Secondly, if you have correspondence from your landlord from 4 years ago, does it match up with the copy invoice you have received? You are looking at things like type set, logos, names, telephone numbers etc.

iv. Subsequent correspondence

a) In your e-mail you state that your landlord never followed up on the outstanding charge. This is good, but not conclusive, evidence. You landlord may simply be inefficient.

b) Stronger evidence can be found by looking at the statements of account you received. Many leases require that landlords produce an annual statement of account detailing all the actual expenditure incurred within the service charge period gone.

c) Whilst some landlords choose to bill the costs which occur every year for matters such as cleaning or insurance in a separate invoice to that of the cost of infrequent larger items of expenditure for ‘Major Works’, the lease to which they are a party may require that a single annual statement is produced as a demand for payment of the service charge. For a legal authority on this point see the case of Southwark LBC v Woelke [2013] UKUT 349 (LC).

d) If the cost of the work did not appear on your annual statement then this is a point you might refer to in support of your contention that the costs were never billed to you.

10. This fourth of our things to look at, whether the costs in question were referred in an annual statement, links into a further point of law upon which you might dispute your service charge liability: Section 20B of the Landlord and Tenant Act 1985.

11. Under section 20B within 18 months of incurring a cost a landlord is required to either:

i. Demand payment of that cost

Or

ii. Notify the leaseholder in writing that the cost has been incurred, how much that costs was, and that they will be required to pay that cost as a service charge at a later date as a service charge.

11. If a landlord does not comply with section 20B then they are statute barred from demanding any of the relevant costs from a leaseholder.

12. Supposing that the demand was sent, that it was the first and only demand that was sent, and that your lease requires service demands to prepared in the form of an annual statement listing all the actualised costs incurred during the year, then this raises the question of whether the demand would (even if it was sent) meet the requirements of section 20B.

13. In the case of Brent LBC v Shulem B Association [2011] EWHC 1663 (Ch) the High Court decided that if a demand that was not contractually valid, because it was not prepared in accordance with the lease, then it cannot count as a demand for payment under the requirements of section 20B.

14. In the Southwark LBC case the Upper Tribunal decided that a separate demand for payment of major works was not a contractually valid demand because the lease required that the costs were demanded in the form of a single annual statement, and the local authority was sent away to reissue a correct demand before they were entitled to claim the money.

15. If your landlord is guilty of the same failing then they could also reissue the demand to make it contractually valid, but because of the 4 year interval you refer to in your e-mail the time period for compliance with section 20B would have well and truly passed.

16. Your next recommended steps are to read your lease carefully, check the copy invoice in comparison to other correspondence you and your neighbours received, and write to your landlord detailing your concerns and any evidence you have supporting those concerns.

17. If your landlord has a complaints procedure you should make sure that you follow all the stages of that procedure before considering formal legal action of any kind.

Click on the link to read more Reader’s Questions and Answers on Billing and Refunds

Click on the link to read more Reader’s Questions and Answers on the 18 Month Rule (Section 20B)

Click on the link to read more Reader’s Questions and Answers on Major Works