This section of our Case Law Library looks at cases related to:
- What makes a Service Charge demand valid
- What form must a demand take and what information must accompany it
- Whether a Service Charge demand must be ‘certified’
- When payment must be made
The Contractual Validity of a Service Charge demand:
The High Court decided that “the form and content of the demand depends upon the wording of the contractual or statutory provision in question and, critically, on the perceived purpose of that provision.” The case involves a detailed consideration of whether a particular Service Charge demand met the requirements of the Lease in question.
Preparation of an Estimated Service Charge demand
Decision by the Upper Tribunal that the inclusion of non-chargeable items in a service charge estimate does not mean that the estimate should be disallowed in its entirety. The UT decided that instead the amount payable in respect of the estimated should be reduced by the application of the limitation referred to in section 19 (2) of the Landlord and Tenant Act 1985.
Billing For Major Works:
In this case the Lands Tribunal decided that although the Lease in question required the Landlord to produce a single statement of Service Charge expenditure for each period, there was nothing stopping the Landlord producing an additional and separate notification of Major Works Service Charge liabilities so long as these sums were also included in the statement of Service Charge expenditure for the period the costs were incurred.
Five Year Limitation Period under the Housing Act 1985 (Right to Buy):
Decision by the Court of Appeal that the sole purpose of Sections 125A-C is to allow a purchaser to identify their maximum potential contribution for the items listed during the initial period of the lease.
Decision by the Lands Tribunal that a leaseholder who purchased under the right to buy was only liable for the costs of works undertaken before the grant of lease if the invoices issued to the landlord in respect of those works were dated in a period after the start of the ‘initial period’. In this case the Lands Tribunal decided that the initial period started on the same date as the reference period quoted in the estimates sent with the section 125 notice.
In this case the Upper Tribunal sets out some important points of guidance in respect of the limitations on what Service Charges may be invoiced to a purchaser under the Right to Buy during the first five years of the Lease:
- By listing costs under Section 125A and Section 125B a Landlord does not guarantee that these costs will be incurred during the reference period.
- If works do not take place in the reference period then a Landlord is not limited as to what can be charged.
- If works ‘straddle’ the periods before and after the end of the reference period, then the costs should be apportioned: the costs incurred before the end of the reference period will be subject to limitation, those incurred after will not.
- A Landlord may recover costs which were not listed on the estimate but within the limits set out in Section 16B (3) of the Housing Act 1985
Requirement to certify or audit Service Charge accounts:
In this case the Lands Tribunal concluded that a failure to meet the contractual requirement of a Lease that a Service Charge demand be certified did not mean that payment of the sums due for the relevant periods could never be due for payment.
Decision by the High Court that the Lease, rather than accounting practice or other considerations, determines the way in which accounts are to be prepared.
Decision by the Lands Tribunal that the LVT had been wrong to assume that the Lease only allowed a single attempt at issuing a contractually valid demand and that, taking account of any relevant provisions in the Lease and statutory restrictions, the Landlord may reissue a valid demand at a later date.
In this case the Upper Tribunal decided an requirement within a Lease to audit accounts at the end of a Service Charge period, was not a precondition for requesting payment of an estimated Service Charge from a Leaseholder. The Upper Tribunal decided that without wording which specifically stated that the auditing of accounts was a precondition of payment then monies could not be withheld on that basis, and that the remedy available to the Leaseholder was to make a counter claim in the County Court for breach of lease.
Information to accompany a Service Charge Demand:
Decision by the Upper Tribunal that the summary of rights and obligation required by Section 21B of the Landlord and Tenant Act 1985 must be sent with any demand for payment of a service charge. In this case the Landlord had sent the summary a number of days after the demand and this was not taken to have met the requirement of the Act.
The Upper Tribunal found that payment of a Service Charge demand was not due because the demand did not include the name and address of the Landlord as required by Section 47 of the Landlord and Tenant Act 1987. Where the Landlord’s address is not within England and Wales, the Upper Tribunal concluded that the address must still be given, but an additional address within England and Wales where notices may be served must also be provided.
Decision by the Upper Tribunal that a Landlord may retrospectively comply with statutory provisions, such as Sections 47 and 48 of the Landlord and Tenant Act 1987, by reissuing a further invoice or notification as the situation requires. A distinction is made between demands which are only invalid in respect of statutory provisions, and demands which are contractually invalid, as in the case of Brent LBC v Shulem B Association  EWHC 1663 (Ch).
Decision by the Upper Tribunal that a demand which includes more than one name and address does not satisfy the requirements of Section 47 of the Landlord and Tenant Act 1987 if it does not identify which of those addresses or names is that of the landlord.
Payment of a Service Charge Demand:
A Tribunal’s jurisdiction under Section 27A of the Landlord and Tenant Act 1985 does not permit the Tribunal to use its powers to determine the date upon a Service Charge is due for payment in such a way as it would, in effect, amend or disregard the payment terms stated in the relevant Lease.
Limitation Act 1980
The Upper Tribunal found that an application under section 27A of the Landlord and Tenant Act 1985 in respect of service charges demanded more than 10 years ago was not time barred by the Limitation Act 1980, even though a subsequent restitutionary claim in respect of an overpayment might be.