This section of our Case Law Library looks at cases related to:
- The situations in which the 18 month restriction under Section 20B of the Landlord and Tenant Act 1985 applies.
- What a Landlord must do in order to have complied with Section 20B of the Landlord and Tenant Act 1985
The point in time when a cost is ‘incurred’:
This case, heard at the England and Wales Court of Appeal (EWCA), is the leading legal authority on the interpretation and application of Section 20B of the Landlord and Tenant Act 1985. The case focuses on the meaning of the wording in Section 20B and in particularly the issue of the point in time when a cost is ‘incurred’ and when the 18 month deadline runs from.
In this case water bills had been sent to the developer rather than the company (Ground Rents (Regisport) Ltd) which had subsequently purchased the freehold. The Upper Tribunal decided that the cost of the water bills had been incurred by the current Landlord -the developer had not paid the bills or passed on – at the in time point at which they received a demand for payment of these overdue water bills. Despite the water bills being more than 18 months old, Section 20B did not stop the current Landlord from demanding payment of a Service Charge in respect of the water supply in these earlier periods.
What counts as a demand for payment or notification under Section 20B:
The High Court decided that if a demand for payment is not a valid demand under the terms of a Lease, it is also not a demand for payment under the requirements of Section 20B of the Landlord and Tenant Act 1985. The High Court did though also consider that if certain conditions were met, then a demand for payment which was not contractually valid might serve as valid notification of cost under Section 20B(2).
In this case the Upper Tribunal made a distinction between a demand which was contractually invalid and one which failed to comply with the requirements of the legislation, in this case sections 47 and 48 of the Landlord and Tenant Act 1987. The UT decided that demand which did meet the requirements of sections 47 and 48 was still a valid demand for the purposes of Section 20B.
Estimated Invoices and the 18 Month Rule:
Gilje v Charlesgrove Securities Ltd  1 All ER 91
The High Court decided that Section 20B does not apply in cases where a (1) a leaseholder is required to make an on account payment against an estimated bill and (2) the final cost to the Leaseholder does not exceed the amount which they paid, or where asked to pay, on account.
In this case the Upper Tribunal decided that in the context of a lease which included no provision for billing ‘balancing’ payment (the lease only allowed the landlord to demand on account payment) Section 20B had no application in respect of an estimated service charge demand. The landlord was therefore not considered to be statute barred under the 18 month rule from recovering an on account service charge relating to a period of around 3 years prior to the date when the landlord issued the estimate, which was a required part of the billing process under the terms of the lease.