Landlord and tenant – Service charge – Limitation – Appropriation – Appellant bringing claims against respondents for arrears of service charge – First-tier tribunal finding that part of claim time-barred because proceedings not brought within six years of relevant sums falling due – Whether payments made by respondents appropriated to most recent debts so that claim for older debts time-barred – Whether appellant sufficiently communicating intention to appropriate payments to older debts first – Appeal allowed
The appellant housing association owned several blocks of flats on an estate on the Isle of Dogs in London. It brought proceedings in the county court to recover arrears of service charge from the leaseholders of a number of the flats, including the respondents. The claims in respect of the respondents’ two flats were for £5,881.92 and £3,032.58 respectively.
The case was transferred to the first-tier tribunal (FTT), which found that part of the appellant’s claim was time-barred under section 19 of the Limitation Act 1980 since the appellant had not brought the proceedings within the time limit of six years from the date when payment fell due. In that regard, the FTT found that payments made by the respondents had been appropriated to the most recent debt and that the appellant had not sufficiently communicated to the respondents any intention to appropriate them to the older debts. It referred to the appellant’s statements of account and found that the figures in those accounts, and the way in which interest had been calculated, showed that the respondents’ payments had always been applied to the most recent service charges outstanding at the time. It concluded that the appellant could not claim arrears from the first respondent which pre-dated March 2007 or from the second respondents which pre-dated May 2006.
The appellant appealed. It contended that a landlord was entitled to apply all payments to the earliest debt unless the tenant specified, when making the payment, that the money was to be applied to a particular debt. It argued that the statements of account merely gave a running statement of the account balance at any given time and did not purport to show how any payments had been appropriated.
Held: The appeal was allowed.
The FTT had erred in its analysis of the appropriation and communication issue. The appellant’s accounts showed what the balance was on the date given in each row, but did not purport to show how each payment was appropriated. The way in which interest had been calculated did not indicate any appropriation of payments to the more recent debts. Interest accrued on a daily basis on the total amount owed such that the interest owed was the same whether payments were allocated to the earlier or later debt. A payment would reduce the amount of subsequent interest but the amount of subsequent interest would not be affected by how the payment was appropriated. The respondents had not raised the limitation point until the hearing itself, at which point the appellant had produced schedules which set out how the payments had been allocated and showed that they had always been appropriated to the earliest debt. The FTT had failed to give any reason for not accepting that evidence, which showed that the appellant had never sought to recover an amount that was more than six years old.
The FTT’s conclusion that there had been no communication of any intention to appropriate the payments to the older debts flowed from its erroneous conclusion that the running accounts and interest calculations amounted to a statement that the payments were being appropriated to the latest debt. The only evidence on appropriation was set out in the schedules presented during the hearing after the issue had been raised. The presentation of those schedules amounted to a communication by the appellant of how the payments had been appropriated. Accordingly, there was no evidence for the FTT’s conclusion that the appellant had failed to communicate that appropriation to the respondents.
Jon Holbrook (instructed by the legal department of One Housing Group Ltd) appeared for the appellant; the first respondent appeared in person for the respondents.
Sally Dobson, barrister
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