Landlord and tenant – Service charge – Lease of flat – Respondent’s father failing to pay estimated service charge demanded by appellant landlords – Father later assigning lease to respondent – Appellants serving respondent with demand for sums due on final account in respect of the works – Whether liability to pay limited by section 23 of Landlord and Tenant (Covenants) Act 1995 – Whether respondent liable by reason of service of final demand under service charge machinery in lease following assignment – Appeal allowed
In 2003, the appellant local authority granted a long lease of a flat in London SE15 to the respondent’s father under the right-to-buy provisions in the Housing Act 1985. In October 2006, the appellants sent an estimated demand for service charges to the respondent’s father in respect of major works, but that sum went unpaid. The respondent’s father assigned the lease to the respondent in September 2008.
In May 2013, the appellants sent a credit note and notice entitled “Final Account Notification and Summary” to the respondent, demanding payment of £8,562.66 as the final sum for the major works. They subsequently issued a credit note in the sum of £3,960.74 on the grounds that the major works had cost less than the original estimate.
The respondent did not pay the sum demanded and the appellants brought proceedings in the county court to recover that sum. The matter was transferred to the first-tier tribunal (FTT), which heard an application by the respondent, under section 27A of the Landlord and Tenant Act 1985 Act, for a determination of the amount of service charges payable by her in respect of the service charge year commencing April 2007 relating to the major works contract.
After hearing evidence, the FTT determined that the respondent was not liable for the sums claimed by the appellant, since, by virtue of section 23(1) of the Landlord and Tenant (Covenants) Act 1995, the respondent was not liable under the lease covenants to pay service charges in respect of the invoice sent to her father in October 2006 before the lease was assigned. The appellants appealed.
Held: The appeal was allowed.
The FTT had proceeded on the erroneous basis that the appellants’ claim was for the estimated cost of work which had formed part of the service charge demanded from the respondent’s father in 2006. The essence of the FTT’s reasoning was that, by reason of section 23 of the 1995 Act, the respondent was not liable to pay the estimated sum demanded because it related to a time before the lease had been assigned to her. However, section 23 did not limit the respondent’s liability to pay in circumstances where the respondent had herself received a valid demand to pay the final account after the lease had been assigned to her. The service charge machinery in the lease provided for a two-stage process, namely an interim payment and the final amount. The FTT had failed to recognise that fact. The appellants’ claim in the county court proceedings was not for the interim sum demanded from the respondent’s father but for the final reduced sum which was sought from the respondent as the assignee of the lease, an appropriate credit having been made accordingly.
The appellant had served a valid demand on the respondent for the adjusted sum of £6,734.10, in accordance with the provisions contained in the lease. The service of a valid demand, credit note and final account notification had triggered the respondent’s liability to pay. Section 23 of the 21995 Act did not limit the respondent’s liability simply because the part of the accounting period preceded the assignment. The respondent was liable to pay the sum demanded.
Michael Walsh (instructed by the legal department of Southwark London Borough Council) appeared for the appellants; the respondent did not appear and was not represented.
Sally Dobson, barrister
Click here to read a transcript of Southwark London Borough Council v Clark
