Landlord and tenant – Service charges – Jurisdiction – Respondent tenant applying for determination of service charges due – Appellant freeholder seeking to strike out application – First-tier tribunal dismissing application – Appellant appealing – Whether FTT having jurisdiction to hear application regarding matters agreed or admitted – Appeal allowed in part
The appellant was the freehold owner of two properties, 22 Collingwood Court and 54 Kenilworth Court, in Washington, Tyne & Wear. The respondent was the leaseholder of the properties. Pursuant to those leases, the respondent was obliged to pay a service charge. The respondent applied to the First-tier Tribunal (FTT) under section 27A of the Landlord and Tenant Act 1987 for a determination of the service charge payable. Before the FTT, the appellant submitted that the charges being challenged by the respondent were either already determined by the court (default judgments having been entered in relation to claims made previously by the appellants for unpaid service charges) or expressly or impliedly admitted by the respondent; and that accordingly the FTT had no jurisdiction to determine the respondent’s application.
The FTT held that it did not have jurisdiction to determine the service charges claimed within the default judgments. However, it noted that it was apparent for the date of the certified accounts, that the default judgments likely related to service charges on account or budgeted amounts and not to the final out turn. Accordingly, it was open to the respondent to request a determination of the final sums now that that expenditure had crystallised and the appellant’s strike out application failed in that regard. The appellant appealed. The appeal was determined under the Upper Tribunal’s written representations procedure.
Held: The appeal was allowed in part.
(1) The FTT had to take a robust approach where it was clear that an application under section 27A was seeking to challenge service charges which had been the subject of the judgment of the court, whether that judgment followed contested proceedings in the county court or had been entered by default. The issue went to jurisdiction. The FTT should therefore have struck out the application insofar as it related to service charges the subject of prior judgments of the court, i.e. for the period from 1 April 2012 to 31 March 2013. Although the judgments also related to service charges for later periods (from 1 April 2013 to 31 March 2015), those charges could not have been certified prior to default judgments being entered, and the FTT was right not to strike out the application in relation to those charges on that ground.
(2) In order to satisfy the FTT that it should strike out the proceedings as it related to charges before 1 April 2012, the appellant had to prove that the respondent had agreed or admitted those charges. Consideration should be given to the conduct of the respondent in the period between 2007 and 2012. The charges for that period had been paid, and charges accrued subsequently had led to default judgments being entered. The FTT erred in law in failing to recognise the significance of the payment of service charge without protest over a period of time long before the application to the FTT was made, the issue of proceedings in the county court to enforce payment of subsequent amounts of service charge and the entry of default judgments in favour of the lessor. It would offend common sense for a tenant who without qualification or protest had been paying a series of demanded service charges over a period of time to be able to turn around and deny that he had ever agreed or admitted to that which he had previously paid without qualification or protest. The FTT acknowledged the weakness of the respondent’s claim in that regard where, having observed that the application related to service charges back to 2007, it stated that the respondent had “not taken timely action in respect of those charges and we find it likely that little evidence will be available of the services provided” but added “We do not consider this should prevent the application proceeding in its entirety”. On the basis of that statement, with its reference to the “entirety” of the application, it appeared that the FTT might not have taken into account its statutory duty to strike out part of the proceedings or case where it did not have jurisdiction in relation to that part. The FTT should have found that the respondent had agreed or admitted the service charges due before 1 April 2012, and struck out that part of the respondent’s claim which related to service charges between 2007 and 1 April 2012: Shersby v Grenehurst Park Residents Co Ltd [2009] UKUT 241 (LC) and Cain v Islington Borough Council [2015] UKUT 542 (LC); [2015] PLSCS 284 considered.
(3) As regards the service charges after 31 March 2013, there was no express or implied agreement or admission of the amount that was actually owing, and in the absence of such agreement or admission, the FTT would have been wrong to allow the appellant’s application to strike out for want of jurisdiction. It was important to consider what issue it was to which the application under section 27A related. In Crosspite Ltd v Sachdev [2012] UKUT 321 (LC); [2013] 1 EGLR 31, a lessee who stated that he was “not averse to paying an administration charge” was held to have admitted that a charge could be made. As a result, the tribunal did not have jurisdiction to determine whether the lessor was entitled to demand an administration charge at all, the lessee having admitted, by implication or inference, that he was under a liability to pay such a charge. In the present case, there was no dispute that the respondent was liable to pay a service charge under the terms of the lease. However, the issue was not merely entitlement to charge, but the reasonableness of the charge being claimed. The respondent might have accepted that the appellant was entitled to a service charge, and agreed that he would pay such arrears as might be due, but there was no agreement or admission of the amount that he was liable to pay. In the circumstances, the FTT was correct in law in determining that the appellant’s application to strike out the entirety of the respondent’s application should fail. The FTT had no jurisdiction to determine the service charges payable by the respondent in respect of periods prior to 1 April 2013 and the FTT should therefore have struck out that part of the respondent’s application pursuant to rule 9(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013.
Eileen O’Grady, barrister
Click here to read transcript: Marlborough Park Services Ltd v Leitner
