The Landlord and Tenant Act 1985 enables parties to residential leases to ask the tribunal to decide the amount, date and manner in which, and by whom and to whom, service charges are payable. The question that arose in Gateway Holdings (NWB) Ltd v McKenzie [2018] UKUT 371 (LC); [2018] PLSCS 199 was whether a tenant, who had inherited a leasehold property from her father, could apply for such a determination in respect of the service charges paid by her father before she acquired her lease.
Section 27A(1) of the 1985 Act states only that “an application may be made” to the appropriate tribunal. In other words, it does not state exactly who can make such an application (although the statutory provision that preceded it did, because it limited the right to apply for a determination to “a tenant by whom, or a landlord to whom, a service charge is alleged to be payable”).
The landlord argued that it could not have been parliament’s intention that anyone could make a section 27A application, and suggested that such an application could be brought only by a party legally obliged to pay, or entitled to collect, a service charge. It suggested that this meant a landlord or a tenant in respect of the period in issue, or the guarantor of a tenant’s obligations. A current tenant would also have standing to apply in respect of a period before they acquired the lease, if he or she were at risk of forfeiture because of the failure of a predecessor to pay. But the tenant in this case ought not to be able to apply because she had not been the tenant during the years in which the disputed service charges had been levied and paid, she had not herself made the payments, and nothing was due from her for the disputed years.
The Upper Tribunal rejected the landlord’s arguments. The words of the statute are unrestricted and there was no justification for implying any restriction into the general words used in section 27A(1): Oakfern v Ruddy [2006] EWCA Civ 1389; [2006] 3 EGLR 30. So residential leaseholders can apply to the tribunal for a determination in respect of service charges paid by their predecessors (subject always to the tribunal’s power to strike out vexatious or abusive applications).
However, this was of no practical assistance to the tenant at all. The lease provided that “the landlord shall give credit for such overpayment”, meaning that any overpayment must be credited to the account of the tenant who paid it. So the personal representatives appointed by the tenant’s father might have a claim to recover any overpayment. But the tenant would have to await the recovery and distribution of the funds by them.
The judge commented that, on the assignment of a lease, incoming and outgoing tenants can agree terms for any overpayment of service charges from earlier years to be credited to the current leaseholder. But there was no evidence of any such arrangement in this case. So it was not possible for the tenant to have her current service charge contribution reduced by any sums that ought to have been credited to her father’s service charge account.
Allyson Colby, property law consultant
