Parliament has enacted legislation to regulate residential service charges in a variety of ways. Section 21 of the Landlord and Tenant Act 1985 enables tenants to require landlords to supply them with a written summary of the costs that form part of their service charge. If so requested, the landlord must comply within a month and must then allow tenants to inspect the supporting documents if they wish to do so.
Failure to comply with these obligations without reasonable excuse is a summary offence, punishable by a fine. The question raised in Di Marco v Morshead Mansions Ltd [2014] EWCA Civ 96; [2014] PLSCS 51 was whether tenants are entitled to ask a civil court to grant a mandatory injunction to force landlords to comply with the statutory requirements.
The company was the freehold owner of a large block of flats in Maida Vale. Each of the tenants in the block had a share in the company and its articles of association empowered the directors to ask members for contributions to fund the company’s activities in accordance with ordinary resolutions of the company. The company began collecting funds via its articles, at first as well as – and then instead of – demanding service charges, to avoid delays and challenges under the Landlord and Tenant Act 1985. The Court of Appeal overruled Mr Di Marco’s objections to the landlord’s method of collecting money in 2008. It decided that this was a valid method of raising funds from shareholders, which did not engage the service charge provisions in the Landlord and Tenant Act 1985.
Mr Di Marco remained unhappy with the charges and sought an injunction to compel the landlord to give him a summary of service charge expenditure for the years in which service charge demands had been issued, even though the legislation provides for criminal, as opposed to civil, enforcement. The High Court upheld his claim, but the Court of Appeal has overruled the decision.
Their Lordships observed that the Landlord and Tenant Act 1985 adopts a variety of techniques for imposing civil liability. However, none of these devices were applied to section 21. Parliament had enacted section 21A of the Landlord and Tenant Act 1985 in 2002, to enable tenants to withhold service charges if their landlord fails to comply with section 21, but had not given tenants the right to sue in damages or to an injunction – and section 21A has never been brought into force.
The fact that local housing authorities are the prosecuting authority for the purpose of criminal enforcement indicated that Parliament expected them to enforce compliance. Parliament had set the level of the fine payable for the offence and the court thought it unlikely that Parliament intended that landlords and directors should be separately liable, at the behest of a private individual, to unlimited fines or, in an extreme case, up to two years imprisonment for failing to comply with an injunction.
Where does this leave tenants? The court suggested that they should consider any contractual remedies available to them since most leases give tenants a right to receive information about their service charges, but gave no further guidance as to the availability of such remedies in this, or other, cases.
Allyson Colby is a property law consultant