Landlord and tenant – Service charge – Demand – Appellant disputing liability to pay service charges demanded by respondent landlord – Appellant contending that charges not demanded in accordance with requirements of lease – Whether service of demands quarterly rather than half-yearly as specified by lease rendering demands invalid – Whether demands calculated by procedure laid down by lease – LVT finding demands to be valid – Appeal allowed in part
The appellant held a lease of a flat from the respondent landlord for a term of 70 years from 1980. Clause 4 of the lease set out the appellant’s obligation to pay an annual service charge “to be calculated and paid in the manner set out hereafter”. Clause 5(a) stated that, in March and September of each year, an estimate was to be provided of the service charge for the ensuing half year, based on the actual expenditure for the immediately preceding financial year. Clause 5(b) provided for the actual annual expenditure to be determined each January. By clause 5(c), the respondent was to notify the appellant of the amounts calculated under (a) and (b) and the appellant was to pay those sums within 21 days of them being demanded.
The appellant applied to the leasehold valuation tribunal (LVT), under section 27A of the Landlord and Tenant Act 1985, for a determination of her liability to pay the service charges demanded for several consecutive service charge years. One of the grounds on which she disputed her liability was that the service charge had not been demanded in the accordance with the requirements of the lease; she pointed out that advance payments on account of the service charge had been demanded quarterly, rather than half-yearly as the lease provided, and she contended that none of those estimated service charge demands were valid.
On that issue, the LVT held that the appellant’s interpretation of the lease was unreasonably harsh, there was no evidence that the appellant had been prejudiced by receiving quarterly demands and that the wording of the clause was not particularly prescriptive. It concluded that the sending of quarterly, rather than half-yearly, demands did not render those demands invalid.
On appeal from that decision, the appellant submitted that the respondent’s failure to follow the procedure required by clause 5(a) for estimating the service charge was further evidenced by the fact that all the quarterly demands had been in the same sum throughout the year, suggesting that no fresh estimate had been made each half year as required by the lease.
Held: The appeal was allowed in part.
The argument before the LVT had concentrated more on the fact that the demands were made quarterly than on whether on the proper clause 5 procedure had been followed in calculating the amount of the demands, the appellant’s case had been than the on-account demands were not properly made in accordance with the terms of the lease. The respondent had placed no adequate evidence before the LVT to show that it had followed the procedure laid down in the lease, which was the procedure that entitled the respondent to seek on-account payments half yearly in advance. There was no sufficient evidence that the respondent had determined an estimated amount as required by clause 5(a) on the basis there set forth. Such evidence as there was pointed away from, rather than towards, the respondent having followed the provisions of the lease, given that the amounts payable were notified to the appellant by way of quarterly rather than half-yearly demands, and were notified in a sum that remained the same throughout the year, which did not indicate any fresh making of an estimate each half year as required by the lease. The evidence indicated that that the respondent was not following the provisions of the lease by determining an estimated amount under clause 5(a) and then notifying the appellant of the amount calculated in accordance with that estimate as provided by clause 5(c). The lease laid down a procedure that the respondent could follow for the purpose for making enforceable demands for on account payments. The respondent’s demands were not made in accordance with the terms of the lease. Accordingly, the service charges demanded by way of quarterly demands in advance were not payable because they failed to comply with the provisions of clauses 4 and 5 of the lease.
Desmond Kilcoyne (instructed by direct access) appeared for the appellant; the respondent did not appear and was not represented.
Sally Dobson, barrister