Service charge – Landlord and Tenant Act 1985 Ð Gas bills – Appellant management company of estate initially receiving and paying bills from wrong energy company – Position corrected several years later and higher bill paid to actual gas supplier – Appellant seeking to recover additional sum from respondent leaseholder as service charge – Whether recovery barred under section 20B of 1985 Act on ground that costs not demanded within 18 months of being incurred – Whether costs “incurred” when gas used or when bill received from supplier – Appeal allowed The respondent was the leaseholder of a property within a substantial estate that had been completed by the developer in 2000. The appellant was the management company for the estate and a party to the respondent’s lease. It was responsible for maintaining communal facilities including a leisure centre and a gas-heated swimming pool, and was entitled to recover its costs through a service charge to the leaseholders. When the appellant began managing the estate in 2001, the developer gave incorrect information to it as to the company that supplied the gas for heating the pool. The appellant received and paid gas bills from that company until late 2007. It then emerged that a different company had in fact been supplying the gas and that a gas meter had been misread, leading to undercharging. The appellant eventually received repayment of the money from the first company and paid the sum demanded by the actual supplier pursuant to a bill issued in November 2007. This was £100,289 more than the sums previously paid. The appellant demanded the additional amount in its service charge accounts for April 2008. The respondentÕs share was a little over £300. County court proceedings between the parties over liability for the additional gas costs were transferred to the leasehold valuation tribunal (LVT) for determination. The LVT found that the respondent was liable under his lease for those costs, which were properly included in the service charge and reasonable in amount. However, it held that the appellant was barred from recovering a large part of them by section 20B of the Landlord and Tenant Act 1985, on the ground that they had been incurred more than 18 months before the appellant served the relevant demand on the leaseholders. The LVT held that the costs were “incurred” when the gas was supplied and the appellant became liable to pay for it, even though the supplier had not invoiced the appellant until a later date. The appellant appealed. Held: The appeal was allowed. The costs had not been incurred when the gas was used. Although liability to pay something to somebody might have been incurred at that point, that liability did not become a cost until it was made concrete by being met or paid or, possibly, by being set down in an invoice or certificate under a building contract.
Whether a particular cost was incurred on the presentation of an invoice or on payment might depend on the facts of the particular case. Where, for example, payment on an invoice had been long delayed, the decision as to when the cost was actually occurred might be different depending on the circumstances and it might be relevant to decide whether the payment had been delayed because there was a justified dispute over the amount of the invoice or whether the delay was a mere evasion or device of some sort. In the former case, the tribunal of fact might find that the costs were not incurred until a genuine dispute had been settled and the bill paid. In the latter case, the tribunal might be reluctant to allow deliberate prevarication to postpone the running of the time limit imposed by section 20B. That was the kind of factual matter that the LVT was well placed to decide. However, no such issues arose in the instant case. The cost of the gas had not been incurred at least until the supplier presented the bill in November 2007. It had been included in the service charge demanded in April 2008, well within the time limit set by section 20B.
Justin Bates (instructed by the legal department of OM Property Management Ltd) appeared for the appellant; the respondent appeared in person.
Sally Dobson, barrister
