Landlord and Tenant Act 1985 – Lease of residential premises – Service charges – Recoverability – Defendant leasing part of building and subletting individual units – Sections 20B and 20ZA of 1985 Act – Whether claimant complying with conditions for recovery of additional amount for previous service charge year – Whether contracts entered into by claimant “qualifying long-term agreements” or agreements for “qualifying works” such that consultation requirements imposed – Whether cap on recovery for lack of consultation applying to entirety defendant’s demise or each individual unit within it – Preliminary issues determined
In 2004, the defendant registered social landlord took a 125-year lease of premises within a building that was under construction. The claimant was party to the lease as the manager of the building. The defendant’s demise comprised 79 affordable housing units, which, after completion of the building in 2005, it let to individual tenants on subleases on terms requiring them to contribute to the service charges payable by the defendant. Since the premises were residential, the Landlord and Tenant Act 1985 and the Service Charges (Consultation Requirements)(England) Regulations 2003 applied to the collection of service charges.
A dispute arose between the claimant and the defendant concerning the amount of service charge payable. Preliminary issues were tried as to the recoverability of certain items in principle.
The claimant first sought to recover an additional sum for the 2005 service charge year, on top of the estimated sums already paid by the defendant in advance, in circumstances where: it had written to the defendant in 2006 indicating that a higher amount might be payable; had demanded an additional sum in August 2007, outside the 18-month time limit prescribed by section 20B of the 1985 Act; and had made a further, corrective demand in December 2007, when, following certification of the service charges for 2005 by the managing agent, the actual expenditure had turned out to be a lesser sum.
Second, an issue arose as to whether various contracts that the claimant had entered into were “qualifying long-term agreements” under section 20ZA(2) of the 1985 Act such as to require it to comply with the consultation requirements of the 2003 Regulations, namely: (i) two contracts for the provision of building maintenance services entered into in 2005 when none of the individual units as then let; (iii) an agreement with a managing agent for an initial term of 12 months, continuing thereafter unless determined by three months’ notice; and (iii) window-cleaning works carried out under a one-off contract.
Finally, if any of those fell within section 20ZA(2), a question would arise as to whether the claimant’s failure to comply with the consultation requirements meant that recovery was capped at £100 pa for each contract or £100 pa for each dwelling comprised in the defendant’s demise.
Held: The preliminary issues were determined.
(1) Any demand by a landlord for a contribution to service charge expenses incurred had to be finalised within 18 months. In so far as errors needed to be corrected, any correction had to be made and demanded within the 18-month period. A subsequent corrective demand made out of time could not, without more, be treated as dating back to an earlier demand for less, made in time, so as to enable the landlord to recover any additional contribution that it might request. The 2006 letter was not a qualifying demand under section 20B since it did not purport to be a demand but was merely an informative updating; moreover, it did not relate to expenses incurred but was only an estimate. The August 2007 demand did not qualify because it did not relate to actual expenses and was in any event out of time. Only the demand of December 2007 related to expenses actually incurred. That demand was out of time and, in the light of the above, could not entitle the claimant to recover on the basis that it was “correcting” an earlier demand.
(2)(i) The two 2005 contracts for building maintenance were qualifying long-term agreements in respect of which the claimant had been obliged to comply with the consultation requirements of the 2003 Regulations. In providing an exception where the building was unoccupied when the agreement was entered into, section 20ZA(3)(1)(d) of the 1985 Act used the word “tenants” generally and without qualification, such that the exception was not made out where the defendant held a lease of part of the building at the time. “Tenants” could not be construed as being confined to the occupying residential tenants who would ultimately have to pay the service charge contributions.
(ii) The contract with the managing agent was not a qualifying long-term agreement. A contract for an initial period of 12 months and then from year to year subject to termination by notice was not an agreement for a term of “more than” 12 months within the meaning of section 20ZA(2). The relevant provisions applied to those contracts that could be regarded as long-term, by reference to the length of the commitment; they applied only where the tenants would definitely have to contribute in respect of a period of more than 12 months.
(iii) The window-cleaning contract did not relate to “qualifying works” for the purpose of sections 20 and 20ZA of the 1985 Act so as to bring the consultation requirements into play. The definition of qualifying works as works on a building or other premises indicated that it comprised matters that would naturally be regarded as “building works”. Cleaning windows did not naturally fall within that concept.
(3) The £100 cap on recovery for a failure to comply with the consultation requirements was to be applied to each individual unit and then aggregated, resulting in a cap of roughly £7,900 for the defendant’s 79 units together. This followed from the fact that the cap related to the relevant contribution of a tenant by way of service charges, defined in section 18(1) of the 1985 Act as an amount payable by a tenant “of a dwelling”. Consequently, it related to the payment in respect of each separate dwelling, namely each individual unit within the lease: Oakferm Properties v Ruddy [2006] 2 EGLR 30; [2006] 49 EG 96considered.
Katherine Holland (instructed by Speechly Bircham LLP) appeared for the claimant; Ranjit Bhose (instructed by Housing & Property Law Partnership) appeared for the defendant.
Sally Dobson, barrister
