Where a lease provides for service charges to be certified by the landlord’s surveyor, the issue of a valid certificate will usually be a condition precedent to the tenant’s liability to pay: see Leonora Investment Co Ltd v Mott MacDonald Ltd [2008] EWCA Civ 857; [2008] EWCA Civ 857, which illustrates the importance of adhering to the contractual machinery set out in tenants’ leases.
However, landlords will have been reassured by Tuckey LJ’s comments that these types of provisions should not be seen as procedural obstacle courses. Consequently, in the absence of lease clauses preventing them from doing so, landlords are entitled to rectify errors. None the less, landlords must act promptly to ensure that subsequent claims for payment are not statute barred.
In Akorita v Marina Heights (St Leonards) Ltd [2011] UKUT 255 (LC); [2011] PLSCS 183, the landlord was entitled to demand service charge contributions in advance and to make a balancing charge at the end of the year. However, the lease stated that it’s surveyor must certify that the advance payments were reasonable, as well as the amount of the annual service charge. The tenant argued that the requirements were a condition precedent to her liability to pay the landlord.
The tribunal accepted the tenant’s arguments and rejected a certificate provided by the landlord’s accountant for the purposes of section 21 of the Landlord and Tenant Act 1985 (which requires landlords to provide regular statements of account). The certificate bore a disclaimer in respect of “the reasonableness of the costs of payments or the standard of services or works provided” and did not satisfy the requirements set out in the tenant’s lease.
The tenant did not press the point further. Consequently, the tribunal did not have to decide whether the landlord was entitled, belatedly, to obtain the relevant certificates from its surveyor and renew its service charge demands or whether the tenant was entitled to rely on section 20B of the 1985 Act to relieve her from liability for the sums claimed.
Section 20B prevents landlords from recovering residential service charges for items of expenditure that are more than 18 months old, unless the landlord has notified its tenants in writing within that 18-month period that the relevant costs will be included in their service charge contributions at a later date: see section 20B(2).
The tribunal suggested that if section 20B were to prevent the landlord from renewing its demands for payment, the landlord might become insolvent. This would prevent the landlord from managing the property for the benefit of all the tenants, but was not a good reason for interpreting the lease differently.
The decision is a reminder that landlords should not lose sight of the fact that their power to levy service charges and a tenant’s obligation to pay are governed by the provisions in the parties’ lease. The 1985 Act provides valuable additional protection for residential tenants without detracting from this principle.
Allyson Colby is a property law consultant
