Section 20B(1) of the Landlord and Tenant Act 1985 provides that a lessee is not liable to pay relevant costs incurred if any of those costs taken into account in determining the amount of the service charge are incurred more than 18 months before the demand for payment is served on the lessee.
Section 20B(2) provides an exception; namely, if a lessee is notified, in writing, within 18 months of the relevant costs being incurred that they are required to contribute to the same pursuant to the terms of their lease, section 20B(1) does not bite.
In Parmar v Ladbrooke Grove Ltd [2022] UKUT 213 (LC); [2022] PLSCS 132, the Upper Tribunal (Lands Chamber) was asked to determine whether the landlord’s failure to certify the amount of the service charge in accordance with the terms of the lease, within the 18-month period envisaged by section 20B(1), rendered irrecoverable the whole of the service charge for that period?
The appellant tenant was the long leaseholder of a flat situated in a converted Victorian house in Ladbrooke Grove, London. The respondent company was his landlord.
By clause 3(2) of the lease, the appellant covenanted to pay a service charge as additional rent. The amount of service charge payable was to be ascertained and certified by a certificate signed by the respondent’s auditors, annually, and soon after the end of the respondent’s financial year “as may be practicable”.
In 2014, the appellant stopped paying the interim service charge demanded by the respondent. Proceedings were issued by the respondent in the county court to recover the interim service charges demanded between 2014 and 2018. Judgment was obtained by the respondent for interim service charges and interest in the total sum £8,610.
In June 2019, the respondent applied to the First-tier Tribunal under section 27A for a determination of the service charges payable by him for the period 2014 to 2018. The FTT found that proper certification for the relevant periods had not taken place. Accordingly, the appellant was not liable to pay the service charges until proper certification had taken place. The FTT found that although the respondent had not been sent a letter which contained a statement in a precise form, it was nevertheless “in no doubt that for the purposes of section 20B(2)” the appellant had been notified in writing that the charges had been incurred and he would be required to contribute to the same.
On appeal the appellant advanced two grounds of appeal. First, on the evidence, the FTT erred in finding that he had been served with a notice that satisfied section 20B(2). Accordingly, the respondent was now out of time in respect of serving a valid demand. The UT agreed. If the respondent intended to demand further service charges after proper certificates had been issued, it would have to demonstrate that it fell within the exception in section 20(B).
Second, the appellant argued that as the respondent was out of time for making any further demand for the years in dispute, the sum of £8,610 he had been ordered to pay in the county court in respect of on-account service charges should be refunded. The UT disagreed. Section 20B did not require an assumption to be made “that costs which were in fact incurred were never incurred”. Rather, section 20B operated by relieving the lessee from the obligation to pay so much of the service charge as reflected costs incurred more than 18 months before a proper contractual demand was served. Section 20B did not interfere with the contractual machinery for identifying the sums for which a lessee would otherwise be liable to pay.
Elizabeth Dwomoh is a barrister at Lamb Chambers
