Service charge provisions must be construed in the context of the lease in which they appear. In circumstances where a provision provides that a tenant must be given one month’s notice before a service charge demand becomes payable, a demand that specifies a shorter notice period will be invalid.
In H Stain Ltd v Richmond [2021] UKUT 0066 (LC), the respondent tenant was the leaseholder of a flat situated in a residential block in Mill Hill, London NW7. She occupied the flat pursuant to a long lease granted in 1977 for a term of 99 years.
Under the terms of the lease, the landlord was responsible for repairs to the structure of the block and maintenance of the common parts. The service charge provisions of the lease enabled the landlord to recover the costs of meeting such obligations through the service charge. Materially, clause 3(6) of the lease provided that the tenant was to pay the landlord “upon demand… such sums as may be incurred or provided for by the Landlord… for the maintenance and repair for those parts of the building and the block not forming part of this demise but of which the Tenant has the benefit and use thereof in common with the Landlord and other owners or occupiers… Provided that … not less than one month’s notice of such advance payment or contribution is given to the Tenant.”
In August 2015, the landlord’s managing agent sent the tenant a service charge demand for a contribution towards anticipated expenditure for the period 2015-16. It was stated at the bottom of the demand, “payment due 30 days after date of demand, arrears by return”. The tenant failed to pay the demand following a dispute with the landlord concerning maintenance of the block. The landlord issued proceedings to recover payment.
Before the First-tier Tribunal, the landlord relied on Mannai Investments Co Ltd v Eagle Star Assurance [1997] UKHL 19 to argue that a reasonable recipient of the demand would have understood that clause 3(6) entitled them to a full month’s grace before payment had to be effected. The FTT disagreed. The 2015-16 demand was invalidated by the request for payment within 30 days. The shortened payment period was expressly contrary to clause 3(6) of the lease, which provided for payment one month after the date of demand.
The Upper Tribunal (Lands Chamber) dismissed the landlord’s appeal. It found that the tenant’s liability to pay the sums demanded under clause 3(6) was conditional upon the landlord setting out not only the amount to be paid, but the date of payment, which in accordance with section 61 of the Law of Property Act 1925 could not be less than one calendar month after notice had been given.
This case is a reminder that proper regard must be paid to notice periods in service charge provisions when giving demands. The UT gave short shrift to the landlord’s assertion that the tenant could simply find out when the demand became payable by looking at the terms of the lease. It found that the notice period in clause 3(6) served two important purposes: first, to fix a date for payment, so both parties knew when the tenant’s obligation to pay fell due; and second, to give the tenant an opportunity make arrangements for payment.
Elizabeth Dwomoh is a barrister at Lamb Chambers
