Landlord and tenant – Service charges – Determination – First-tier Tribunal (FTT) determining service charges due in from appellant tenant for certain years – Respondent management company applying to county court to enforce decision – County court concluding respondent entitled to enforce decision under section 176C of Leasehold Reform Act 2002 and CPR 70.5 – Appellant appealing – Whether FTT’s decision susceptible to enforcement in county court – Appeal allowed
Clarendon Court, Sidmouth Road, London, NW2, comprised six blocks, each of 10 flats. The appellant held a long lease of one of the flats. The freehold was held by a tenant-owned company. The respondent, a management company, had responsibility for, among other things, raising the service charges for Clarendon Court.
On 3 September 2017, the appellant made an application to the First-tier Tribunal (FTT) under section 27A of the Landlord and Tenant Act 1985 for a determination of the service charges due in 2015-16 and 2016-17. He disputed, among other things, a number of elements of the service charge accounts, including £23,604 for legal fees. The FTT decided that only £2,000 of the legal fees were properly allowable; otherwise, nothing was disallowed.
On 9 August 2018, the respondent applied to the county court for the FTT’s decision to be enforced pursuant to CPR 70.5. On 25 September 2018, a “Proper Officer sitting at the County Court” ordered that the respondent might enforce the award “in this court” and specified the amount enforceable as £9,316.04.
A district judge refused to set aside the order. That decision was upheld by the county court where the judge noted that the FTT decision was not an award whereby the respondent could seek to use the operative provision of section 27 of the Tribunals, Courts and Enforcement Act 2007. However, the judge concluded that the respondent was entitled to use section 176C of the Leasehold Reform Act 2002 and CPR 70.5 to enforce the decision as to hold otherwise would make the section otiose and override the clear intention of its operation.
The appellant appealed. The question was whether the FTT’s decision was susceptible to enforcement in the county court.
Held: The appeal was allowed.
(1) Section 27A of the 1985 Act was inserted into it by the 2002 Act. As amended in 2013, the 2002 Act also provided, by section 176A, that, where court proceedings raised a question which the FTT would have jurisdiction to determine under, among others, the 1985 Act, the court might transfer to the FTT “so much of the proceedings as relate to the determination of that question”; and, by section 176A(3), once the FTT had determined the question, the court might give effect to the determination in an order of the court.
Section 176C of the 2002 Act allowed a decision of the FTT other than one ordering the payment of a sum to be enforced in the same way as orders of the county court. A county court order which was merely declaratory could not be the subject of enforcement. It followed that an FTT decision which was no more than declaratory was similarly incapable of enforcement and that section 176C could not be invoked in such a case.
(2) The terms of section 27A of the 1985 Act made it impossible to equate “payable” with “due”. Section 27A(2) provided for section 27A(1) to apply “whether or not any payment has been made”. Where there had been payment, the FTT would necessarily be considering, not whether there was an outstanding liability, but how much could be charged by way of service charge. Section 27A(4) which prohibited any application in respect of a matter which had been agreed or admitted by the tenant also indicated that the role of the FTT was to decide what service charges could be charged rather than what the tenant owed.
Section 19 of the 1985 Act pointed in the same direction, limiting the amount “payable” in respect of a service charge on the basis of reasonableness. Plainly, “payable” referred there to what could be charged. Nor was section 81 of the Housing Act 1996 inconsistent with that view of section 27A of the 1985 Act. “Payable” could be expected to have the same meaning in the two provisions, but it could not be inferred that the word “payable” signified “due” in section 81. If “payable” meant “properly charged” in sections 81 and 27A alike, a landlord would be unable to seek to forfeit for non-payment of a service charge without a prior determination that the service charge was legitimately levied but there need have been no determination that the service charge was due: Cannon v 38 Lambs Conduit LLP [2016] UKUT 371 (LC); [2016] PLSCS 235 applied.
(3) The appellant accepted that FTT decisions on applications under section 27A of the 1985 Act sometimes stated what was due from the tenant rather than just whether the relevant service charges were properly imposed. Even assuming that it was open to the FTT to say what a tenant actually owed, rather than merely what had properly been charged, such a decision would be no more than declaratory. Therefore, in a case in which the FTT expressed a conclusion on what the tenant currently owed, the landlord would not be able to resort to either section 176C of the 2002 Act or section 27 of the 2007 Act for enforcement. If necessary, the landlord would have to issue new proceedings in the county court in which the FTT’s decision would be binding on the parties: Cain v Islington London Borough Council [2015] UKUT 542 (LC); [2015] PLSCS 284, Jarowicki v Freehold Managers (Nominees) Ltd [2016] UKUT 435 (LC); [2016] PLSCS 276 and Avon Ground Rents Ltd v Child [2018] UKUT 204 (LC); [2018] PLSCS 114 considered.
(4) There was no question of the FTT having attempted to specify what the appellant owed in the present case. Its determination involved the disallowance of £21,604 of legal costs and the decision that nothing else should be disallowed. Not only did the FTT not try to work out what amount was outstanding from the appellant on the basis of its conclusions, but it was impossible to do so from the FTT decision alone. It neither ordered the appellant to make any payment nor required him to do or refrain from doing anything else. It was declaratory in nature and so not susceptible to enforcement pursuant to either section 176C of the 2002 Act or section 27 of the 2007 Act.
Timothy Cowen (instructed by Direct Access) appeared for the appellant; Jonathan Wragg (instructed by PDC Law, of Hertford) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Termhouse (Clarendon Court) Management Ltd v Al-Balhaa
