Landlord and Tenant Act 1985 – Service charge – Determination of charges payable by respondent lessee in respect of flat – Leasehold valuation tribunal finding charges payable to management company until date of liquidation of that company and to appellant headlessee thereafter – Whether appellant entitled to charges for entire period – Construction of lease terms – Appeal allowed
The respondent was the lessee of a flat under a lease made in 2008 between the freeholder of the building, as “the Landlord”, a management company and the respondent. The lease provided that the landlord would grant a headlease of the whole estate to the management company. It further provided that, prior to the grant of such headlease, or in the event of termination of the headlease or the winding up or liquidation of the management company, the landlord would carry out the services under the lease on the part of the management company, subject to receiving payment of the relevant service charge from the tenants. In 2009, the freeholder granted a headlease not to the management company but to the appellant, subject to the existing leases of the individual flats and on terms that the appellant would observe and perform the covenants and conditions to be performed by the landlord and the management company under those leases.
The management company went into liquidation in March 2011. The respondent subsequently applied to the leasehold valuation tribunal (LVT) for a determination, under section 27A of the Landlord and Tenant Act 1985, as to the service charges for which he was liable for the years 2009 to 2011. The LVT found that the service charges had been payable to the management company until it went into liquidation, after which the appellant became liable to perform the services under the leases and entitled to the service charges in the management company’s stead. It concluded that it could not reach a decision as to how much service charge was payable to the appellant, since that would require an apportionment of the charges for 2011 between the management company and the appellant and the LVT was unable to undertake that accounting exercise. The appellant appealed.
Held: The appeal was allowed.
Where no headlease had ever been granted to the management company, the freeholder remained responsible, under the terms of the respondent’s lease, for carrying out the services and was entitled to receive payment of service charges from the respondent. The freeholder had then granted an overriding lease of the entire estate to the appellant, subject to all the existing leases including the respondent’s lease of his flats. The appellant thereupon became entitled to the reversion immediately expectant on the respondent’s lease and became “the Landlord” for the purposes of that lease. In effect, the appellant stepped into the freeholder’s shoes. In consequence, it became subject to the obligations, and entitled to the rights, that the freeholder had previously possessed against the respondent. That included the obligation to provide the services under the lease and the right to receive payment of the service charge.
The LVT had therefore erred in concluding that the management company was entitled to receive the service charge up to the date of its liquidation. The management company had never acquired a headlease and had not provided the services or incurred the cost of doing so. The matter should be remitted to the LVT to determine the payments due for the service charge years in question.
The appeal was determined on the written representations of the parties.
Sally Dobson, barrister