Landlord and tenant – Service charge – Payments on account – Appellant’s headlease containing obligation to pay interim maintenance charge to freeholder in respect of costs of maintaining exterior of building – Appellant in turn subletting flats in building to respondents on terms providing for payment of service charge – Whether respondents liable to contribute through service charge to sums paid by appellant as interim maintenance charge – Whether recovery of such sums barred by absence of provision in subleases for payments on account – Appeal allowed in part
The appellant held a headlease, for a term of 125 years from 1989, of a property comprising part of a building in Folkestone, Kent. The property contained a number of flats which the appellant had let on subleases to the respondents for terms of 125 years less one day.
The appellant was liable under the terms of the headlease to pay a “maintenance charge” to the freeholder, representing 75% of the costs incurred by him in maintaining the exterior of the building. An interim maintenance charge was payable on account in January of each year in respect of the forthcoming year’s maintenance charge.
The respondents were in turn liable to pay a service charge to the appellant in respect of her costs of discharging a covenant in the sublease to repair, maintain and renew the structure and exterior of the building and the common parts; they also covenanted to pay the rent, service charge, insurance premium and other rents reserved by the headlease.
The appellant withheld payment of the interim maintenance charges demanded by the freeholder for four consecutive years to the end of March 2011. The £5,840 charge for the year to 2008 was not the subject of litigation but the leasehold valuation tribunal was asked to determine the charges for the other three years. In January 2012, the LVT determined that £6,215.63 was payable for the year to 2009 and a total of £12,463.19 for the years ending in 2010 and 2011. Permission to appeal was refused in April 2012 but the appellant did not pay the four interim charges until August 2013, after the freeholder began possession proceedings.
The appellant then issued service charge demands requiring each of the respondents to pay a proportion of those sums as service charge. She subsequently brought a county court action claiming payment and the matter was referred to the first-tier tribunal to determine whether the sums claimed were due. The FTT held that those sums were not recoverable through the service charge since they were payments on account and the terms of the subleases made no provision for such payments. It further held that, if it were wrong on that issue, recovery of the sums demanded for the first two years was still barred, by virtue of section 20C of the Landlord and Tenant Act 1985, since the sums in question had not been demanded within 18 months of the relevant costs being incurred. The appellant appealed.
Held: The appeal was allowed in part.
(1) It was not disputed that the respondents were obliged by their leases to pay to the appellant a service charge reflecting money spent by her on the interior of the property, or by the freeholder on the exterior pursuant to the headlease. While the subleases contained no provision for payments on account in respect of the service charge, the sums demanded by the appellant were not payments on account. The demands themselves made no reference to payment on account but were described simply as service charge demands. They represented sums that the appellant had been obliged to pay, and had paid, to the freeholder. They were reimbursements of sums that they appellant had had to pay, rather than advance payments representing what she might have to pay. They were imposed on the respondents as service charges, not payments on account. Accordingly, recovery of those sums was not precluded by the terms of the subleases.
(2) The first two years’ payments demanded, for the years to 2008 and 2009, were nonetheless irrecoverable pursuant to section 20B of the 1985 Act since the relevant costs were incurred more than 18 months before the service charge was demanded from the respondents.
(3) In respect of the two years’ payments to 2010 and 2011, the matter would have to be remitted to the FTT to consider the respondents’ contentions that those charges, while not barred by section 20C, were not recoverable by virtue of section 19 since they were not reasonably incurred and, so far as they related to the provision of services, or the carrying out of works, the services or works were not of a reasonable standard.
The appellant was represented by her husband, Mr P Vairavan; four of the respondents appeared in person.
Sally Dobson, barrister
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