RTMs, Service Charges and Estate Management

August 2015 Update

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Willens v Influential Consultants Ltd [2015] UKUT 0362 (LC)

Summary:  (1) An email sent by the landlord to its solicitors containing express instructions in respect of matters incidental to the preparation and service of notice under s.146 was clear evidence that forfeiture of the lease was clearly in the contemplation of the landlord at the time it incurred expenditure on legal fees so that such costs were recoverable as an administration charge; (2) While a mortgagee had the right to preserve its security by paying the service charges to prevent a forfeiture, it did not do so as agent for the lessee but on its own behalf. The making of the payment did not prejudice the lessee’s entitlement to pursue the appeal.

Facts: The lease contained the usual covenant by the lessee:

“To pay all expenses including solicitor's costs and disbursements and surveyors' fees incurred by the Landlord incidental to the preparation and service of a notice under section 146 of the Law of Property Act 1925 or incurred in or in contemplation of proceedings under sections 146 or 147 of that Act notwithstanding in any such case forfeiture is avoided otherwise than by relief granted by the Court…”

The FTT found that the lessee was liable to pay the sum of £2,427 as an administration charge representing legal fees incurred by the landlord (“ICL”) between 22 January and 12 June 2013 in contemplation of proceedings to be commenced against her in the county court.  The FTT referred to a letter of claim issued by Kingsley Smith, ICL's solicitors, on 19 February 2013 in which they had threatened court proceedings for the recovery of the total sum of £7,940 then outstanding if that sum was not paid within 7 days.  The letter had made no reference to forfeiture.  The FTT was not aware of the UT’s decision in Barrett v Robinson (which was issued only a week before the FTT reached its decision in this case) when it made its own decision.  The FTT therefore granted permission to appeal. 

On appeal, the lessee argued that that the correspondence she had received from Kingsley Smith had made no reference to forfeiture.  In particular the letter before action of 19 February 2013, to which the FTT had referred, did not threaten forfeiture.  After her receipt of the letter before action substantial correspondence ensued between the lessee and Kingsley Smith in which forfeiture was never mentioned.

In 2011 ICL's solicitors had served notice under s.146 as a prelude to forfeiture proceedings against the lessee over the non-payment of service charges.  Following the service of the s.146 notice in October 2014 ICL's solicitors had invited the lessee’s mortgagee, Swift, to discharge her liability for the charges which the FTT had determined were payable.  The mortgagee subsequently paid £13,641.95 (which included ground rent, interest and costs as well as the sums within the FTT's jurisdiction).  On 13 November 2014 ICL's solicitors wrote to Swift acknowledging receipt of the payment and describing it as being “in full and final settlement” of the charges determined by the FTT.  ICL argued that payment by the mortgagee of the full amount claimed in the proceedings precluded any further challenge by the lessee herself to her liability and ought to result in her appeal being struck out or dismissed. 

ICL also referred to an e-mail which he had sent to Kingsley Smith on 13 February 2013, in the week before the letter before action, which had not been seen by the FTT.  The email contained express instructions in respect of matters incidental to the preparation and service of notice under s.146.

Held: Dismissing the appeal, the UT (Martin Rodger QC, Deputy President) held: (1) service of a notice under s.146 and, if necessary, proceedings for the forfeiture of the lease, were clearly in the contemplation of ICL at the time it incurred the expenditure on legal fees which the FTT found was recoverable as an administration charge.  The fact that the solicitors themselves did not refer to forfeiture in their correspondence did not detract from the force of ICL’s instructions; (2) as regards ICL’s submission that the appeal should be struck out, proceedings before the FTT had been commenced by the lessee under s.27A of the 1985 Act and para 5 of Schedule 11 to 2002 Act.  They were for the determination of her liability to pay the service charges and administration charges claimed.  The right to apply for such a determination applies whether or not any payment has been made: s.27A(2) and para 5(2).  An application may not be made in respect of a matter which has been agreed or admitted “by the tenant” but the tenant is not to be taken to have agreed or admitted any matter by reason only of having made a payment: s.27A(4)-(5) and para 5(4)-(5).  It follows that the mere fact of a payment having been made did not preclude the lessee from pursuing her appeal.  Nor did the description of that payment as being “in full and final satisfaction” of the liability identified by the FTT confer any different status on the payment by the mortgagee.  The lessee clearly did not agree that the administration charge was properly due and indeed she had already applied for permission to appeal to the Tribunal by the time the payment was made.  While her mortgagee had the right to preserve its security by paying the service charges to prevent a forfeiture, it did not do so as agent for the lessee but on its own behalf.  In any event the description of the payment as “in full and final settlement” was made by ICL's solicitor and not by Swift, which may or may not have been aware that the proceedings were continuing.  The making of the payment did not therefore prejudice the lessee’s entitlement to pursue the appeal.

 

Pendra Loweth Management Limited v North [2015] UKUT 91(LC)

Summary:   Demands for service charges made by a management company were held to be valid notwithstanding the omission of the management company's name and address: s.47 of the 1987 Act has no application to demands for payments of sums due parties to leases who are not landlords within the meaning of the definition in s. 60 of the 1987 Act.

Facts: demands for service charges made by a management company did not give the management company's name and address.  s.47(1) of the 1987 Act requires that the name and address of the landlord be contained in “any written demand” given to a tenant of premises.  A “demand” for this purpose is defined in s. 47(4) to mean “a demand for rent or other sums payable to the landlord under the terms of the tenancy.”  Section 60(1) of the 1987 Act contains a definition of “landlord” applicable to s. 47 as meaning “the immediate landlord”; there is no statutory extension of the expression “landlord” to include any person with the right to enforce the payment of a service charge (as there is in s. 30 of the 1985 Act).

Held: s.47 of the 1987 Act has no application to demands for payments of sums due parties to leases who are not landlords within the meaning of the definition in s. 60 of the 1987 Act. 

 

Skelton v DBS Homes (Kings Hill) Limited [2015] UKUT 0379 (LC)

Summary: The service charges demanded on account for the years 2011-12, 2012-13 and 2013-14 became payable when the copy of the Estimate was eventually provided to the lessees in 2014. 

Facts: The lease made provision for the preparation and service of an Estimate of expenditure together with a statement showing the Service Charge payable by the Tenant on account of those estimated Service Costs.  The landlord prepared an estimate but failed to serve a copy with the demands for payments on account.  The FTT held that the service of the estimate was not a condition precedent and payment was due on the date referred to in the demands. 

Held: The Tenants were entitled to see a copy of the Estimate before being required to pay a demand prepared in accordance with that Estimate.  Once the copy of the Estimate was provided, albeit woefully late, the Tenants each then had all the information they were entitled to so far as concerns the demand for on account payments.  As from the date of receipt of the Estimate in 2014 the Tenants became obliged to pay the amount of the two demands for payment of an instalment of interim service charge.