Swanlane Estates Ltd v Woods and others LRX/159/2007 (.pdf)

This case concerns the not uncommon situation of a court or tribunal (in this case, a Leasehold Valuation Tribunal) taking a point which the applicant / claimant had not expressly pleaded and the respondent / defendant then losing the case on that very point.

Mr Wood and a number of his fellow leaseholders applied to the Leasehold Valuation Tribunal (LVT) for a determination of their service charge liabilities for the years 2004 – 2007. The extent of the challenge was described as “request fully detailed itemised dated of each charge on list (this had not been forthcoming) assess what should be covered by buildings insurances establish which work actually carried out, and by whom. Proof of what has been paid to whom.” A list of disputed items was also attached.

Some of the items related to costs had clearly been incurred at least 18 months before being demanded. This was important because, by virtue of s.20B Landlord and Tenant Act 1985, a landlord must demand service charges within 18 months of incurring them or he is not entitled to recover anything from the leaseholders in respect of the expenditure in question. However, Mr Wood made no express reference to a challenge under s.20B.

The landlord filed a statement in reply, setting out its factual response to each disputed item. It also contended that there had been compliance with s.20 Landlord and Tenant Act 1985, more commonly known as the consultation requirements (i.e. that the leaseholders had been properly consulted in respect of the disputed items). If the consultation requirements are not complied with, the amount of money which the landlord and recover by way of service charges is severely limited, unless the LVT can be persuaded to grant the landlord dispensation from the consultation requirements.

At the hearing, the LVT took two points which Mr Wood had not raised himself. Firstly, they suggested that a number of the disputed items fell foul of s.20B in that they had not been demanded within 18 months of being incurred and, secondly, that the landlord had not properly complied with the consultation requirements contained in s.20. The landlord was given a short adjournment of 30 minutes in order to produce evidence relating to these points. The evidence which was produced did not satisfy the LVT and, as a result, the service charges of Mr Wood and the other leaseholders were reduced by £71,019.18.

The landlord appealed on two grounds. Firstly, it was said that the LVT was wrong in law to take points which had not been pleaded. Secondly, it was said that the LVT had not afforded the landlord a fair hearing in that it had not allowed the landlord sufficient time to respond to the points.

The first ground of appeal failed. The Lands Tribunal concluded, in very robust terms, that the LVT was entitled to raise the points that it did. It is quite right that the LVT clarify the issues between the parties, particularly where one side is not legally represented. It was quite possible that the leaseholders were not aware of the rights which Parliament had conferred upon them. The LVT was not required to sit in silence and find the applicants liable for service charges when the LVT had good reason to query as to whether the charges were legally due. Whilst there was no obligation on a landlord to disclose documents on matters which had not been pleaded, a prudent landlord which was certain that it had complied with the law would have disclosed all relevant documents relating to both the s.20 consultation point and the s.20B point.

The second ground of appeal, however, succeeded. The LVT had erred in law by only allowing 30 minutes for the landlord to produce the relevant documents. It should have granted an adjournment to the next day in order to allow the landlord to address the point and find the relevant evidence.

The case was remitted to a differently constituted LVT with directions for the disclosure of the relevant notices and for the leaseholders to file written submissions as to whether or not they had received the notices.

It is not uncommon for a leaseholder to challenge their service charges in the most general terms, often with only a basic understanding of the relevant law and it is very encouraging to see the Lands Tribunal encouraging the LVT to take a robust approach to such cases and to make sure that all relevant matters are dealt with, regardless of whether the leaseholders have expressly raised the point. Landlords will consider that this represents further evidence of the alleged pro-leaseholder bias of the LVT but, as the Lands Tribunal pointed out, a well organised and prudent landlord should have access to the relevant paperwork and should be able to disclose it without too much difficulty. Now, just to find a well organised and prudent landlord… it can’t be that hard, can it?