05/09/2010

Service charges due and payable?

Staunton v Kaye & Anor [2010] UKUT 270 (LC)

This is a rather confused matter from the Upper Tribunal (Lands) sitting in Manchester. It is made all the more confused by a transcript which muddles parties and at one point suggests the LVT was in error in remitting the matter to itself.

At issue was the payability of a demand for £1,227.47. The questions were variously whether it was a service charge, whether the s.20 Landlord and Tenant Act 1985 notification procedure had been complied with, or could be dispensed with, and particularly whether the demand complied with s.47 Landlord and Tenant Act 1987 (and, on appeal, also s.48 L&T 1987 and s.21B of the Landlord and Tenant Act 1985).

Mr Staunton, the appellant, is the leaseholder of a flat in Barracks Square, Macclesfield, unsurprisingly a former barracks. Kaye and Taylor, the respondents, owned the freehold of the flat and, together with a Mr & Ms Dykstra, the freehold of the former parade ground around which properties were set.

The brief outline of events was:

Beneath the parade ground is a sewer, to which the drains of 28 of the properties are connected, 15 of them via a further length of sewer serving only those 15 properties. The respondents told the LVT that in 2005 and 2006 a company called Genie Developments that owned buildings on the northern side of the square had commissioned surveys from Jet Rod Drainforce and Dyno Rod Drain Services. The surveys showed considerable tree root incursion into the sewers and suggested that rehabilitation was urgent. Genie Developments called several meetings of residents, encouraging the formation of a management company to raise funds and carry out the works that were needed, but they lost interest, and in November 2006 an informal committee called the Barracks Square Renovation Committee was formed by residents. Having obtained estimates from two companies for the remedial works the committee initially decided to accept the higher quotation on the basis that the specification was better. They divided the amount relating to the part of the sewer serving the 15 properties equally between those properties, and the rest they divided equally between the 28 properties. The total attributable to the subject property on this basis was £1,227.47. In the event the contract was let to another company that carried out the work in November 2007 and charged less. The amount attributable to the subject property on this basis was £999.32.

A demand for the sum of £1,222.47 was sent to the appellant on 21 January 2008. It did not state the name of the landlord. It included the note: “Payee details: Barracks Square Renovation Committee”.

Mr S refused to pay as he had seen no problems with the drains and thought the works were to increase the value of another area of the barracks for developers. A claim was brought for £1,222,47 in the County Court in the name ‘Barracks Square Renovation Committee’. Eventually in that claim Kaye and Taylor were substituted as claimants. Mr S defended on grounds that the demand was invalid as a demand for a service charge as it did not give the name and address of the landlord, contra s.47 L&T 1987 and the s.20 L&T 1985 consultation requirements had not been met.

The County Court transferred the case to the LVT for determination of whether the service charge was payable; and if so whether it was reasonable; and whether the s.20 requirements and been met, or if not whether a dispensation under s.20za(1) should be made.

The LVT found that there was no provision in the lease to allow for the creation of a fund by service charge for repairs to the common parts. Although the lease contained a provision for the tenant to contribute to the costs of repairing the sewer, there as no corresponding obligation for the landlord to repair or keep in repair the sewer.

The ‘Barracks Square Committee’, which issued the demand and brought proceedings was not the landlord. Nor were Kaye and Taylor. The landlords were Kaye, Taylor and the Dykstras, jointly. There was no evidence that the costs claimed had been incurred by the landlords.

In the circumstances, there was no need to decide the s.47 issue, nor the s.20 consultation point, although had it been necessary, the LVT would have granted a dispensation and would have found a reasonable charge was £999.32.

Given that the tenant used the drain, there was an equitable obligation to pay. There was also the clear clause in the lease, but this was for the County Court to decide.

Mr S appealed to the Upper Tribunal (Lands Chamber) and permission was given on 3 grounds: whether the respondents are the appellant’s landlords; whether the service charge claimed is in respect of a relevant cost; and whether the amount due is made not payable by sections 47 and 48 of the 1987 Act and section 153 of Commonhold and Leasehold Reform Act 2002.

Held:
It was clear that the respondents were the landlords. They held the freehold title from which Mr S’s lease was demised. The LVT was in error in saying that Kaye, Taylor & the Dykstras were the landlord jointly.

The charge was a service charge:

The lease includes the following tenant’s covenant in clause 2:

“(ix) At all times hereafter to contribute and pay a proportionate part of the expense of maintaining repairing or renewing a) the gutters pipes and other things for conveying rain water from the demised premises b) the gas and water pipes drains conduits and electric wires and other gas water and electric installations in under or upon the upper flat or the reserved property or any part thereof enjoyed or used by the Lessee in common with the Lessor or other the owners and occupiers of the upper flat of the other reserved property …”

Under clause 2(iii) “the reserved property” includes “so much of the Barracks Square as is coloured brown” on the plan annexed to the lease and other land over which there are rights of way. The land coloured brown is the old parade ground.

The landlord’s covenants in clause 3 include the following:

“4) Not to cause or permit obstruction of any drain or pipe used in common with the Lessee for the passage of water or soil in connection with the reserved property.

5) Not to do or permit or suffer to be done in or upon the reserved property anything which may be or become a nuisance annoyance or cause damage or inconvenience to the Lessee or neighbouring owners or occupiers …

9) To pay a proportionate part of the expense of maintaining and repairing so much of the Barracks Square as is shown coloured brown on Plan Number 1 annexed…”

On the s.47. s.48 and s.21(B) point, the Court’s reference to the LVT had not included the s.47 point, however this did not preclude the LVT from considering the point. While on a referred case the LVT could go no wider than the pleaded cases, it was not limited to the expressly referred issues. The LVT had found that the claimants had provided no evidence that section 47 had been complied with. It also found the same in relation to section 48 and found that the relevant summary required by section 21B had not been provided.

However, it was clear that by the time of the LVT hearing, indeed by the County Court hearing, the landlords had provided their names and address. Mr S could be under no doubt that:

the claim was being pursued by the respondents and he had received correspondence from them as landlords. Since, therefore, the information had been furnished, under section 47(2) the amount demanded was no longer to be treated as not due.

LVT’s decision set aside
Dispensation under s.20ZA given for the reasons given as hypothetical by the LVT
Service charge payable by Mr S in respect of the works
Service charge limited to £999.32

Comment
With all due respect, I think this decision illustrates a few difficulties in the transfer of cases between County Court and the LVT/Upper Tribunal. While the LVT and Upper Tribunal focus on the s.47 issue in terms of whether the charge could be said to be due and payable at the time of their hearings – the LVT finding no, but the Upper Tribunal finding that notice of landlord’s name and address had been given by ‘at least the time of the county court hearing’ – this doesn’t deal with the issue facing the County Court, which surely has to be whether the demand was payable at the date the claim was issued. On the apparent evidence, and in view of the claim being issued in the name of the ‘Barrack Square Renovation Committee, this would not appear to be the case.

There was also no apparent evidence that the s.21(B) requirements had been met.

“21B Notice to accompany demands for service charges
(1) A demand for the payment of a service charge must be accompanied by a summary of the rights and obligations of tenants of dwellings in relation to service charges.
(2) The Secretary of State may make regulations prescribing requirements as to the form and content of such summaries of rights and obligations.
(3) A tenant may withhold payment of a service charge which has been demanded from him if subsection (1) is not complied with in relation to the demand.
(4) Where a tenant withholds a service charge under this section, any provisions of the lease relating to non-payment or late payment of service charges do not have effect in relation to the period for which he so withholds it.”

However, it may be that there was evidence that suitable details had been provided.

I’m also not sure that the issue of the landlord is quite so clear cut. While Kaye and Taylor were certainly the landlords of Mr S’s flat, the affected drain was in the freehold held by Kaye, Taylor and the Dykstras. While this area was covered by ‘the area coloured brown’ in the plan to the lease, it is not clear, without more, how the costs of the drainage works were incurred by Kaye & Taylor as landlords of Mr S’s property, given the separation of the freehold interests since the grant of Mr S’s lease. But again, they may have been further evidence on this not referred to in the transcript.

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts.

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