Those with good memories will remember that a year or so ago the Upper Tribunal gave judgment in a case called Om Property Management Ltd v Burr (our note here) in which the issue was at what point in time does a cost became incurred for the purposes of s.20B, Landlord and Tenant Act 1985. It decided that costs became incurred on the presentation of an invoice or on payment.
Mr Burr appealed against that decision and the Court of Appeal recently gave its judgment on the subject (judgment here).
The facts, for those too lazy to click the link above, were that in November 2007, through no fault of its own, Om found itself with a gas bill in the region of £100,000. This arose because it had mistakenly been paying EDF Energy for the gas it was using, when EDF were not responsible for the supply of gas to the block (this was unsurprising as the developer had told Om that EDF supplied the gas). Moreover, EDF had been under charging. Even when EDF paid Total Energy (i.e. the company who had been supplying the gas) what it had received there still remained a shortfall of £100,000. Om subsequently put the sum through the service charge and demanded it from its leaseholders.
Before the LVT Mr Burr argued that these costs were irrecoverable because they had been incurred more than 18 months before the service charge demand was sent. He said that the cost of supplying the gas was incurred when it was supplied. Mr Burr won in the LVT but lost in the Upper Tribunal.
The Court of Appeal dismissed his appeal. The Upper Tribunal was right; a cost becomes incurred on the presentation of an invoice or when it is paid.