When service charges become indisputable

Marlborough Park Services Ltd v Micha Leitner (2018) UKUT 230 (LC)

Tenants/Leaseholders can seek a determination of the payability and reasonableness of service charges under s.27A Landlord and Tenant Act 1985. It has been something of a question about how far back a challenge can extend in terms of service charge years. While this Upper Tribunal decision is not a complete answer, it does address some of the ways in a which a service charge can become unchallengeable.

Mr L had brought a challenge to 10 years worth of charges from 2007 to 2016 in the FTT. The freeholder landlord had sought to strike out the application on the grounds that the sums at issue had either been admitted (expressly or impliedly) by Mr L, or had already been subject to determination by the court in the form of two county court default judgments obtained on money claims. S.27A(4) L&TA 1985 rules out any application by the tenant on a matter whichL

(a) has been agreed or admitted by the tenant;[or]

(c) has been subject to determination by a court.

S.27A(5) adds “But the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment”.

The FTT dismissed the application, finding that

  • the default judgments were on ‘on account’ demands, not on final out turn demands, so it remained open to Mr L to dispute the final sums.
  • The FTT did not think there had been an express or implied admission.

The landlord appealed to the Upper Tribunal. The tenant did not take part, beyond a letter about the landlord’s solicitors ‘waffling their way through the case’.

The landlord argued

  • the documents before the FTT showed that the default judgments related to final determinations of charge for 1 April 2012 to 31 March 2013, as the charges had been certified before the default judgments.
  • On service charges before 1 April 2012, those had been paid by the tenant without qualification or protest, such that agreement with the charges could be inferred.

The Upper Tribunal accepted the position on the default judgments. There were on the final determinations and a default judgment was a determination of the court. That year could not be challenged as the FTT had no jurisdiction to hear it.

On the payment without protest, following Shersby v Grenehurst Park Residents Co Ltd (2009) UKUT 241 (LC) (our note) and  Cain v Islington BC (2015) UKUT 542 (LC), payment without challenge over an extended period could and probably would amount to admission or agreement of the sums, without more. Agreement could be inferred from the conduct of the tenant.

In my judgment, the FTT erred in law in failing to recognise the significance of the payment of service charge without protest over a period of time long before the application to the FTT was made, the issue of proceedings in the county court to enforce payment of subsequent amounts of service charge and the entry of default judgments in favour of the lessor. As the Tribunal said in Cain at [18], “it would offend common sense for a tenant who without qualification or protest has been paying a series of demanded service charges over a period of time to be able to turn around and deny that he has ever agreed or admitted to that which he has previously paid without qualification or protest.

The pre 1 April 2012 period should also have been struck out as outside the FTT jurisdiction.

However, Mr L’s responses in correspondence on post April 2013 charges were ambiguous and conditional, could not be said to amount to agreement or admission, and certainly not of any specific amount. The challenge to the post 31 March 2013 charges could go ahead in the FTT.

Comment

This goes a long way to show why the usual advice to tenants/leaseholders is pay the charge then bring a challenge, because facing a money claim is a) tactically bad and b) leaves the leaseholder at a serious risk of legal costs. Payment is not an admission.

However, payment over a sustained period without any question or dispute can be an admission. So, the advice should properly be ‘pay, under protest, then challenge’.

While this can only realistically be sustained for a period until a challenge becomes impossible on other reasons (absence of memory, evidence, documents for periods many years ago), there is no reason why a challenge can’t incorporate a number of past years when the charge had been paid, under protest.

The ‘default judgment as determination’ issue is interesting. I have not yet seen a full challenge to that, as a default judgment on a money claim is effectively an administrative act. Does it count as ‘determination by a court’? In the absence of Mr L from this appeal, we will have to wait for this to be argued another time.

About Giles Peaker

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, and still is Nearly Legal on Google +.
Posted in Housing law - All, Leasehold and shared ownership and tagged , .

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