In a recent appeal case the Upper Tribunal ruled that the FTT could determine the reasonableness of a service charge – even if an error in the demand meant it was not due for payment. Sam Andrews of Brady Solicitors explains.
In an ideal scenario, service charges will be demanded properly every time. However, even where they are not, the First-tier Tribunal (FTT) can still determine the leaseholder’s liability to pay them.
In the 38 Lambs Conduit* Upper Tribunal case the leaseholders were appealing their liability to pay service charge sums demanded by the landlord.
A number of other issues were in dispute but this blog focuses on the issue of the Tribunal’s jurisdiction to determine the reasonableness of service charges under Section 27A (S.27A)
Section 27A explained
S.27A of the Landlord and Tenant Act 1985 allows both landlords and leaseholders to apply to the Tribunal for a determination as to whether a service charge is payable and, if it is, as to:
- the person by whom it is payable,
- the person to whom it is payable,
- the amount which is payable,
- the date at or by which it is payable, and
- the manner in which it is payable.
The 38 Lambs Conduit demands had been issued without the name and address of the landlord, in breach of Section 47 (S.47) of the Landlord and Tenant Act 1987.
The leaseholders argued that this meant that the demands were invalid and not yet payable – and so the Tribunal had no jurisdiction to determine their reasonableness.
The Tribunal disagreed with the leaseholders
It found that, as long as there was a service charge payable at some point, the FTT could consider an application under S.27A – whether or not the service charge was due.
Failure to comply with the requirements of S.47 did not rob the Tribunal of its jurisdiction under S.27A.
Our analysis
The Upper Tribunal has provided a timely reminder as to the purpose of S.27A, which is to provide a “low cost, easily accessible machinery for dispute resolution”. Furthermore, it is clear that the Upper Tribunal will do everything it can to maintain its jurisdiction over service charge disputes.
Advice for managing agents
It is clear that the FTT can, and will, be able to hear applications under S.27A at any time, even if there has been no payment or the service charge is not due – so long as the lease obliges the leaseholder to pay a service charge at some point.
This case also highlights that many service charge demands continue to fall foul of S.47 of the Landlord & Tenant Act and are being issued without the name and address of the landlord.
Check that your demands are correct and compliant otherwise the leaseholder is not liable to pay – and you could still face a test for reasonableness at the FTT!
For help with perfecting your service charge demands or dealing with a service charge challenge, contact the property management specialists at Brady Solicitors.
If you found this Brady Solicitors service charge blog helpful, you may also want to read:
Expert view: how to issue a service charge demand
Invalid service charge demand? All may not be lost
Service charge demands – the devil is in the detail
Reasonableness of service charges – 7 steps to a fair approach
* Cannon and another v 38 LAMBS CONDUIT LLP [2016] UKUT 371 (LC)
