Decision Nº LRX 24 2012. Upper Tribunal (Lands Chamber), 04-09-2013
| Jurisdiction | UK Non-devolved |
| Judge | Martin Rodger QC, Deputy President |
| Date | 04 September 2013 |
| Court | Upper Tribunal (Lands Chamber) |
| Judgement Number | LRX 24 2012 |
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UPPER TRIBUNAL (LANDS CHAMBER)
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UT Neutral citation number: [2013] UKUT 0420 (LC)
UTLC Case Number: LRX/24/2012
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LANDLORD AND TENANT – service charges – date on which costs incurred for the purpose of section 20B, Landlord and Tenant Act 1985 – electricity charges not billed by supplier for five years – relevant costs not “incurred” until invoice delivered or paid – lessee liable to pay - appeal allowed
IN THE MATTER OF AN APPEAL AGAINST A DECISION
OF A LEASEHOLD VALUATION TRIBUNAL FOR THE
SOUTHERN RENT ASSESSMENT PANEL
BETWEEN
WENGHOLD LIMITED Applicant
and
GEORGE STEPHEN EGLETON Respondent
Re: 16 Brockenhurst Court
Hillcroft Close
Lymington
S041 9BA
Before: Martin Rodger QC, Deputy President
Decision on written representations
© CROWN COPYRIGHT 2013
The following cases are referred to in this decision:
Brent LBC v Shulem B Association Ltd [2011] 1 WLR 3014
Jean-Paul v The Mayor and Burgesses of the London Borough of Southwark [2011] UKUT 178 (LC)
OM Property Management Ltd v Burr [2012] UKUT 2 (LC)
OM Property Management Ltd v Burr [2013] EWCA Civ 479
DECISION
Introduction
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This appeal once again raises the important question of when relevant costs are to be taken to have been “incurred” for the purpose of the time limit on the recovery of service charges from tenants imposed by section 20B of the Landlord and Tenant Act 1985 (“the 1985 Act”).
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The appeal is against a decision of the Leasehold Valuation Tribunal for the Southern Rent Assessment Panel (“the LVT”) given on 20 December 2011. Mr George S. Egleton, the lessee of Flat 16 Brockenhurst Court at Hillcroft Close in Lymington, Hampshire (“the Property”) had applied to the LVT under section 27A of the 1985 Act to determine the service charge he was liable to pay to his landlord (the appellant) for electricity used in lighting the common parts of his building in the period from 2004 to 2009. By an oversight, the appellant’s managing agents did not receive invoices from the supplier of that electricity for almost all of the first five years of the building’s occupation. The LVT decided that only the costs of electricity supplied in the 18 months ending on 16 September 2010 were payable by the lessees, and that the appellant was prevented from recovering charges for the period before 16 March 2009 by section 20B of the 1985 Act. The basis of that decision was that the relevant costs had been incurred more than 18 months before the lessees had been notified of them by the appellant’s managing agents.
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The appeal was brought with the permission of the President granted on 4 May 2012 on the grounds that the LVT’s conclusion was inconsistent with this Tribunal’s decision in OM Property Management Ltd v Burr [2012] UKUT 2 (LC), a case on rather similar facts decided a few weeks after the LVT’s decision. Since the grant of permission to appeal, the Tribunal’s decision in that case has been upheld by the Court of Appeal in OM Property Management Ltd v Burr [2013] EWCA Civ 479. This appeal was stayed to await the decision of the Court of Appeal and now comes before me for determination on the basis of written representations.
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Mr Egleton, the original applicant before the LVT, has chosen not to participate in the appeal. Submissions have been made on behalf of the appellant in a statement of case settled by Mr Justin Bates of Counsel.
The relevant statutory provision
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Sections 18, 19 (in part) and 20B of the 1985 Act are relevant to this appeal and provide as follows:
"18 Meaning of "service charge" and "relevant costs"
(1) In the following provisions of this Act "service charge" means an amount payable by a tenant of a dwelling as part of or in addition to the rent— (a) which is payable, directly or indirectly, for services, repairs, maintenance, improvements or insurance or the landlord's costs of management, and
(b) the whole or part of which varies or may vary according to the relevant costs.
(2) The relevant costs are the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a superior landlord, in connection with the matters for which the service charge is payable.
(3) For this purpose—
(a) "costs" includes overheads, and
(b) costs are relevant costs in relation to a service charge whether they are incurred, or to be incurred, in the period for which the service charge is payable or in an earlier or later period.
19 Limitation of service charges: reasonableness
(1) Relevant costs shall be taken into account in determining the amount of a service charge payable for a period—
(a) only to the extent that they are reasonably incurred, and
(b) where they are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard;
and the amount payable shall be limited accordingly.
(2) Where a service charge is payable before the relevant costs are incurred, no greater amount than is reasonable is so payable, and after the relevant costs have been incurred any necessary adjustment shall be made by repayment, reduction or subsequent charges or otherwise.
20B Limitation of service charges: time limit on making demands
(1) If any of the relevant costs taken into account in determining the amount of any service charge were incurred more than 18 months before a demand for payment of the service charge is served on the tenant, then (subject to subsection (2)), the tenant shall not be liable to pay so much of the service charge as reflects the costs so incurred.
(2) Subsection (1) shall not apply if, within the period of 18 months beginning with the date when the relevant costs in question were incurred, the tenant was notified in writing that those costs had been incurred and that he would subsequently be required under the terms of his lease to contribute to them by the payment of a service charge."
The relevant facts
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These were not significantly in dispute before the LVT and I take the following summary as the basis of my decision.
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The Property is one of fourteen flats in a block which is itself one of five similar blocks on a small estate completed by Barratt Homes Ltd in 2004. Under a lease of the Property granted by Barratt Homes to Mr Egleton on 30 April 2004, which I take to be in standard form, the lessor covenanted to provide certain services, including lighting the common areas of the building, for which the lessee was to pay through an annual service charge. The lessee’s contribution to the costs of services provided to the building (as opposed to those provided to the estate as a whole) is 6.62%.
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The internal common areas of the building comprise two separate staircases, each of which is served by a separate electricity supply with its own meter located in a storage cupboard on the ground floor. Each of the blocks on the estate is arranged in a similar manner so that in total there are ten meters for which ten separate bills should have been provided by EDF Energy which supplied electricity to the estate.
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The appellant acquired the freehold interest in the building in October 2005 and appointed agents to manage it on its behalf. For reasons which are not apparent from the LVT’s decision, the appellant’s agents did not initially receive any bill for electricity supplied through one of the two meters in Mr Egleton’s building. There is a suggestion that bills for that meter was sent to an incorrect address, but in any event it was not until 7 October 2009 that invoices were sent to the appellant’s agents for electricity supplied through the relevant meter from 17 October 2004 to 13 July 2009. The invoices totalled £9,362.28 which the agents promptly arranged to be paid on 14 October 2009.
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The payment fell in the service charge year which ended on 31 March 2010, the annual accounts for which were not certified until July of the following year. On 16 September 2010, before the accounts were prepared, the managing agents wrote to all of the lessees in the building giving notice under section 20B(2) of the 1985 Act that expenditure on the historic electricity charges had been incurred and warning that the lessees would be required to contribute towards it through the service charge.
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At 6.62% Mr Egleton’s proportion of the historic electricity charges came to £619.78 and that sum was duly included as part of a total end of year adjustment of £915.01 demanded of him. On 8 August 2011 Mr Egleton applied to the LVT for a determination of his liability to pay the disputed charge.
The LVT’s decision
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The LVT first decided that the agent’s letter of 16 September 2010 was a valid notice for the purpose of section 20B(2) of the 1985 Act with the result that any part of the historic electricity charges incurred within 18 months of that date was recoverable. It then went on to consider how much of the total charge of £9,362.28 had been incurred within that period.
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The LVT decided that the reference in section 20B(2) to “the date when the relevant costs were incurred” did not mean the date on which a demand for payment was received, but rather meant the date on which...
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