Decision Nº LRX 64 2011. Upper Tribunal (Lands Chamber), 26-01-2012
| Jurisdiction | UK Non-devolved |
| Judge | His Honour Judge Mole QC |
| Date | 26 January 2012 |
| Court | Upper Tribunal (Lands Chamber) |
| Judgement Number | LRX 64 2011 |
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UPPER TRIBUNAL (LANDS CHAMBER) |
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UT Neutral citation number: [2012] UKUT 2 (LC)
Case Number: LRX/64/2011
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LANDLORD AND TENANT – service charge – Landlord and Tenant Act 1985 s.20B – ‘costs’ are ‘incurred’ when ‘expended’ or ‘become payable’ – gas used from 2001 to 2007 not billed by correct supplier until November 2007 – included in service charge April 2008 – tenant liable
IN THE MATTER OF AN APPEAL AGAINST A DECISION
OF A LEASEHOLD VALUATION TRIBUNAL
and
THOMAS BURR Respondent
Re: 9 Cambridge Square,
Royal Eastwood Park,
Redhill, RH1 6TG
Before: His Honour Judge Mole QC
Sitting at 43-45 Bedford Square, London, WC1B 3AS
on 12 December 2011
Justin Bates instructed by Ms McQueen-Prince, solicitor for Peverel Property Management Limited
The respondent in person
The following cases are referred to in this decision:
Gilje v Charlgrove Securities [2004] 1All ER 91
Hyams v Wilfred East Housing Co-op Ltd (LRX/102/2005)
Mrs Marie Jean-Paul and another v the London Borough of Southwark [2011] UKUT 178 (LC), London Borough of Brent v Shulem B Association Ltd [2011] EWHC1663, and v Charlgrove Securities [2004]1 All ER91.
Capital and Counties Freehold Equity Trust Ltd v BL PLC [1987] 2 EGLR 49
DECISION
Introduction
1. Mr Burr, the respondent, owns the leasehold interest in 9 Cambridge Square, Royal Eastwood Park, Redhill and has done since September 2006. This flat is part of a substantial estate known as Royal Eastwood Park, completed by Barratt Homes Ltd in 2000.
2. The appellant, OM Property Management Ltd, is the management company for the estate and a party to Mr Burr's lease. The appellant is responsible for maintaining the communal facilities, which include a leisure centre and swimming pool. The pool is heated by gas. The appellant’s duties involve (amongst other things) paying the gas bills. It recovers its costs through a service charge to the leaseholders.
3. At the start of the appellant's management of the estate in April 2001, the developer told the appellant that the gas for heating the pool was supplied by EDF Energy. Gas bills were duly received from EDF and paid by the appellant from 2001 until late 2007. In November 2007 Total Gas and Power informed the appellant that it, not EDF, had been supplying the gas to the development. Worse, a gas meter had been misread and EDF had been undercharging. Total demanded a payment of £135,337.28. A dispute ensued that led to the gas being cut off for some months. Eventually EDF returned the money wrongly paid to it, the appellant paid Total the full amount demanded and Total agreed to reduce by 20% the sums it was claiming. This left £100,289.28, which sum the appellant demanded from the leaseholders in the service charge accounts for 30th of April 2008. Mr Burr's share was £313. 90. He made a part payment of £194.49 under protest and then, on 10 June 2010 issued a claim against the appellant (then known as Peverel O M Ltd) in the Reigate County Court claiming the sum of £200.57 as damages for negligence. He claimed that the appellant was responsible for the mistake with the gas meter and if the proper amount had been included in a service charge at the proper time the previous leaseholder would have shouldered the cost. The Appellant denied the claim and negligence and said that Mr Burr was liable according to the terms of the lease and that the charges due to Total were only incurred when they were invoiced in November 2007. The County Court transferred the proceedings to the Leasehold Valuation Tribunal for determination.
4. With the agreement of the parties the LVT dealt with the application on the basis of their written representations.
5. The chairman of the LVT decided the application on 27th April 2011. After setting out on the submissions of the parties and the law and the LVT said that it had no power to determine allegations of negligence. It was not for it to decide whether it might have been possible for the appellant to discover the correct identity of the gas supplier or whether the bills were too low. The LVT concluded that that under the terms of the lease Mr Burr was liable to take on any outstanding liability that might otherwise have fallen on his predecessor. The LVT also concluded that the charges for the costs of supply of gas to the swimming pool were properly included within the service charge and that the charges for the gas supplied by Total were reasonable.
6. At paragraph 30 the LVT turned to the issue in this case.
"30. The cost of the gas supply is a relevant cost within the meaning of Section 18 of the Act. The question is when that cost was incurred. Was it incurred when the gas was supplied or was it incurred when Total issued invoices? If it was incurred more than 18 months before a demand for payment of aid service charge was served on the tenant then Section 20B provides that the tenant is not liable to pay those costs unless subsection 2 applies.
31. Section 20B was intended to deal with the problem of stale or historic claims for service charges. In Gilje v Charlgrove Securities [2004] 1All ER 91 at paragraph 27 Etherton J said "the policy behind section 20B of the Act is that the tenant should not be faced with a bill for expenditure, of which he or she was not sufficiently warmed to set aside provision."
32. The (appellant) submits that the cost of gas was incurred when Total submitted invoices in November 2007. If that is correct, the policy of the section as set out by Etherton J would be defeated. In a case such as this, whether the fault lies at the door of the supplier or the (appellant), the lessees would face a bill for unanticipated and unbudgeted expenditure unless they are protected by Section 20B.
33. In the normal course of events, there will not be significant delay between gas is being supplied and an invoice being issued and so the question of when the cost is incurred is unlikely to arise. It is only where there has been some sort of unusual occurrence such as here that the issue will arise.
34. The Oxford English Dictionary gives a long entry for "incur" but it includes: "to run, flow, fall or come to or into; to fall (within a period of time, the scope of an argument, etc.)... To devolve or accrue; to supervene... to become through one's own action liable or subject to; to bring upon oneself..."
35. Section 20B refers to the "relevant costs... were incurred". V (appellant) became liable to pay for the gas when the gas was supplied even though it may not have been invoiced until a later date. The cost had been accrued at that time. The Tribunal considers that if the policy of 20B is not to be defeated, then that is the meaning which must be given to the word "incurred". The consequence is that the lessees are not liable to pay for the cost of gas supplied more than 18 months before notification was given to the lessees.
36. The letter dated 23 October 2008 which enclosed a copy of the accounts clearly amounted to a demand for payment of the service charge. The tribunal has considered whether any of the letters from 17th of April 2008 up to that date amounted to sufficient notification so as to satisfy section 20B (2). It concludes that they did not. The letters appear to be a genuine attempt to keep the residents informed of the problem and the attempts to resolve them. The letter dated 24th of June 2008 informed lessees that the total sum of £135, 337.25 had been paid to Total. However, there is no suggestion in any of those letters that the lessees would be required to contribute towards the payment which was being made.
37. In conclusion, the cut off date is 18 months before 23 October 2008, namely 23 April 2007.
7. The LVT then considered the schedule of amounts and sought to apply the cut-off date to it. It's further dealt with a point arising out of the alleged use of the reserve fund to offset gas charges. Neither of those points arise in this case.
Submissions
8. Mr Bates submitted that the case law establishes that costs are "incurred" by the landlord within the meaning of section 20B either when the landlord actually pays the bill or when he becomes contractually obliged to pay it by receiving an invoice. Costs are not "incurred" until at least an invoice is presented; a liability may arise on the provision of goods or services but the landlord is not obliged to pay until a quantified demand is presented. Until then no cost is "incurred." He took me to the authorities of Hyams v Wilfred East Housing Co-op Ltd (LRX/102/2005) , Mrs Marie Jean-Paul and another v the London Borough of Southwark [2011] UKUT 178 (LC), London Borough of Brent v Shulem B Association Ltd [2011] EWHC1663, and v Charlgrove Securities [2004]1 All ER91. On either analysis, he...
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