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Jurisdiction of the FTT: the reasonableness of historic service charge

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Whether continuing to pay service charges prevented a leaseholder from challenging them

The background

In Marlborough Park Services v Leitner [2018], the leaseholder held long leases of two properties granted by the freeholder. Each lease was subject to the payment of service charge. The leaseholder paid service charges up to the end of the service charge year ending in March 2012, but failed to pay for the year April 2012 to March 2013. The landlord obtained a County Court default judgment against the leaseholder.

The leaseholder still made no payment, and the landlord served a s.146 notice. The leaseholder claimed that he had not received relevant correspondence, and agreed to pay the service charge but not any interest or charges. He asked the FTT to determine the reasonableness of the service charge for years 2007 to 2016. The freeholder argued that the FTT was unable to make a judgment as reasonableness had already been determined by the court and the leaseholder had continued to pay, therefore agreeing or admitting the sums due. The FTT dismissed the freeholder’s application, and the freeholder then appealed.

The decision

The Upper Tribunal allowed the freeholder’s appeal in part. As payments due from April 2012 to March 2013 were already subject to the default judgment by the County Court, the FTT did not have jurisdiction to consider those sums.

The leaseholder had paid service charges up to March 2012 without protest. The UT therefore determined that they had been agreed by the leaseholder following payment over an extended period of time and the FTT again did not have jurisdiction to consider sums due during this period.

With regards to sums due from April 2013, the UT found that the leaseholder could seek determination of reasonableness in the FTT. The leaseholder had not made any statements to indicate that he agreed to the sums demanded for this period.

Advice and action for landlords

This is a helpful case, providing guidance as to the jurisdiction of the FTT to determine applications relating to the reasonableness and payment of service charges. Where a challenge is delayed and brought late, after a long period of acceptance and payment of sums demanded, the FTT is likely to find that it does not have jurisdiction to deal with the application.

Applications for the determination of reasonableness of service charges by leaseholders need to be brought promptly. Where a challenge is delayed following a long period of acceptance and payment, it is unlikely to succeed.

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