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Service Charges: Obligation of landlord to give notice to tenant of sums to be demanded (H Stain Ltd v Richmond – 2021)

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Where a landlord is to make a demand for service charge sums from a tenant, is the landlord’s demand validly served and sums payable where insufficient notice is given to the tenant?

The background

In H Stain Ltd v Richmond [2021], a residential flat was let on a long lease, under which the landlord was responsible for the repair of the structure of the building and maintenance of its common parts. The tenant was obliged to pay service charges to the landlord in respect of the sums incurred. Specifically, the lease wording included an obligation on the part of the tenant to make “a contribution in advance and/or to a sinking fund on account of expense and payment anticipated Provided that if the tenant so requires the amount of any such contribution is certified as being fair and reasonable…and that not less than one month’s notice of such advance payment or contribution is given to the Tenant.”

A managing agent was appointed by the landlord to manage the block. The agent sent an invoice to the tenant on 18th August 2015 in the sum of £2,395, stated as ‘projected expenditure’ and indicating that the sum was demanded in advance of sums being incurred. Payment of the outstanding amount was due within 30 days of the date of the invoice.

The tenant failed to make payment, having been engaged in dispute with the agent over the maintenance and repair of the building. The landlord commenced proceedings against the tenant, as well as other tenants of the building, to recover the sum. The First-tier Tribunal considered the meaning of the lease wording above. The landlord argued that the tenant was liable to pay the sum demanded a month after the date of the demand. Finding that the tenant could not have received the demand earlier than 19th August, the landlord had given no more than 29 days’ notice of demand. The conditions for making such demand had not been met according to the lease wording, and the FTT therefore concluded that the demand was not valid and the tenant was not liable for the sums demanded. The landlord appealed.

The decision

The Upper Tribunal agreed with the FTT and found in favour of the tenant. The landlord argued that the lease wording did not require the landlord or its agent to state when payment of a sum demanded was due. The tenant was required to make payment one month after the demand was made, and liability to pay was not conditional on the specification of a payment date one month or more later.

The UT found that the demand issued did not comply with the lease wording. The UT interpreted the lease wording as meaning that the tenant was liable to make payment immediately after the expiry of a notice period given by the landlord of one month. Service charge sums demanded were to be fair and reasonable, and if the tenant required certification by a chartered accountant, the tenant’s liability to pay only arose following receipt of such certification. The tenant was therefore entitled to receive at least one month’s notice of ‘on account’ sums demanded before they became liable to pay them, the landlord was required to stipulate the required payment date, and this was a condition of liability.

Advice and action

This is a word of warning for landlords and managing agents to ensure that lease wording is closely followed, ensuring that tenants receiving demands for sums are given appropriate notice as required and are not liable to make payment until the expiry of such notice period.

Failure to meet a condition of terms such as this is critical, resulting in an invalid demand and non-payment from tenants of essential sums which could seriously impact a maintenance schedule.

The Upper Tribunal agreed with the FTT. The demand did not comply with the lease wording, and the tenant was therefore entitled to receive at least one month’s notice of ‘on account’ sums demanded before becoming liable to pay them.

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