Service Charges: Whether an order for costs should be reversed where the First-tier Tribunal erred in law

The Upper Tribunal considers an appeal by a landlord in respect of a costs order made against it by the First-tier Tribunal in a dispute concerning a demand for service charges. The Tribunal considered the effect of s.47 Landlord and Tenant Act 1987, and whether the absence of an address for the landlord rendered the demands invalid.

The background

In Simon Birch v Paul Meredith [2026], the landlord was the freeholder of a mixed use property in Arundel, West Sussex comprising a ground floor commercial unit with 6 residential flats above. The respondent leaseholder held a long lease of the six residential flats, each of which were sublet.

The leaseholder made an application to the First-tier Tribunal (“FTT”) for determination as to the payability of service charges in respect of the service charge year 2023-24, which totalled £46.918.26 and comprised charges for drainage works, legal fees, pointing and scaffolding.

The FTT determined  that the service charge demands were invalid as they had not included an address for the landlord in accordance with s.47 Landlord and Tenant Act 1987. The FTT then considered whether service charges would have been payable if they had been properly demanded, concluding that the costs of the works had been reasonably incurred, but reduced legal fees by a small amount. The leaseholder was found to be liable for service charges in the sum of £46,500.89.

The leaseholder successfully applied to the FTT for an order under s.20C Landlord and Tenant Act 1985 and para. 5A Sch. 11 Commonhold and Leasehold Reform Act 2002, preventing the landlord from recovering legal fees through the service charge, and a further order seeking reimbursement of his Tribunal application fee. The landlord appealed the FTT’s decision with regards to costs and fees.

The decision

The Upper Tribunal (“UT”) agreed to set aside the s.20C and para. 5A costs orders, and refused to make an order that the landlord reimbursed the leaseholder’s FTT application fee.

The landlord argued that the failure to comply with s.47 of the 1987 Act had been an irrelevant consideration taken into account by the FTT when making its decision, and that a relevant consideration as to his success in demonstrating that works costs had been reasonably incurred had not been taken into account. The landlord stated that the FTT should not have made the s.20C and para.5A orders, or alternatively that orders should have been made only in respect of part of the costs incurred.

The UT found that the FTT had demonstrated its awareness of the principle that s.20C and para.5A orders interfered with the contractual rights of the landlord, but that the FTT had erred in its approach to the s.47 issue. The FTT had concluded that the service charge demand had been invalid as a result of the landlord’s omission, but the UT disagreed with this approach, finding that the payment of service charges was only delayed until the relevant information was supplied, rather than invalidating the demand in its entirety.

The UT found that the leaseholder had not successfully challenged the service charges save for a small reduction in legal fees, and concluded that the landlord had been “overwhelmingly successful” in respect of the issue of reasonableness of the service charges.

The UT substituted the FTT’s decision. The service charge demands had not been invalidated, and the landlord should be able to exercise its contractual rights to recover costs through the service charge.

Advice and action for landlords

The Upper Tribunal addressed a number of key issues in this decision which will be of interest to landlord and agent clients. Firstly, that a minor failure to comply with the provisions of s.47 was not fatal to the service charge demand and did not render it invalid, merely that the demand was suspended until all required information was provided.

Secondly, that where a landlord has successfully proven its case in respect of the reasonableness of service charges, it should not then be prevented from exercising its contractual right to recover its costs through the service charge. S.20C orders must be justified in the context of the dispute, disregarding irrelevant matters and maintaining proportionality.