Service charge claim – Southwark LBC v Akhtar

In Southwark LBC v Akhtar [2017] UKUT 150 (LC), the Upper Tribunal held that the service charge notices drafted and served by the landlord were valid and served properly on the tenant despite being served late and in the incorrect form. This meant the tenant was liable to pay the service charges totalling £40,701.57.

Background Facts

The tenant held a long lease of a flat in John Kennedy House (“the Property”), pursuant to the tenant’s right to buy scheme. The lease required the landlord to serve notice of the estimated service charge due for major works (“the Paragraph 2(1) notice”) in advance for the coming financial year, with the sum in the Paragraph 2(1) notice being paid in four equal quarterly payments based on the estimated costs. The tenant agreed a payment plan for the amount requested on account by placing a charge against the Property.

The landlord produced a paragraph 2(1) notice dated 12 February 2013 requiring the tenant to pay the service charge in respect of the years 2012-2015. The landlord also served notices under section 20 B of Landlord and Tenant Act 1985. Section 20B requires a landlord to notify a tenant of service charge costs within 18 months of them becoming due. The total the landlord demanded was approximately £40,000. The tenant argued that the landlord had not served a notice in accordance with the terms of the lease or in accordance with the Landlord and Tenant Act 1985 because they were served late.  

Decision in the First-Tier Tribunal

The First-Tier Tribunal found in favour of the tenant and held that the paragraph 2(1) notice was ‘confused and confusing’ stating that the tenant was entitled to a clear and unambiguous demand.

Decision in the Upper Tribunal

The following issues were considered by the Upper Tribunal;

  • Was the paragraph 2(1) notice in the right format;
  • Was the paragraph 2(1) notice served late;
  • Had the tenant waived the invalidity of the notice by agreeing to pay the service charge by placing a charge against the Property;
  • Was the section 20B notice a notice under the lease.

The Upper Tribunal held the following, finding in favour of the landlord:-

  • The demand in relation to the year 2014 – 2015 was valid in that it was served before the financial year and specified 4 equal payments were to be made. Therefore, there was nothing confusing in the information given about the estimate for that year.
  • The paragraph 2(1) notice was invalid in respect of the year 2012 – 2013 because it was served too late, i.e. after 1 January 2013 purporting to become due on 1 April 2013.
  • However the Upper Tribunal viewed the tenant’s agreement to pay the service charge by way of a payment plan and a charge being placed against the Property charge against the Property as a waiver of the invalidity of the notice.
  • S196 (4) and (5) of the Law of Property Act 1925 provides that notices are deemed served if sent by post and this applied to the section 20B notices which were notices “under” the lease. It was held the section 20B notices were validly served and so the tenant was required to pay the landlord.

For further information, please contact the Real Estate Disputes Team at Hamlins.