Disputes over ownership of land all too often become protracted and lead to costs out of...
Landlords would be well advised to check the terms of their leases before undertaking any projects that may cause problems with issuing service charge demands. Recently, the Upper Tribunal (UT) ruled that a local authority landlord must wait to collect charges from a tenant after a delay in sending out an estimate of the service charge for the year.
The lease required the tenant to pay an estimated service charge in advance, as notified to him before the commencement of the service charge year. The service charge was to be paid in four equal quarterly instalments, with a balancing charge at the end of the year if the actual costs for the year exceeded the estimated costs.
After experiencing IT problems, the landlord failed to send a notice of the estimated service charge for the year ahead. Instead a notice was sent before the beginning of the second quarter, requiring payment of three quarters of the charge in three instalments and relying on the balancing process at the end of the year for the missing quarter. The tenant did not pay the quarterly payments and the landlord brought proceedings, which were transferred to the FTT for a determination under Section 27A of the Landlord and Tenant Act 1985 as to whether the charges were payable.
While the landlord had sent the notice of the estimated service charge late, in the FTT's view it had still satisfied the key functions of the relevant clause in the lease. Noting that the landlord had waived the charge for the first quarter until the balancing process, the FTT was unable to identify any prejudice or detriment caused to the parties. The FTT concluded that time was not of the essence in the clause and that the charges were payable. The tenant appealed that decision to the UT.
The UT referred to the Court of Appeal's decision in Kensquare v Boakye, in which the Court had found that a tenant did not have to pay interim service charges because the landlord had failed to serve notice of them by the deadline specified in the lease. The UT found that there was no authority supporting the FTT's flexible approach to construction in this case, and there was nothing in the lease that could lead to a different conclusion about the timing requirement in the relevant clause from that reached in Kensquare v Boakye.
The UT observed that the relevant clause specifically required the tenant to pay if he had had a notice of the estimated service charge before the end of the previous service charge year. That reinforced the conclusion that time was of the essence in that clause. The appeal was allowed.