Service charge demands: a reminder of key principles
In our insight last year, which can be found here, we summarised the decision of No. 1 West India Quay (Residential) Limited v. East Tower Apartments Limited  EWCA Civ 1119.
The decision was appealed to the Court of Appeal, which recently upheld the Upper Tribunal’s decision, and confirmed that a service charge demand in respect of long leasehold residential premises must be a contractually valid demand for the purposes of Section 20B of the Landlord and Tenant Act 1985 (“the 1985 Act”).
The dispute concerned a mixed use building comprising a hotel and residential flats. East Tower held leases of 42 residential flats. The electricity charging structure in the leases was unusual and extremely complex, such that it had been the subject of a long-running dispute between the parties. In an earlier Upper Tribunal decision, it had been determined that electricity charges were recoverable as a service charge. The consequence of that decision was that electricity charges had not been correctly demanded in accordance with the terms of the lease and the argument was raised that the sums were irrecoverable as they had not been demanded within 18 months of being incurred.
Section 20B(1) of the 1985 Act imposes a limitation period for the recovery of service charges from long leaseholders of residential premises and costs are not recoverable if they were incurred more than 18 months before they were demanded. However, that restriction does not apply if the tenant has been informed in writing under Section 20B(2) of the 1985 Act within 18 months of the costs being incurred, that those costs have been incurred and are recoverable from the tenant
The Court of Appeal’s Decision
The Court of Appeal held that it was bound by an earlier decision in Skelton v. DBS Homes (Kings Hill) Limited  EWCA Civ 1139 and it was necessary for a landlord to issue a contractually valid demand in accordance with the terms of the lease. In this case, the landlord was prevented from recovering the electricity charges because they had not been demanded within 18 months of falling due and unfortunately, no protective Section 20B(2) Notice had been served.
This decision confirms the position as it was understood to be and does not create any change in practice. Landlords and managing agents should continue to ensure that they follow the terms of the lease carefully in respect of demands for service charge and serve a contractually valid service charge demand within 18 months’ of sums being incurred. If they are prevented from doing so for any reason, they should serve a Notice under Section 20B(2) of the 1985 Act to protect their position, otherwise the 18 month limitation period may affect recovery.
This article was written by Laura Bushaway, for more information please contact them or your usual Charles Russell Speechlys contact.
Strategic Planning for Modern Landed Estates
The second in our series of articles on succession planning for landed estates covering a wide variety of matters.
Thirsty work – Reporting on data centre water usage and environmental measures in the EU
When can you set off claims against different elements of a project
The Court’s decision raises important drafting considerations for construction contracts involving multiple elements of a project.
Drafting terms and conditions or negotiating a contract? Be wary of "unusual" and "exorbitant" exclusion clauses
When drafting a set of terms and conditions, companies must adhere to the requirements contained in the Unfair Contract Terms Act 1977
Stop, collaborate and listen: Top 10 Tips with Collaboration Agreements
Providing you with the top ten tips on collaboration agreements - what should you know?
Phase out of temporary restrictions on use of winding up petitions
Hannah takes a look at the recent UK Government announcement on statutory demands and the presentation of winding up petitions
Preparing your company for sale
We set out here some initial steps to consider in anticipation of a sale.
ESG investment and the challenges for trustees
What challenges does the ESG revolution present for trustees of private family trusts?
Save the date: 1 October 2021 - Notice periods for some residential tenancies to return to pre-pandemic position
The impact of COVID-19 on commercial and residential tenancies
What impact has COVID-19 had on commercial and residential tenancies? Read more here.
Charles Russell Speechlys advises discoverIE on its acquisition of Antenova
discoverIE is a leading international designer, manufacturer and supplier of customised electronics to industry.
From I, Robot to E-Witness: the rise of automated authority
Q&A: Separate blocks, common parts and enfranchisement
Miriam Seitler and Lauren Fraser answer queries relating to leaseholders seeking to acquire the freehold.
Let the party commence - Government launches consultation to make al fresco hospitality permanent
Coded messages for landlords and tenants
“What does the code of practice mean for landlords and tenants? Read more here”
The family court’s role in micro managing 'trivial' disputes
The recent decision has dealt with the family court’s role in micro managing “trivial” disputes in relation to children
Taxing horizons and fiscal black holes
A super-massive black hole at the centre of the nation’s finances means that tax reform and rates rises look increasingly likely.
Charles Russell Speechlys advises Acora on acquisition of Westgate IT
Westgate IT specialises in providing IT support to businesses in the South West.
Q&A: Wrestling with restrictive covenants
Camilla Lamont (barrister at Landmark Chambers) and Real Estate Disputes Partner Emma Humphreys answer a pair of covenant queries
Charles Russell Speechlys advises Grape Paradise on the acquisition of a fine wine business
Charles Russell Speechlys has advised Grape Paradise on the acquisition of the Sarment Group in the China Mainland territories.