Tuesday, 21 January 2020

Service Charges - Advance Demand Appeal Ruling



Your lease of residential premises probably entitles the landlord to require you to stump up cash in advance of carrying out major works. When assessing what is a reasonable advance sum, does the landlord have to take into account a cash contribution which some third party may be making. If, say, an insurer might be forking out for some of the work,  should this be ignored when your contribution is calculated?

The amount of the advance payment can be challenged before a tribunal on the basis that it is unreasonable under the Landlord and Tenant Act 1985. That says at section 19(2)

Where a service charge is payable before the relevant costs are incurred, no greater amount than is reasonable is so payable, and after the relevant costs have been incurred any necessary adjustment shall be made by repayment, reduction or subsequent charges or otherwise.

In the case of Avon Ground Rents Ltd v Cowley and others [2019] EWCA Civ 1827 which has just been before the Court of Appeal, there was the possibility of a payment by NHBC. It was not a certainty . It was, as I say, a possibility. In giving guidance on what significance the landlord should place on this possibility, the Court of Appeal ruled that flexibility in approach was required. Certainty of the third party payment was not necessary for it to be taken into account, it was held.  That would constrain the discretion of  tribunal which was deciding on a challenge to the amount of the advance demand when in reality what was required was a test which allowed account to be taken of all relevant matters and to those matters the appropriate wright would be attributed. 

So by ignoring a good chance of a third party payment, the landlord may well be in trouble. 
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