Ensuring Service Charge Demands are Correct
Leases for flats will invariably contain a provision for the leaseholder to contribute towards the upkeep of the buildings in which the flats are situated via service charge recovery mechanisms.
Service charge recovery mechanisms will be detailed within the leases. Such mechanisms can contain prescriptive details of what landlords must do before the service charges fall contractually due and payable by leaseholders.
H Stain Ltd v Carol Richmond  UKUT 0066 (LC)
This case concerned an unwieldy service charge recovery mechanism that was the subject of debate between the landlord and the leaseholder. Both parties had differing interpretations of how the service charge should fall due.
The mechanism crucially provided for the service charges to be demanded with “not less than one month’s notice”.
At first instance, there was a finding of fact that the landlord had sought to demand payment of the service charge 30 days after the date of the demand. The first instance Tribunal found that as the demand was sent by post, then with allowing time for delivery of the demand via post, the landlord had only given a maximum of 29 days’ notice.
The landlord sought to argue that reading the demand in conjunction with the lease would mean that the leaseholder could work out when payment was due, and the sums would not fall due before one month had passed.
In opposition to the landlord’s position, the leaseholder argued that the service charge recovery mechanism was clear and one month’s notice should be given in the demand for payment, in order for the service charge to fall due as payable.
The Upper Tribunal found in favour of the leaseholder, commenting that the appearance of the service charge recovery mechanism suggested that it appeared to have undergone a significant amount of changes between conveyancing solicitors when the lease was initially drafted. This suggested to the Upper Tribunal that the inclusion of “not less than one month’s notice” must have been a significant inclusion on the part of the leaseholder.
This is a warning to check the service charge recovery mechanisms in leases before deciding whether service charges fall due and payable. In this decision, the demand for payment was not set out in the manner detailed in the lease and this was crucial to the service charge demand being invalid. Importantly, the Upper Tribunal pointed out that the landlord should have also taken into account the time it takes to post the demand to the leaseholder, and this demonstrates that not only should there be consideration to what the lease says, but also the practicalities of how the demand is sent.