Cases - Wigmore Homes (UK) Ltd v Spembly Works Residents Association Ltd
Record details
- Name
- Wigmore Homes (UK) Ltd v Spembly Works Residents Association Ltd
- Date
- [2018]
- Citation
- UKUT 252 (LC)
- Legislation
- Keywords
- Service charges – Reasonableness – Interim payments – Landlord and Tenant Act 1985, s.19(2
- Summary
-
The tenant was the long lessee of a flat in a converted factory and office building. The respondent was the landlord. The respondent began proceedings against the appellant for the recovery of service charges. The service charge element was transferred to the First-Tier Tribunal (FTT) for determination.
Clause 5.1 of the appellant’s lease provided that the tenant would pay the landlord ‘a proportionate sum on account of Service Charge... as the Landlord shall consider is fair and reasonable on account of the Service Charge and forthwith on receipt of the Certificate.’ The ‘Certificate’ was defined as a containing ‘a fair summary of the Landlord’s expenditure and outgoings as incurred in the financial year of the Landlord and the Certificate shall be final and binding on the Tenant except in the case of manifest error.’
The appellant challenged the interim service charge demands for the years between 2010 to 2016. The primary challenge was that the respondent had failed to provide the relevant certificates in accordance with clause 5.1 of the lease and that the demand exceeded the expenses incurred. The FTT found for the respondent landlord and held that the interim service charge demands were reasonable and payable in full for the relevant years. The appellant appealed.
In allowing the appeal, the Upper Tribunal (Lands Chamber) (UT) found that certification was not a condition precedent for the payment of the interim charge under the terms of clause 5.1 of the lease. The requirement was only imposed for the balancing charge. The fact that the 2 halves were in the same clause did not affect the position. In the present case the interim payment was set by reference to what the landlord considered ‘fair and reasonable’ and not by reference to what may be certified, Urban Splash Work Ltd v Ridgway [2018] UKUT 32 (LC) applied.
The interim service charge under the lease had to be a proportionate part of the landlord’s estimated expenditure. That proportion could not be greater than 100%. Accordingly, as a matter of construction the interim service charge could not be higher than 100% of the estimated expenses.
By virtue of s.19(2) of the Landlord and Tenant Act 1985 (the Act) where a service charge was incurred before the relevant costs were incurred no greater amount than was reasonable was payable. The sum claimed had to be objectively reasonable, Pendra Loweth Management v North [2015] UKUT 91 (LC) applied. The absence of proper certification could be relevant to the question of reasonableness. Further, the reasonableness of the demand had to be assessed by what was known at the time the tenant’s liability arose. In the present case, all the invoices were dated after the due date specified in the lease. Accordingly the relevant date for assessment was the date of the invoice, Knapper v Francis [2017] UKUT 3 (LC) applied.
In upholding each of the invoices, the FTT based its conclusions on inferences. The UT found that there were a number of problems with the FTT’s decision. First, there was an increasing amount of knowledge available to the respondent of the actual level of expenditure at the time of the demands. The respondent had taken over management of the building in 2011, but there was no reason to believe that it would not have had some idea of the actual expenditure incurred historically by the date of the first demand. Second, the fact that the amount demanded each year was identical was a clear indication that the respondent did not carry out a careful assessment each year and that the figure claimed was not based on a genuine estimate of the likely expenditure. Third, the onus was on the respondent, as landlord, to establish the reasonableness of the estimates. It may have been reasonable for the estimates to be twice the expenditure in any given year, but it was for the landlord to justify. The fact that this happened on a consistent basis made it more and more difficult to justify in the present case as the respondent failed to provide any explanation.
For the above reasons the UT was unable to find that the amounts claimed in the demands were reasonable within the meaning of s.19(2) of the Act.