Service charges: limitation period

Citation

Lee, R. and Waterson, G. (2001), "Service charges: limitation period", Property Management, Vol. 19 No. 1. https://doi.org/10.1108/pm.2001.11319aab.006

Service charges: limitation period

Service charges: limitation period

R v. London Leasehold Valuation Tribunal exp. Daejan Properties Ltd (2000), The Times, 20 October, [2000] GGCS 108

The question at issue in this case was, basically, whether the reasonableness of service charges which had already been paid by the tenant to the landlord under the terms of the lease could subsequently be queried under the provisions of s.19 of the Landlord and Tenant Act 1985 (as amended to include a new s.19(2A) by the Housing Act 1996).

The relevant statutory provisions are set out in the Law Report as follows:

Section 19 of the 1985 Act provides: (1) Relevant costs shall be taken into account in determining the amount of a service charge payable for a period – (a) only to the extent that they are reasonably incurred, and (b) where they are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard; and the amount payable shall be limited accordingly.

(2) Where a service charge is payable before the relevant costs are incurred, no greater amount than is reasonable is so payable …

(2A) A tenant by whom, or a landlord to whom, a service charge is alleged to be payable may apply to a leasehold valuation tribunal for a determination – (a) whether costs incurred for services, repairs, maintenance, insurance or management were reasonably incurred, (b) whether services or works for which costs were incurred are of a reasonable standard, or (c) whether an amount payable before costs are incurred is reasonable.

In deciding in favour of the tenant, Sullivan J appears largely to have reached his decision on grounds of practicality and fairness. In the words of the judge:

There was no reason to distinguish between tenants who had paid, paid under protest reserving the right to challenge the reasonableness of the charges, paid without reserving the right, or refused to pay at all.

The applicant's interpretation would encourage tenants not to pay the service charge for fear of losing their right to challenge under section 19, and that would not be in the interests of landlords or tenants.

Section 19(2A) was not intended to exclude tenants who had paid a service charge from applying to the tribunal for a determination of reasonableness. The respondent's approach was within the spirit of the legislation …

The tribunal's decision to consider the reasonableness of charges going back twelve years was reasonable in the circumstances …