Recovering Payment Out of time?

If the demand is provided later than this, the landlord cannot recover the costs at all, unless a notice is served during the 18 months stating that costs have been incurred and that the tenant will be required to contribute to them by payment of a service charge.

The idea behind this policy was stated by Mr. Justice Etherton in the High Court case in 2003 of Gilje v. Charlgrove Securities Limited, “….so far as discernible, the policy behind Section 20B of the Act is that the tenant should not be faced with a bill for expenditure, of which he or she was not sufficiently warned to set aside provision. It is not directed at preventing the lessor from recovering any expenditure on matters, and to the extent, of which there was adequate prior notice”.

Lately the High Court Chancery Division has considered the content of the prior notice in the judgment of Mr. Justice Morgan in the case of London Borough of Brent v.Shulem B Association Limited, as reported in Issue 56 of News on the Block.

There the leaseholders argued that they were not liable to pay for major works because of Section 20B.

The court found in favour of the leaseholders and decided that to comply with Section 20B a notification must state:

A figure for the costs which have been incurred by the lessor; and

Inform the leaseholder that they will be eventually required to contribute to those costs by the payment of a service charge. The notice does not need to tell the leaseholder how much they will be called upon to pay but only that they are likely to have to contribute to the costs by way of service charge.

The court also provided guidance where the actual costs were uncertain.

The lesson to be learned from the Shulem B case is that the Section 20B notification must be for actual costs incurred and not estimates and must state a figure for those costs.

Nicholas Kissen and Christopher Last are legal advisors with the Leasehold Advisory Service.