Summary

A leasehold valuation tribunal had been wrong to allow amounts claimed for building works to be certified by a landlord, even if the year of certification was different from the year in which they were claimed, and, consequently, service charges payable by a tenant had been incorrectly stated in the end-of-year accounts.

Facts

The appellant tenant (B) appealed against a decision of a leasehold valuation tribunal that she was liable to pay the respondent landlord (S) certain service charges. B was the tenant of a flat under a lease containing a provision for an annual sum for building works and repairs carried out for the benefit of the building as a whole, or of the tenant and other tenants as a class. Between 2000 and 2003, two phases of building work were carried out straddling the lease's year ends in October 2000 and 2001. While certificates valuing the work had been issued in March 2001 and November 2002, S, anticipating the building costs, had requested payment from B by way of the annual service charges in the years ending October 2000, 2001 and 2002. B resisted the claim and the matter came before the tribunal, which rejected all B's challenges to the accounts and determined that she was liable for all the items save for one minor matter. B paid the sums claimed by S, but questions of costs were reserved, hence B's subsequent appeal. It fell to be determined whether the tribunal could allow amounts claimed for building works, even if the year in which they were certified was different from the year in which they were claimed.

Held

The lease required that the actual cost had to be ascertained before a charge was made; it could only represent that which the landlord had been required to pay. The lease was so drawn that the liability of the tenant was to be calculated at or after the end of the relevant year. Costs not incurred in the relevant year could not be claimed. A landlord's liability to pay a contractor only arose on the date after a certificate had been issued, and then after 14 days had elapsed, Henry Boot Construction Ltd v Alstom Combined Cycles Ltd (2005) EWCA Civ 814, (2005) 1 WLR 3850 applied. The liability to pay could not become a cost until it was actually paid. It followed that the certificates for the years ending October 2000 and 2002 had significantly overstated the amounts that were chargeable under the lease, whereas the certificate for the year ending October 2001 had understated it. The amounts payable by B to S had, therefore, been incorrectly stated in the end-of-year accounts. While those accounts and certificates had been calculated in a manner inconsistent with the lease, it did not follow that they were of no effect in law. They were not nullities but had effect, subject to the right of B to challenge them before the tribunal. The notices relied on by S were valid and effective notices, but the tribunal and the Lands Tribunal on appeal had power to determine whether the amounts that they claimed were actually payable. As the tribunal had been wrong to allow amounts claimed for building works to be certified, even if the year of certification was different from the year in which they were claimed, the Lands Tribunal could exercise the tribunal's powers under the Landlord and Tenant Act 1985 s.27A and calculate the correct figures based on the correct legal principles applied to the agreed evidence, although the parties would be given an opportunity of commenting on the actual calculations.

Appeal allowed