Summary

In the circumstances, s.20B Landlord and Tenant Act 1985 did not prevent a landlord from charging expenditure by way of service charges in certain accounting periods, notwithstanding that such expenditure was incurred 18 months prior to the supply of final accounts and certificates for those accounting periods.

Facts

Claimants' appeal from an order of Master Price of 12 December 2002 declaring that s.20B Landlord and Tenant Act 1985 did not prevent the defendants from charging expenditure by way of service charges in accounting periods ending 25 March 1999 and 25 March 2000 notwithstanding that expenditure was incurred 18 months prior to the accounts and final demands served by the defendants. The claimants held long leases to flats in a building known as Lennox Gardens. The first defendant was the landlord, the second defendant was the landlord's agent who was responsible for recovering service charge contributions from the claimants. The leases required the first defendant to provide services in respect of the building and the claimants to contribute towards the cost of providing those services by way of a service charge. The service charge provisions provided that the sums recoverable by way of service charge were to include all monies expended by the first defendant providing services, the cost of insurance and such sum as the first defendant should reasonably require for the purpose of setting up an adequate reserve fund to pay for any intended substantial works that were not annually required to be done. The claimants' liability to pay their share of that expenditure was to be discharged by making quarterly payments on account and by the payment of a balancing charge. Annual accounts were to be prepared within three months of year-end. The first defendant gave notice requiring payment on account but the accounts for years ending 1999 and 2000 were not supplied until October 2001, well after the three-month period provided for by the leases. The claimants contended inter alia that by s.20B of the 1985 Act the first defendant was not entitled to recover by way of service charge any expenditure in those accounts as such expenditure was incurred more than 12 months previously.

Held

The master was correct in deciding that s.20B had nothing to do with payments on account that fell to be dealt with under s.19(2) of the Act and that s.20B only came into play if the defendant had spent more than that demanded on account, in which case he had to raise a further demand within the 18 month period. The claimants had interpreted s.20B as requiring the supply of accounts and certificates as a demand for payment. Section 18 of the Act provided that quarterly payments on account were payments of any service charges within s.20B. There was no metamorphosis of those payments once final accounts were prepared. The policy behind s.20B was that a tenant should not be faced with a bill of expenditure of which he had not been sufficiently warned. The claimants had other remedies against the first defendant for its failure to prepare accounts in time.

Appeal dismissed.