Cash is King, or so the saying goes. In a property management context, it is cash flow that is King. Service charge monies need to be collected, in order that those monies can be expended in the provision of services.  Arrears really do have a massive impact on the ability of the landlord to provide the services it is obliged to provide under the lease.

Anecdotally, one of the main reasons given by leaseholders for failing to pay their service charges is that they did not receive the service charge demand.

It is exactly this kind of scenario that was considered by the Upper Tribunal (Lands Chamber) in London Borough of Southwark v Akhtar & anr [2017] UKUT (LC).

This case focuses on the application of Section 7 of the Interpretation Act 1978 where Section 196 of the Law of Property Act 1925 applies.

 

Section 196 Law of Property Act 1925

*Most* leases will refer to Section 196 of the Law of Property Act 1925.  In those leases, reference is likely to be made to Section 196 applying to any notice under the lease.

Section 196(4) and (5) provide that certain notices are deemed to have been served if sent by registered post or “any other instrument”.

 

Section 7 Interpretation Act 1978

Section 7 of the Interpretation Act 1978 goes a little further.

Where notices are send by ordinary post (and are properly addressed, pre-paid and posted) they are deemed served at the time at which they would be delivered in the ordinary course of post.  The presumption in Section 7 is in favour of the sender.  Therefore, notices sent by post are deemed served, unless the contrary is proved.

 

Does Section 7 apply to Section 20B Notices?

In Southwark v Akhtar, the Upper Tribunal considered whether Section 7 of the Interpretation Act 1978 applies to Section 20B notices.

Firstly, it considered whether the demand was a “notice under [the] lease”.

The Upper Tribunal decided that “under” was wide enough to encompass “in connection with” or “relating to”.  As a Section 20B notice enables a landlord to do something prescribed by the lease (i.e. recover service charges) a Section 20B notice is therefore caught by this clause.

Having satisfied itself that Section 196 applied, the Upper Tribunal then had to deal with the second issue, namely whether Section 7 was engaged.  Because, as is the usual practice, the Section 20B notices were not sent by registered post, but were sent by ordinary post.

In wrestling with this issue, the Upper Tribunal came to the following conclusions:

  1. Section 196 permits service by registered post or by “any other instrument”.
  2. Section 196 therefore authorises service by ordinary post (on a basis that ordinary post is like “any other instrument”).
  3. Therefore, where Section 196 applies, Section 7 also applies.

Comment was made that the 1978 Act changes the meaning of the 1925 Act in a way that accords with modern business practices.

 

What’s the practical effect?

There is a presumption in favour of delivery.

Once a landlord has shown that any Section 20B notice has been:

  1. properly addressed;
  2. pre-paid; and
  3. posted

it has got nothing further to do, unless the contrary is proved.

It is worth noting that “proved” isn’t *just* asserting; bare denial is not “proving”.

As in this case, a leaseholder simply asserting that she had not received the Section 20B notices was insufficient to rebut the presumption of service that applied under Section 7.

 

Commentary

Landlords, or those acting on their behalf, are now equipped to deal with the common argument that arises in relation to delivery of service charge demands. So long as a landlord can prove that the demand was:

  1. properly addressed;
  2. pre-paid: and
  3. posted

the presumption is that the demand will have been delivered, and it’s up to the recipient of the notice to prove otherwise.