I’m regularly to be found on my soap box espousing the need to read, understand and implement the terms of leases, particularly where service charges are concerned.  In H Stain Ltd v Richmond [2021] UKUT 66 (LC) the Upper Tribunal considered a lease clause which required the lessee to be given “not less than one month’s notice of such advanced payment or contribution…”.

Where the demand received by the lessee included the wording “payment due 30 days after date of demand, arrears by return”, had the correct notice period been given in the service charge demand, and accordingly was the demand valid?

 

Terms of the lease

The terms of the lease were conventional, placing responsibility on the landlord for the repair of the structure and maintenance of the common parts, and requiring the lessee to pay service charges to meet the landlord’s expenses.

By clause 3(6) of the lease, the lessee had covenanted

“…[To] pay to the landlord upon demand a rateable or due proportion… Of such sums as may be incurred or provided for by the landlord in accordance with the covenants on that behalf hear in after contained for the maintenance and repair of those parts of the building and the block not forming part of this demise but of which the tenant has the benefit and use thereof in common with the landlord and other owners or occupiers…Provided that if the [lessee] so requires the amount of any such contribution is certified as being fair and reasonable by the landlord’s chartered accountant and that not less than one month’s notice of such advance payment or contribution is given to the [lessee]”

 

Demand for payment

In July 2015, the landlord appointed a new managing agent to manage the block.  On 18th August 2015, the agent wrote to the lessee, enclosing an invoice for service charges for the period 25th March 2015 to 24th March 2016.  The invoice showed how the charges of £2,395 were made up.  After giving credit for money previously received, the total amount outstanding was £2,255.77.

At the bottom of the invoice the landlord’s name and address were given, along with details of the agent’s bank account.  The following statement also appeared in capital letters

“PAYMENT DUE 30 DAYS AFTER DATE OF DEMAND, ARREARS BY RETURN”

The service charge demand went unpaid, and in May 2016 the landlord brought proceedings for non-payment against the lessee in the County Court.  Matters were subsequently transferred to the FTT.

The FTT determined that the advance payment had not been valid or demanded, and accordingly that the service charges were not payable.

 

Issues on appeal

There were two issues for the Upper Tribunal to consider on  appeal:

  1. What does clause 3(6) require as to the form of a demand?; and
  2. Did the invoice of 18th August 2015 satisfy those requirements?

The Upper Tribunal agreed with the FTT, and was satisfied that the demand failed to comply with the minimum requirements of clause 3(6).

The Upper Tribunal held that the lessee was entitled to receive not less than one month’s notice of the sum demanded in  advance before the liability to pay takes effect.  As the Upper Tribunal put it:

“The giving of notices is a condition of liability and it requires a particular step to be taken by the landlord to inform the tenant not only of the amount which must be paid, but of the date by which it must be paid.  That date must not be less than one month from the giving of the notice.  If the condition is not satisfied the sum is not payable”

A requirement to give one month’s notice means one calendar month (the section 61 of the Law of Property Act 1925).  The demand for payment in 30 days arrived on 19th August and expired on 18th September.  Accordingly, it did not provide the required one month’s notice.

The appeal was therefore dismissed.

 

Commentary

This case is another reminder of the importance of reading, understanding and implementing the terms of leases.  Consideration must be given to notice periods defined in leases, and service charges must be demanded in accordance with those notice periods.  If not, the service charge demand will likely be invalid.