Westmark (Lettings) Ltd v Peddle  

[2017] UKUT 449 (LC)

Martin Rodger QC, Deputy President

The Upper Tribunal (Lands Chamber) has held that, where service charge costs are passed down a chain of title (e.g. from freeholder to headleaseholder to occupational leaseholder), then the costs are “incurred” afresh for the purpose of s.20B(1), Landlord and Tenant Act 1985 at each stage in the chain.

Justin Bates of Arden Chambers acted for the successful appellant

The Landlord and Tenant Act 1985 makes provision for the regulation of residential service charges payable by long leaseholders. In particular, s.20B(1) provides that a tenant is not liable to pay service charges which were incurred more than 18 months before a demand for payment was served on him. That provision does not apply if, within the same 18 month period, the tenant is notified in writing that the costs have been incurred and that he will subsequently be required under the terms of his lease to contribute to them by payment of a service charge (s.20B(2)).

22-25 Queen Square was a mixed-use building in Bristol. The freehold was owned by Bristol City Council. There was a headlease of the whole building which was held by the Epic (Colmore Road) Trust. There was then a sub-lease of the residential parts which was held by Westmark (Lettings) Ltd. A further lease of those residential parts had then been granted in favour of Queen Square (Bristol) Management Company Ltd. Finally, there were 29 occupational leases of individual flats.

Under the headlease, Epic was responsible for the provision of services to the building. Pursuant to the sub-lease, Epic was entitled to demand a service charge in respect of those services from Westmark. In turn, Westmark was entitled to recover its payment to Epic by way of a service charge payable by the management company. Finally, the management company was able to recover those costs from the occupational leaseholders.

The occupational leaseholders issued proceedings in the FTT, alleging, inter alia, that they were not liable to pay some of their service charges by virtue of s.20B because the 18-month period in s.20B ran from when Epic incurred a cost and demands had not been made of them by their landlord (nor had demands been made by Westmark of their landlord) within the 18-month period. Westmark disputed this analysis and contended that the 18-month period applied afresh at each stage of the service charge chain. The FTT found for the occupational leaseholders.

The Upper Tribunal allowed an appeal. A cost was incurred by a different landlord/tenant at each stage of the service charge chain so that the 18-month period ran afresh at each level of the chain of liability.