John Stephenson, Senior Partner of Bircham Dyson Bell LLP, believes that the clarification of section 20B of the Landlord & Tenant Act in the case of OM Property Management Ltd. v Burr has been brought about by a bizarre set of circumstances nobody could have predicted would ever make it to court.
Section 20B is the provision that renders service charges irrecoverable if a landlord does not demand payment, or at least warn the tenant that a payment will be required, within 18 months of the service charge costs being incurred.
"In this case, the Upper Tribunal was required to consider at what point in time service charge costs became incurred and ruled that it was at the point of an invoice being received rather than when the gas in question was used," explains John Stephenson.
"However, the ruling aside, one has to marvel at the set of circumstances that have brought about the ruling."
"Firstly, the incorrect energy company was charging OM Property Management for gas for no less than seven years, whilst the actual supplier had not realised that they pad not charged or been paid; this led to the demand for back payment of over £100,000."
"Secondly, the tenant, Mr Burr took the management company to a leasehold valuation tribunal over his share, which was just £300 - not an amount that would usually result in litigation."
"Finally, the management company was sufficiently determined as to appeal to the Upper (Lands) Tribunal, which is an expensive and timeconsuming process involving legal counsel costing much more than the amount disputed. Of course, the ruling sets a precedent for the future with wide application which justified its being pursued, but it was brought about by a quite extraordinary set of circumstances.
"In light of the ruling, both landlords and leaseholders will know that the 18 month period runs from the date of receipt of the invoice in question, and landlords will be on notice accordingly. They should also make sure they are paying the right supplier!"
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.