Case law update: OM Property Management Ltd. -v- Burr (2013)

Some would say it is timely, even ironic, that the Court of Appeal decided this appeal clarifying the 18 month rule in just under 18 months.

Earlier this month, the Court of Appeal upheld the decision made by the Lands Chamber of the Upper Tribunal in the case of OM Property Management Ltd -v- Burr made in January 2012. Mr Burr was a leaseholder on an estate managed by OM Property Management Ltd and the estate featured a gas-heated communal swimming pool. Mr Burr challenged the costs of heating the swimming pool, claiming the management company was time-barred from recovering certain costs because the gas used to heat the pool was provided more than 18 months ago. The Lands Chamber of the Upper Tribunal originally ruled that Mr Burr was liable under the terms of the lease to pay his share of this gas bill.

The Court of Appeal upheld the Upper Tribunal's decision, finding that the gas bill costs had not been incurred until the date of the invoice from the supplier, or the date that the costs are actually paid. Under section 20B, the date that the cost is incurred is the date the clock starts ticking for the purpose of recovering those costs from the leaseholders. The landlord must demand such costs from the leaseholder within 18 months of being incurred, failing which they are barred from recovery.

The Court of Appeal distinguished a liability to pay and the incurring of a cost. It held that a cost was only incurred at the point when it was paid or when an invoice was submitted. Part of the Court's reasoning was based on the mechanism for adjusting costs under section 19(2) of the 1985 Act and it concluded that an amount could not be adjusted until it had been ascertained. The cost was usually ascertainable upon the rendering of an invoice not the provision of services which, without more, did not comprise anything that was capable of being adjusted.

It is encouraging to see the Court following the Upper Tribunal's decision and taking a common-sense approach to what could be a complicated landlord and tenant issue. Whilst in most cases the presentation of an invoice will precede payment, we would advise landlords and managing agents to calculate the 18 months within which they can demand the costs from the leaseholders from whichever is the earlier date – be that the presentation of the invoice or payment.

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