Often a leaseholder will take the view that an incorrect demand must be invalid without further discussion and whilst steps to address the issues are perhaps relatively simple in most cases (and thereby avoid the need to litigate), sometimes the matter is not so straightforward.

So where do you stand on the question - Is a demand that contains an error in the sum demanded invalid or valid notwithstanding the error?

That was the question brought before first the FTT and then the Upper Tribunal in Price v Mattey [2021] UKUT.

The issues are simple. The leaseholder, Ms Price, held a lease of her property in Tipton under which she was liable for:-

• 1/8th of the costs incurred in managing the Block in which her Flat was located; and

• 1/31st of the costs relating to the costs incurred in looking after the Estate of which the block formed part.

There were 31 flats overall across the Estate.

The dispute related to deficit charges from 2009 through to 2017 and thus the invalidity or otherwise of the demands became very important as issues of s.20B (the 18 month rule) would arise preventing recovery if the demands were indeed found to have been invalid because of the error.

The landlord’s mistake at issue, which related on to the demands for the charges for the Estate, had been raised based upon a proportion for each lessee at 1/24th, as opposed to the correct 1/31st proportion. The leaseholder contended that the demands were for the wrong proportion and therefore invalid for failing to comply with the lease terms.

The FTT took the view that whilst the demands quoted the wrong sum as due (calculated at 1/24th) the correct approach was to limit the amount that the landlord could actually recover to the 1/31st proportion set out in the lease.

Ms Price then appealed to the Upper Tribunal who reached the same conclusion as the FTT, that the demands were not invalidated by the mistake but that the landlord was merely prevented from recovering any part of that demanded sum that exceeded the leaseholder’s actual liability of 1/31st as set out in the lease. The appeal was therefore dismissed and the landlord able to recover the correct sums demanded.

The full case report is attached here.

Conclusion

This decision will be seen by most as wholly sensible and practical and, hopefully, it will assist the avoidance of disputes escalating in the future on similar grounds.

It does however highlight the need to check information when setting up a development at the point of taking over management. A few of the following basic (but frequently overlooked) rules are a good starting point when starting to, or taking over, the management of a development. Following these will assist those managing the development to avoid, sometimes costly, disputes or mistakes going forward:-

1. Never trust fully the information obtained from a former agent or the developer but always check it against the titles and the leases for the units that you are to manage - see also 2 below.

   We are regularly surprised when undertaking reviews for our professional and lay clients how many times the service charge proportion data contains errors (usually copied from that provided by the developer or former agent) when compared to the individual leases.

2. Don’t rely on “example” leases/transfers but download from HM Land Registry official copies of the registered leases and any Variations or Re-grants relating to the specific property you are to manage. The cost is £3.00 (no VAT) per document and most are available to immediately download online.

3. Don’t assume that all leases on any development are identical. They are frequently not at all, either intentionally or through mistakes in the drafting.

4. Where you find errors in the drafting of leases, be that seemingly incorrect proportions or a lack or expressed proportion in relation to a charge falling under a specific schedule, do not be tempted to “correct” that error by amending your scheduling. Any amendment to a lease must be dealt with properly by deed if it is to have any enforceable effect.

5. If in doubt, seek advice before progressing management as issues found and resolved at the outset will always avoid costly and time consuming disputes and difficulties later. There is no embarrassment in being diligent and exhibiting to your client/the leaseholders that you are doing your job properly.

If you or your clients would like further advice on the implications of the Price v Mattey case, please get in touch with Kevin Lever at Kevin.Lever@kdllaw.com or 01435 897297. See also here for details on the Covenants Review Service that KDL Law provides to its landlord, RMC, RTM and professional managing agent clients which should minimise the issues found in this case.

Disclaimer

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