As we all know, any leaseholder can make application under s.27A Landlord & Tenant Act 1985 to the Court or Tribunal for a determination as to whether a service charge is payable.  There is, however, a caveat to that provision in the form of s.27A(4)(a) which prevents the application by the leaseholder in respect of any sum that they have admitted is due.  In other words, once admitted, you can’t change your mind.

What follows is an example of a landlord doing things incorrectly and a leaseholder who saw an opportunity to save some money as a result of the landlord’s error and took it.  Did that work in his favour though?

The case we are looking at here is Thirty One Crescent Grove Ltd v Atherden [2024] UKUT 80 (LC)

31 Crescent Grove is a block of 6 flats in a converted house and the leaseholders were all shareholders in the landlord company.

As is painfully common (but so very wrong) the leaseholders met and made most decisions collectively but, ultimately, informally. This included the decision to spend £3,880 in repairing the communal stairwell, which you will immediately have realised was qualifying works under s.20 Landlord and Tenant Act 1985 and so the landlord should have complied with the consultation requirements under s.20 prior to appointing the contractor.  Again, as is common in such informally run blocks, no consultation was completed - see here also. 

The errant leaseholder in this matter, Mr Atherden, was initially prepared to pay his share of the costs and had in fact been very much involved with the decision making process, even specifying the paint to be used in completing the project and had suggested a choice of a slightly higher priced set of works.  However, for whatever reason (but one assumes not one taken with any competent advice or consideration for his neighbours!) Mr Atherden decided to seek a determination in the FTT disputing his liability to pay service charge due in respect of his flat.

The resulting FTT determination was that there had been a breach of the consultation requirements and so the FTT capped the service charge liability of Mr Atherden at the statutory maximum of £250.

The landlord (Mr Atherden’s neighbours in essence) appealed the FTT ruling to the Upper Tribunal arguing that the FTT had been wrong to consider the point at all as Mr Atherden had, by his conduct, agreed to pay the relevant share of the major works to the stairwell.  The landlord exhibited an email from Mr Atherden to prove its point. 

The emails relied upon here were really rather simple.  An email was sent by another leaseholder to all leaseholders setting out that the works to the stairwell were about to start, what the cost was going to be and that, in line with Mr Atherden’s request, a specific paint, Trade Diamond Paint, was to be used on the walls.  Mr Atherden replied to that email as follows:-

"Thank you David, I am really pleased to hear that the decorating is starting tomorrow.

In relation to the paint, you clarified Trade Diamond will be used on the walls, (resulting in an increased cost of £280) I presume you meant all surfaces including the woodwork as per my request?"

The Upper Tribunal considered that “Mr Atherden's email of the 10 May 2021 did not in terms state that he was content with the overall price. But two things are perfectly clear: one is that he was content for the work to go ahead. The other is that when he made an application to the FTT he did not raise a challenge on the basis of consultation under section 20 of the 1985 Act. And I take it from his enthusiasm for the work to go ahead that the absence of formal consultation did not trouble him. There had already been considerable email discussion as to what work was needed and indeed, Mr Atherden himself had originally proposed a more extensive programme costing £4,800.

The absence of formal consultation as prescribed by section 20 and the regulations thereunder was not a problem for Mr Atherden; to put it formally it was "a matter" that he had agreed to for the purposes of section 27A(4).  The decision [ of the FTT ] that only £250 was payable because of the absence of consultation was therefore made without jurisdiction and is set aside.”

The Upper Tribunal determined that the full sum of the major works to the stairwell demanded of Mr Atherden was due.

Lesson to be learned by both sides here

1. No matter how well you may get on with your neighbouring leaseholders in your block and how lovely it is to make decisions informally, or how many years “this way of doing things has worked perfectly fine”, it is sadly not correct and as a landlord/RMC/RTM you must do things correctly. Demands and notices must be properly served, accounts must be produced and served and statutory rules must be complied with.  If you choose not to, you open the landlord/RMC/RTM to abuse and expense at the whim of a Mr Atherden type of neighbour.  Accordingly, no matter how much of a pain it might be, do things properly and if you are not sure how to do that (as it is complicated at times) employ a professional managing agent.

2. A point raised by the UT Judge in this matter and a point that we find ourselves frequently making to leaseholders who bring an action against their landlord/RMC/RTM company where that company is owned by their neighbours - what exactly do you hope to achieve?  Even if the landlord has got it wrong, how does the complaining leaseholder expect to benefit from their action?

• If the complaining leaseholder succeeds, all they do is either make the landlord/RMC/RTM company insolvent and thus risk having the block no longer managed at all or by those who care (the leaseholders), or they and their neighbours as shareholders of the landlord company will all need to contribute to any award made in the litigation.

• If the complaining leaseholder does not succeed in their claim then all they have achieved is to cause a whole heap of expense in dealing with their application which they and their neighbours will then have to pay for, and so increasing the very expenses which the leaseholder was likely complaining about in the first instance. 

Both outcomes do rather make such actions utterly pointless - unless the aim was simply to make relations between the complaining leaseholder and their neighbours rather frosty moving forward. 

There will always be options in such circumstances other than bringing an application in the tribunal and which will always give rise to significant cost.  It is best to investigate/pursue those alternative less costly/less damaging options first - really it is.

If you have any queries on this week’s Legal Update, please contact a member of the team on 01435 897297 or info@kdllaw.com. 

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