Adam Davies v Benwell Road RTM Company Ltd

A dismissal of a landlord’s earlier claim does not extinguish a leaseholder’s liability for sums already paid and not in issue in that claim. A service charge demand must comply with the lease’s payment mechanism. Where the lease requires payment by instalments, a demand for a single annual lump sum creates no liability until a competent tribunal determines the sum payable and specifies a future payment date. Limitation runs from the date on which the charge becomes due. A landlord cannot retrospectively appropriate later payments to an earlier debt where the debtor’s basis for payment clearly indicates otherwise. Contractual recovery of administration charges is confined to costs incurred in connection with recovering existing arrears. The First-tier Tribunal may assess variable administration charges, including contractual litigation costs, but must address any statutory application to reduce or extinguish liability for such costs.

The respondent, an RTM company, claimed service charges, administration charges, interest and costs from the appellant under a long residential lease. Earlier County Court proceedings in 2013 had been dismissed because the respondent had failed to prove relevant matters concerning its entitlement to manage and the contractual payment procedure. The First-tier Tribunal later determined that the respondent had acquired the right to manage and that a 2014–15 estimated charge was payable. In 2022, following transfer of the respondent’s County Court claim to the FTT, the FTT found the appellant liable for a disputed service charge, administration charges, interest and litigation costs, and a County Court judgment was entered. The appeal concerned the effect of the earlier dismissal, an alleged agreement and limitation, contractual administration charges, and the FTT’s jurisdiction over costs.

1. Earlier County Court proceedings. The 2013 dismissal did not extinguish liability for the £616.60 interim charge paid in 2013, because that sum was not claimed or determined in those proceedings. Nor did the later FTT proceedings create any agreement or estoppel giving the appellant a credit for it.
2. Limitation and appropriation. The disputed £616.60 was part of the 2014–15 charge demanded on 15 May 2014. The claim issued in May 2021 was therefore out of time under section 19 of the Limitation Act 1980. A part-payment does not extend time for arrears of rent under section 29(6). The respondent’s proposed appropriation of later payments to the earliest debt was too late and inconsistent with the appellant’s clearly communicated basis for payment. The £616.60 had to be omitted from the amount payable.
3. Validity of the demand. The lease required payment by instalments. The single lump-sum demand for 2014–15 did not comply with that requirement and initially created no liability or arrears. The FTT’s later determination that the charge was payable, with payment required by 19 November 2014, made the sum definitive from that date, but did not retrospectively create arrears before then.
4. Administration charges. The costs of the 2014 FTT proceedings were not recoverable under the lease. At commencement there were no arrears, and the proceedings principally concerned the respondent’s right to manage. The later debt-collection letters were recoverable under the contractual provision for costs incurred in connection with recovery of arrears. The proper administration charge was £840.
5. Costs jurisdiction. The FTT had jurisdiction to determine the reasonable amount of variable administration charges, including contractual costs, under Schedule 11 to the Commonhold and Leasehold Reform Act 2002. It had nevertheless failed to determine the appellant’s paragraph 5A application and had assessed costs on an incorrect basis. Its costs assessment was set aside. The County Court had no jurisdiction to award costs relating to proceedings transferred to the FTT, pursuant to section 29(1) of the Tribunals, Courts and Enforcement Act 2007 and Mayor and Burgesses of the London Borough of Tower Hamlets v Khan [2022] EWCA Civ 831.
6. The appeal was allowed in part. The appellant remained liable for £840 in administration charges, but the £616.60 service charge and the FTT’s costs assessment were set aside. Further submissions were invited on the contractual costs and the paragraph 5A application. The Tribunal could not alter the County Court judgment; any correction had to be sought from that court.

• County Court: The respondent’s 2013 claim was dismissed. A later County Court judgment entered judgment for £6,719.59 plus costs of £8,197.50 following the FTT’s 2022 decision.
• First-tier Tribunal (Property Chamber): In 2014 it determined that the respondent had acquired the right to manage and that the 2014–15 estimated service charge was payable. On 31 August 2022 it determined liability for the disputed service charge, administration charges, interest and costs.
• Upper Tribunal (Lands Chamber): The appeal was allowed in part. The £616.60 service charge was barred by limitation, £840 of administration charges remained payable, and the FTT’s costs assessment was set aside.