Mary Middleton & Anor v Karbon Homes Limited

Service charges may include the cost of services agreed or understood to be chargeable when an assured tenancy began. A landlord may add a genuinely new service to the service-charge schedule, subject to any contractual consultation and notice requirements. It may not reclassify an existing service, previously provided without separate charge, as a newly chargeable service without corresponding authority to adjust the rent. A failure to include the prescribed statutory information with a service-charge demand suspends recovery until a compliant demand is served; it does not entitle a tenant who has already paid to repayment.

The appellants were assured tenants of retirement flats whose landlord, Karbon Homes Ltd, had acquired the landlord’s interest in 2017. They challenged service charges for 2017 to 2021 under section 27A of the Landlord and Tenant Act 1985. The First-tier Tribunal determined that most charges were payable, subject to minor reductions.

The appeal concerned the addition of services to the service-charge schedule, the apportionment of certain contract costs, and compliance with section 21B of the Landlord and Tenant Act 1985. Permission to appeal was granted on three issues, while permission on two further issues was considered at the hearing.

1. Additional services. The tenancy agreements provided for service charges and contained a mechanism for varying existing services. The landlord was entitled to charge for services which the original estimate and the first service-charge schedule showed, or which the evidence indicated were understood to be covered by the charge.
2. Clause 57 permitted the landlord, after consultation and notice, to add a genuinely new service. It did not permit the landlord to reclassify an existing service, previously supplied without a separate charge, and impose a new charge for it. Such a reclassification would amount to adding a charge rather than adding a new service, particularly because the clause provided no corresponding reduction in rent.
3. The evidence did not establish that the disputed items had been improperly transferred from rent to service charge. Some alleged new services involved only a change of provider, and another had been introduced after consultation and written agreement. The charges were therefore not shown to be wrongly recoverable. The Tribunal would interfere with the FTT only if its decision was shown to be wrong.
4. Section 21B. The challenge to the prescribed information was not properly raised before the FTT. In any event, the FTT was entitled to accept the evidence that Karbon’s notices contained the required information. A failure to provide the information makes a service charge unenforceable until a compliant demand is served, but section 21B does not require repayment of sums already paid without a proper demand.
5. The apportionment issue was not live. The evidence showed that the disputed amount represented the agreed price per connection for the relevant monitoring contract.
6. The appeal was dismissed on all permitted grounds. Permission to appeal on the two deferred issues was refused.

• First-tier Tribunal (Property Chamber): On 25 April 2022, determined under section 27A of the Landlord and Tenant Act 1985 that most of the disputed service charges were payable, with minor reductions.
• Upper Tribunal (Lands Chamber): Dismissed the appeal and refused permission on the deferred issues.