Russell Stewart Lacy v Homeselect Finance (No.3) Limited

A tenant’s payment of a service charge does not alone amount to an agreement or admission for the purposes of Landlord and Tenant Act 1985, section 27A. A series of unqualified payments may justify that inference, but it must rest on evidence.

An estoppel by convention may arise where parties to a deed have acted on a shared but erroneous construction. Detriment is not a necessary element of that form of estoppel. Failure to complete the statutory consultation procedure for qualifying works, including the required post-contract notice, limited the tenant’s liability to £250. A demand made before costs are incurred is not barred by section 20B.

The tenant appealed a First-tier Tribunal decision concerning service charges for a flat. The dispute included the form of service-charge demands, major works to a driveway and retaining wall, legal fees, cleaning costs and management fees.

The First-tier Tribunal had held that earlier charges had been admitted through payment and that it therefore lacked jurisdiction under section 27A. It also rejected the consultation challenge to major-works charges. The appeal concerned whether those findings had an evidential and legal basis, and what sums were reasonably recoverable.

1. Appeal allowed on all grounds. The First-tier Tribunal wrongly treated the tenant as having admitted service charges up to September 2016, and a payment of £957 in January 2017, for the purposes of section 27A. Although a series of unqualified payments can support an inference of agreement or admission, the service-charge account did not evidence payment of the disputed sums. An isolated payment could not itself amount to an admission under section 27A(5).
2. The Upper Tribunal substituted a finding of estoppel by convention. The parties to the lease had proceeded on the shared, but erroneous, basis that quarterly on-account charges could exceed £100. Detriment was not required for that species of estoppel. The tenant was therefore estopped from objecting to the quarterly charging mechanism before the end of 2013, but remained entitled to challenge the reasonableness of the charges.
3. The appeal against the driveway and retaining-wall charge succeeded. The landlord had not given the notice required by paragraph 6 of Schedule 4 to the Service Charges (Consultation Requirements) (England) Regulations 1987 after accepting a quotation not disclosed to the leaseholders. The consultation requirements were therefore not met, and liability for the charge was limited to £250 under section 20 of the Landlord and Tenant Act 1985. Section 20B did not prevent a charge being made before the relevant cost was incurred.
4. The respondent conceded that the further £3,015.64 major-works charge was not due. The Tribunal also found that £585 had been debited for legal fees, substituted a reasonable cleaning charge based on four hours’ work, and reduced the 2015/16 management charge by £36.92.
5. The tenant’s applications under section 20C of the 1985 Act and paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 were not determined. The respondent was given 14 days to make observations.

• Upper Tribunal (Lands Chamber): Allowed the tenant’s appeal on all grounds and substituted determinations on liability and reasonable charges.
• First-tier Tribunal (Property Chamber): Determined service-charge liability and reasonableness. Its decision was set aside or varied on the appealed issues. No citation is stated in the judgment.