Talbot Group Limited v Kishorkumar Valji Khets Kotecha & Ors

Interim service charges are assessed when demanded. The likelihood that the proposed expenditure will be incurred is relevant to whether an advance demand is reasonable. A landlord may in principle include an unspecified contingency provision, but it must be authorised by the lease and supported by evidence showing that the amount is reasonable.

Where a landlord repeatedly demands advance charges for services which it has not provided, its past failure may cast doubt on future expenditure and make repeated demands unreasonable. Failure to provide accounts or carry out contractual reconciliation does not make repeated charging reasonable. A procedural fairness complaint will fail where the landlord had a clear opportunity to provide relevant evidence but chose not to do so.

The landlord appealed against a decision of the First-tier Tribunal (Property Chamber), dated 5 November 2024, concerning interim service charges for Flats 14 and 19. The FTT held that a roof-works demand for Flat 14 was invalid because it was not made on a quarter day, although the works charge for Flat 19 was reasonable and payable. It also disallowed contingency charges and held that repeated interim charges for later years were unreasonable where the landlord had provided no evidence of works or services.

The appeal concerned the construction of the leases, the reasonableness of advance charges under Landlord and Tenant Act 1985, the relevance of actual expenditure and the landlord’s failure to provide services, procedural fairness, and the evidential basis for the FTT’s findings.

1. Disposition. Grounds 1 and 2 succeeded. Grounds 3, 4 and 5 failed. The FTT’s conclusions stood except in relation to the Flat 14 roof-works charge.
2. Construction of the Flat 14 lease. The lease required payment of an interim charge on the quarter days, but did not require the demand itself to be made on a quarter day. The demand was subject to the statutory notice requirements under sections 166 of the Commonhold and Leasehold Reform Act 2002 and 21B of the Landlord and Tenant Act 1985. The roof-works charge was therefore reasonable and payable when demanded.
3. Interim charges. Under section 19(2) of the Landlord and Tenant Act 1985, reasonableness is assessed at the time of demand. The likelihood of the proposed expenditure being incurred is relevant. Applying Knapper v Francis [2017] UKUT 3 (LC), the landlord’s failure to provide services in earlier years could properly cast doubt on its intention to incur equivalent expenditure later. The absence of actual expenditure was therefore centrally relevant once charges were repeatedly demanded.
4. The contractual reconciliation mechanism did not prevent that conclusion. Because the landlord had not produced accounts or credited unspent sums, repeating the demands could cause tenants who had paid to pay twice and tenants who had not paid to be treated as doubly in arrears.
5. Contingencies and evidence. An unspecified contingency charge was permissible in principle under the leases, but remained payable only if reasonable. The landlord provided no evidence or explanation supporting the amounts, so no contingency charge was payable for any year.
6. There was no procedural unfairness. The landlord had ample opportunity to provide evidence after relying on Knapper v Francis and chose not to do so. The FTT was also entitled to accept the respondents’ unchallenged evidence that no works or services had been provided.
7. The Flat 14 roof-works charge was to be re-credited because the works had not been carried out. The respondents nevertheless remained liable for their share of the roof works.

• First-tier Tribunal (Property Chamber): Decision dated 5 November 2024. It determined the payability and reasonableness of the disputed interim service charges, including roof works, contingencies and later repeated charges.
• Upper Tribunal (Lands Chamber): Appeal allowed in part. Grounds 1 and 2 succeeded; grounds 3, 4 and 5 failed. The FTT’s conclusions otherwise stood.