This case was considered by the Upper Tribunal on 25 September 2015 and concerned Mr Cain’s challenge to reasonableness of service charges over the previous 12 years. This is an important case as it provides scope for limiting the leaseholders ability to challenge the reasonableness of the service charges where the leaseholder has repeatedly paid the service charges in the past. Therefore, landlords should be aware of this case, particularly with a view to limiting the scope of challenges to the service charges by their leaseholders.
In this case Mr Cain acquired his flat in 2002 and had paid all of the service charges demanded since then until raising a challenge in 2014. That was considered by the First Tier Tribunal (FTT) in November 2014. The FTT had found that he could not challenge the previous 12 years of service charges because:
- Mr Cain had made repeated payments of the service charge demands throughout the period he was now seeking to challenge; and
- Mr Cain correspondence with his landlord had historically raised requests for information rather than challenging the service charges; and
- When asked by the FTT why he had not raised his concerns with the FTT earlier he said “ I did not want to waste anyone’s time. Why should I waste the time of the Tribunal when Islington had the information but would just not provide it.”
As a result of the conduct of Mr Cain he was found to have admitted that the service charges were due. Section 27A(4)(a) prevents challenges to the reasonableness of the service charges where they have been admitted or agreed.
Mr Cain appealed that decision on the grounds that under the relevant statutory provisions, namely s.27A(5) of the Landlord and Tenant Act 1985, his conduct was insufficient to result in a finding of any agreement or admission on his part. He argued that no specific date or act or failure to act was identified by the FTT so that, on analysis, all that was left was his payments which, by virtue of section 27A(5) , cannot be found to be an admission or agreement. Further, as a matter of law, an admission or agreement cannot be inferred from a lessee’s conduct under section 27A(5).
At the Appeal the Upper Tribunal considered s.27A(5) in particular, which states “the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment”. The FTT took the view that an agreement could be implied or inferred from the circumstances, usually by “an act or a series of acts or inaction in the face of specific circumstances or even mere inaction over a long period of time or a combination of the two”, as well as being express.
Further, the FTT took the view that the wording of 27A(5) meant that whilst the making of a single payment on its own will never be sufficient to infer or imply an agreement or admission, the making of multiple payments even of different amounts over a period of time may suffice to give rise to an admission or agreement. The reason why a single payment cannot give rise to an admission or agreement is because failure to make such a payment can put the leaseholder at risk of forfeiture so they will need to make the payment while still challenging it.
The Upper Tribunal found that the FTT was entitled to find Mr Cain had admitted or agreed the service charge amounts purely by the series of payments made in respect of the demanded service charge “without reservation, qualification or other challenge or protest”. Further, that entitlement was reinforced by the length of time which has passed before a challenge was first. The Upper Tribunal found that the FTT is entitled to look at matters in the round “and find that where there has been substantial delay in making any challenges to the items now in dispute, and most if not all of which have long-since been paid, that the tenant has agreed or admitted the amounts claimed which, after all, have long-since lain dormant without challenge”.
For further information, please contact Neil Lawlor or Alex Wyatt.
