The claimant managed a development where the respondent was one of the tenants. Through a mix up, the company had failed to collect sufficient sums to discharge communal fuel service charges. They now sought payment of the apportioned but substantial arrears from the respondent even though they related to a time before he had taken over the tenancy. He counterclaimed for their negligence.
Held: The tenant’s appeal failed.
Lord Dyson said: ‘the difference between a liability to pay and the incurring of costs is recognised by the draftsman in section 20B(1) itself. Where he wishes to refer to a liability, he does so: note the words ‘the tenant shall not be liable to pay so much of the service charge as reflects the costs so incurred.’ It is significant that the phrase ‘relevant costs’ is defined in section 18(2) as ‘the costs or estimated costs incurred or to be incurred’. It is not defined as ‘the liability or estimated liability for costs. Similarly, section 20B(1) does not say ‘if any liability for any of the relevant costs is incurred more than 18 months before a demand for payment of the service charge is served on the tenant, then (subject to subsection (2)), the tenant shall not be liable to pay so much of the service charge as reflects that liability so incurred.’
Thirdly, section 19(2) provides strong support for the view that costs are incurred only when they are paid (or when an invoice or other demand for payment is submitted by the supplier or service provider) and not when services are provided or supplies are made. The subsection draws a distinction between (i) what is to happen before the relevant costs are incurred and (ii) what is to happen after they have been incurred. Section 20B deals with (ii). The significance of section 19(2) in relation to relevant costs that have been incurred is that it provides in relation to such costs that any necessary adjustment to the service charge shall be made by ‘repayment, reduction or subsequent charges or otherwise’. Such an adjustment of the service charge to reflect the costs that have been incurred can only be made after the amount of the costs has been ascertained (usually by the submission of an invoice or other demand for payment). In other words, the incurring of costs entails the existence of an ascertained or ascertainable sum which is capable of being adjusted by repayment, reduction etc. The mere provision of services or supplies does not without more entail anything which is capable of being adjusted in this way.’
Lord Dyson MR, Elias, Patten LJJ
[2013] EWCA Civ 479
Bailii
Landlord and Tenant Act 1985 18 19 20B
England and Wales
Citing:
Appeal from – OM Property Management Ltd v Burr UTLC 26-Jan-2012
UTLC LANDLORD AND TENANT – service charge – Landlord and Tenant Act 1985 s.20B – ‘costs’ are ‘incurred’ when ‘expended’ or ‘become payable’ – gas used from 2001 to 2007 not billed by correct supplier until . .
Cited – Gilje and others v Charlgrove Securities Ltd CA 4-Oct-2001
The court was asked as to the liability of five underlessees to pay the rent for a caretaker employed by the landlord. The lease envisaged a caretaker living in the building. Previously the caretaker had been paid a larger wage but had then paid a . .
Cited by:
Cited – Ground Rents (Regisport) Ltd v Dowlen and Others UTLC 22-Apr-2014
groundrents_UTLC_0414
UTLC LANDLORD AND TENANT – service charges – lengthy delay by utility provider in delivering invoices to new landlord – invoices delivered to previous landlord – when costs ‘incurred’ – section 20B Landlord and . .
Lists of cited by and citing cases may be incomplete.
Landlord and Tenant
Leading Case
Updated: 10 November 2021; Ref: scu.495180