When do you lose the right to challenge the recoverability and reasonableness of service charges?
A tenant is entitled to make an application to the First-tier Tribunal (Property Chamber) to challenge the recoverability and reasonableness of service charges pursuant to section 27A of the Landlord and Tenant Act 1985 (“the 1984 Act”). But just how far back can a tenant go when challenging their liability?
The Upper Tribunal considered this question in Cain v Islington  UKUT 0542 (LC). Here, Mr Cain issued an application in June 2014 challenging the reasonableness of service charges spanning a period of 12 years from 2002/2003 up until 2012/2013. The Upper Tribunal considered whether any limitation period applied to an application under s.27A of the 1985 Act. It concluded that:
a). The Limitation Act 1980 (“the 1980 Act”) imposed no limitation period to applications made under section 27A of the 1985 Act. Such applications were neither actions for recovery of rent or recovery of service charges (which are governed by the 1980 Act).
b). The doctrine of laches applied to equitable claims for which there is no limitation period. An application under s.27A of the 1985 was not an equitable claim and as such the doctrine of laches did not apply.
c). The Tribunal’s case management powers under the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 were not intended to allow it to strike out what is considers to be a “stale” claim.
However, Mr Cain was not given a carte blanche to challenge all of the contested service charges. Instead, the Upper Tribunal found that he had “agreed or admitted” his liability for all service charges falling due before 2007/2008 by reason of him having made payment of the service charges for these years without reservation, qualification or other challenge or protest. Pursuant to section 27A(4)(a) of the 1985 Act, a tenant is unable to pursue an application under in respect of service charges that have been “agreed or admitted”.
The Upper Tribunal said that “[a]n agreement or admission may be express, or implied or inferred from the facts and circumstances. In either situation the agreement or admission must be clear, the finding being based upon the objectively ascertained intention of the tenant which may be express or implied or inferred from the conduct of the tenant—usually 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”.
The lesson to be learned from Cain v Islington is that a tenant needs to be careful to ensure that they do not lose their right to challenge their liability for service charges. It is possible to lose this right by inaction over a period of time (particularly combined with the making of payment of the later disputed service charge). Tenants would be well advised (if they anticipate later disputing liability for a particular service charge) to make payment of the service charge on the express (and communicated) basis that payment is made without prejudice to their right to later make an application under section 27A of the 1985 Act.
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