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Property Law - Another trap for the unwary residential landlord

By : Nicola Muir

With the plethora of statutory regulations now in place to protect residential leaseholders from unscrupulous landlords, it is becoming increasingly difficult to recover service charges at all. The recent Lands Tribunal decision in London Borough of Islington v Abdel-Malek 7th August 2007 identified one more trap for the unwary landlord.

As is often the case with large schemes undertaken by public landlords, Islington came to bill a major works project a number of years after the project was first conceived. The works were carried out in stages and stage payments continued even after the works were completed.

Section 20B of the Landlord and Tenant Act 1985 is intended to protect the tenant from unexpected and unbudgeted for bills. Section 20B (2) provides that the lessor may only recover costs if:
“ . . .within the period of 18 months beginning with the date when the relevant costs in question were incurred, the tenant was notified in writing that those costs had been incurred and that he would subsequently be required under the terms of the lease to contribute to them by the payment of a service charge.”
 
There is no “get out” clause in relation to this subsection – failure to comply means that the relevant service charge cannot be recovered – there is no power to grant a dispensation. In the Islington case, the Council sent its leaseholders a letter within the 18 month period enclosing an estimated invoice for the works and advising the tenant that the works continued and that the final account would be produced once the defects liability period had expired.The invoice attached to the letter was for the same sum as had been estimated for the whole of the works in the Section 20 notice. The tenant argued that only part of this sum had so far been incurred and she had no way of knowing what part. The tenant said as no figure stating the amount actually spent to date was included in the notice, it was invalid. The Lands Tribunal agreed.
 
Inevitably, this decision gives rise to a number of problems for landlords. First, in relation to many old cases where it was assumed that it was sufficient to warn the tenant that he would be receiving a bill in due course without specifying the liability to date, many claims for service charges will now be statute barred. 
Secondly, it is easy to imagine the chaos which may ensue where landlords pay for the works as and when. In order to comply with s. 20B the landlord would be well advised to keep a running tally of the costs spent so that they can notify the tenant of the exact amount incurred within the time limit set down by the section.