Simon Birch v Paul Meredith

The following cases were referred to in this decision: Cannon v 38 Lambs Conduit LLP [2016] UKUT 371 (LC) Tedla v Cameret Court Residents Association Ltd [2015] UKUT 0221 (LC) Introduction .

1. This is an appeal by a landlord against one aspect of a decision made by the First-tier Tribunal in its jurisdiction under section 27 A of the Landlord and Tenant Act 1985 , to determine whether and to what extent leasehold service charges are payable. The appellant Mr Birch is the freeholder of 55-57 High Street, Arundel, BN18, and the respondent Mr Meredith holds a long lease of the residential parts of the building, comprising six flats. The flats have been sub-let by the respondent, and he holds one of the sub-leases himself, but the proceedings in the FTT were about the respondent’s obligations as head-lessee.

2. This appeal has been conducted under the Tribunal’s written representations procedure. Representations for the appellant were drafted by Mr Hugh Rowan of counsel; the respondent has not been legally represented. I refer to the parties as “the landlord” and “the leaseholder”, rather than as appellant and respondent, to avoid confusion since Mr Meredith was the applicant in the FTT and the respondent on appeal. The decision in the FTT.

3. The proceedings in the FTT began with an application by the leaseholder for a determination as to whether service charges in respect of the service charge year 2023-24 were payable. Whether a charge is payable will depend upon the terms of the lease and upon statutory provisions; it will also in most cases depend on whether the relevant cost was reasonably incurred, because section 19 of the 1985 Act provides (in brief paraphrase) that service charges are not payable unless the cost was reasonably incurred

4. The service charges in issue for the year 2023-24, and demanded from the leaseholder, amounted to £46,918.26. The charges were for four items: drainage works, legal fees, pointing and scaffolding.

5. The FTT made two substantive decisions. First, it found that since the service charge demands did not include an address for the landlord as required by section 47 of the Landlord and Tenant Act 1987 , they were invalid. Section 47 provides that a written demand for rent or service charges must contain the name and address of the landlord; if it does not, then any service charges demanded “shall be treated for all purposes as not being due from the tenant to the landlord at any time before that information is furnished by the landlord by notice given to the tenant.”

6. Second, the FTT went on to consider whether the service charges would have been payable if properly demanded. It is not entirely clear to me whether the landlord had by then provided the information required by section 47 ; my understanding from paragraph 90 of the FTT’s decision is that he had done so, by re-serving the demands, but if I have misunderstood that it makes no difference to this appeal. The FTT considered the work done under each of the four heads, and found all the costs to have been reasonably incurred save for the smallest item, the legal fees, as to which it imposed a reduction of £417.37. The total amount payable by the leaseholder was therefore £46,500.89.

7. The FTT then went on to consider the leaseholder’s application for orders under section 20 C of the Landlord and Tenant Act 1985 and under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 , and for reimbursement of the fee he paid in making his application to the Tribunal.

8. Section 20 C provides: “(1) A tenant may make an application for an order that all or any of the costs incurred, or to be incurred, by the landlord in connection with proceedings before a court [or the FTT] … are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the tenant or any other person or persons specified in the application.”

9. Paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 makes similar provision in respect of service charges. The idea behind the two provisions is that there are cases where it would be unfair to allow a landlord to recover its legal costs of proceedings as service or administration charges under the provisions of the lease, in light of the outcome of those proceedings.

10. When an order under section 20 C (and/or paragraph 5A) is not made, a landlord may recover its legal costs as service or administration charges only insofar as the lease allows that, and only insofar as they were reasonably incurred ( section 19 of the 1985 Act ).

11. In the present case the FTT made the orders sought by the leaseholder, and ordered that the landlord reimburse his tribunal fee, on the basis that the leaseholder “had achieved complete success in challenging the service charges as demanded in invalid demands” and that so far as the reasonableness of the costs was concerned: “The [landlord] just about scraped through in respect of most of the costs incurred being reasonable when properly demanded, with the large caveat of not being able to charge the [leaseholder] again if the pointing work needs to be re-taken as seems entirely possible but not proved. That is not a great success in itself.”

12. The landlord appeals, with permission from this Tribunal, against the FTT’s decisions in respect of costs and fees The arguments in the appeal

13. The landlord’s argument, in summary, is that in making its determinations about costs and fees the FTT took into account an irrelevant consideration, namely the failure to comply with section 47 of the 1987 Act . Moreover, the FTT was mistaken when it said that the leaseholder had “achieved complete success” in challenging the service charges; and it was wrong to say the landlord had “just about scraped through” in terms of showing that his costs were reasonably incurred and wrong to regard that as relevant to the decision about costs. Furthermore the landlord argued that the FTT failed to take into account the relevant consideration that he has been substantially successful in showing that his costs were reasonably incurred, and failed to take into account the leaseholder’s conduct.

14. The landlord’s position is that no section 20 C/paragraph 5A orders should have been made, but in the alternative he argues that the FTT should have considered making an order in respect of part only of the costs rather than ruling them out altogether; likewise with the FTT fee incurred by the leaseholder.

15. The leaseholder in response argues that the landlord was aware that the leaseholder had raised the failure to comply with section 47 , and should have put that failure right well before the hearing rather than at the last minute. If the landlord had done so he argues that he, the leaseholder, might not have gone ahead, knowing that his strongest point was no longer in issue. Other points made by the leaseholder are relevant either to the reasonableness of the costs incurred, as to which the leaseholder was unsuccessful before the FTT, or to whether a section 20 C order should have been made but to whether the landlord’s costs were reasonably incurred (which is a separate issue and not relevant to the appeal), or to events that have happened after the works with which the FTT was concerned. Discussion and conclusion

16. An order under section 20 C of the 1985 Act , or under paragraph 5A of Schedule 11 to the 2002 Act , is an interference with the contractual rights of the landlord. It is well-established that such orders are not made as a matter of course when a tenant has been successful, and that on the other hand they may be made even where a tenant has been unsuccessful. By contrast, an order that a respondent reimburse the tribunal fee paid by a successful applicant (under rule 13(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, and likewise under rule 10(14) of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010) is generally made in favour of a successful applicant, although there is no rule to that effect and, as ever, costs are within the discretion of the FTT.

17. It is clear to me from the FTT’s decision that it was aware of the principles I have just set out.

18. What I think went awry is that the FTT fell into error about the effect of failure to comply with section 47 of the 1985 Act . The effect of that provision is suspensory only. Failure to comply does not, as the FTT thought, invalidate the service charge demand and does not prevent the recovery of the service charges; it provides that they are not due until the relevant information is provided. As the authors of Service Charges and Management (Tanfield Chambers, 4 th edition) put it: “If the landlord has not complied, all that is required is for a notice to be given to the tenant informing it of the name of the landlord and of its address. As a landlord may give a valid notice at any time the failure to serve a demand that complies with [ section 47 ] does not prevent a tribunal from determining whether the sums demanded are otherwise payable ( Cannon v 38 Lambs Conduit LLP [2016] UKUT 371 (LC) ).”

19. The Tribunal (HHJ Stuart Bridge) said this in Cannon v Lambs Conduit LLP at paragraph 25: “The effect of section 47(2) is aptly described as ‘suspensory’ by the Tribunal in Tedla v Cameret Court Residents Association Ltd [2015] UKUT 0221 (LC) at [38]. Any service charge (or other sum) is treated as not being due ‘at any time before the information is furnished by the landlord by notice given to the tenant.’ This clearly carries the implication that, all other things being equal, the service charge will become due when the tenant is given written notice by the landlord of the landlord’s name and address. That can be done at any time. As stated in Tedla at [38], ‘From the time at which such a notice has been given the service charges will be treated for all purposes as being due’ from the tenant to the landlord

20. The FTT having found that the service charge demands in question did not comply with section 47 said at its paragraph 79: “It necessarily follows, that the service charges demanded for 2023 were not payable. The Applicant’s application therefore necessarily succeeds in that none of the service charges the subject of this case are payable. Strictly, that is the end of the matter.”

21. That is wrong, for the reasons explained above.

22. As I observed above, costs are in the discretion of the FTT and the Tribunal will not interfere with a decision that falls within the generous bounds of the FTT’s discretion. But in the present case the FTT made an error of law. It took the view that the leaseholder had achieved complete success in challenging the service charges, which was incorrect. It therefore set off on the wrong foot in its consideration of whether to make orders under section 20 C and paragraph 5A, and whether to order reimbursement of the leaseholder’s fee, basing its decision on an irrelevant consideration, namely a legally erroneous view of the effect of section 47 .

23. A further difficulty is the FTT’s observation (see paragraph 11 above) that the landlord had “just about scraped through” in showing that its costs were reasonably incurred. The standard of proof in the FTT is the balance of probabilities; how far that balance is tipped is often difficult to say, and in my judgment it was not right to interfere with the landlord’s contractual rights on the basis that the balance was not tipped very far. Equally, I regard as irrelevant the FTT’s comment that an attempt to charge remedial work in the future would be unsuccessful; no such costs have yet been incurred or charged for and no judgment can be made about them.

24. For those reasons the FTT’s decision was made on the basis of irrelevant considerations, and is set aside. It is not necessary for that purpose to consider the landlord’s allegations about the leaseholder’s conduct.

25. It would not be proportionate to remit the matter to the FTT for a fresh decision. I substitute the Tribunal’s decision. The relevant considerations appear to me to be as follows.

26. First, the landlord’s failure to comply with the requirements of section 47 of the 1985 Act did not invalidate the service charge demands; its effect was suspensory only as explained above. Second, in terms of the real issue before the FTT, namely whether service charges were payable, the landlord was overwhelmingly successful. The amount in issue was very nearly £47,000; the reduction made by the FTT, of only just over £400, was tiny. The challenge brought by the tenant was a serious and expensive one. The landlord proved its case and it is very hard indeed to see why the landlord should not be able to exercise whatever contractual rights it has under the lease in respect of costs. I say that, again, without the need to consider the allegations of misconduct made by the landlord against the leaseholder.

27. I do not accept the leaseholder’s argument that if the landlord had corrected the failure to comply with section 47 before the hearing he would not have pursued his challenge. Section 47 appears to have received only a brief mention in the leaseholder’s statement of case in the FTT; his energies in preparation for the hearing and in argument at the hearing itself were devoted to the substantive challenge to the costs incurred, which was (and clearly remains) a matter of serious concern which he would not have dropped on provision of the landlord’s address pursuant to section 47 .

28. Accordingly I make the requested orders under section 20 C of the 1985 Act and under paragraph 5A of Schedule 11 to the 2002 Act in respect of the landlord’s costs in the FTT, and I refuse to order that the landlord reimburse the fee paid in the FTT by the leaseholder. Upper Tribunal Judge Elizabeth Cooke 7 January 2026 Right of appeal Any party has a right of appeal to the Court of Appeal on any point of law arising from this decision. The right of appeal may be exercised only with permission. An application for permission to appeal to the Court of Appeal must be sent or delivered to the Tribunal so that it is received within 1 month after the date on which this decision is sent to the parties (unless an application for costs is made within 14 days of the decision being sent to the parties, in which case an application for permission to appeal must be made within 1 month of the date on which the Tribunal’s decision on costs is sent to the parties). An application for permission to appeal must identify the decision of the Tribunal to which it relates, identify the alleged error or errors of law in the decision, and state the result the party making the application is seeking. If the Tribunal refuses permission to appeal a further application may then be made to the Court of Appeal for permission.