Terms of Lease Not Followed – No surveyor’s Certificate Appropriately Served Rendering 6 years of Service Charge Demands Invalid

It is extremely important not to assume that a freeholder has the right to demand a particular service charge; you must check the lease first. In the case of a flat at Marina Heights, St Leonard’s-on-Sea, 6 years of service charge demands were held invalid as the charges were not certified by a surveyor as required by the lease.

In this case, Ms A (who held a long lease on the flat) argued that the freeholder had no right to recover any service charges between 2002 and 2008. She believed that the freeholder had not complied with a condition precedent to the recovery of any service charges under her lease. The condition she referred to was that before any charge became payable it had to be properly certified by the freeholder’s surveyor, which had not been done.

The freeholder argued that, although there was no certification for the charges between 2002 and 2008, it did not matter because there was in fact no condition precedent under the lease. Furthermore, if there was such a condition it had been materially satisfied by an accountant’s verification of the charges demanded.

The Upper Tribunal found that the lease itself stated that service charges were to be “ascertained and certified by the lessor’s surveyor”, and referred to this passage from Woodfall’s Landlord & Tenant:

“7.180. Where a lease provides for the amount payable to be certified by the landlord’s surveyor or accountant, the issue of a valid certificate will usually be a condition precedent to the tenant’s liability to pay.”

There was nothing found in the lease to support the argument that a condition precedent was not created. The freeholder had provided an accountant’s certificate, but the requirement stated in the lease was for that of a surveyor and thus this would not do.

Subsequently, the tenant was successful and was not rendered liable to pay service charges for between 2002 and 2008. That said, the question was left open as to whether the freeholder could belatedly procure certification of the 2002-2008 service charges and then serve a fresh demand for the payment of the certified charges.

Depending on the works carried out, it is probable that all or some of the service charge will not now be recoverable. This could have far reaching consequences for some advising solicitors and property managers.

29th July 2011