Service Charge Dispute Case Law – Service Charges

The Lease Valuation Tribunal case of Abouzaki Holdings Limited v Connaught Court Residents Management Limited deals with a familiar type of service charge dispute.   The Tribunal was asked to determination under Section 168 of the Commonhold & Leasehold Reform Act 2002 as to whether the Leasehold owners had breached the terms of its lease by failing to pay on account and actual service charges demanded in respect of the service charge years ending on 31st March 2004 to 2008.

Pre Trial Directions were given after an oral hearing on 18th November 2008 for a Preliminary Hearing to determine the meaning and effect of certain aspects of a decision Leasehold Valuation Tribunal dated 2" April 2007. The 2007 Tribunal Decision intended to deal (amongst other things) with the service charge years 2004 - 2006. The freeholder and leaseholder were in dispute as to whether that decision dealt with both reasonableness and the amounts of the service charges which were in dispute.

The leasehold owners submitted that the 2007 Leasehold Tribunal Decision had decided both the reasonableness and amounts of the service charges demanded by the landlord for the year ending 31st March 2004 (as the result of a Compromise Agreement dated 25th March 2003), and for the years ending 31st March 2005, and 2006. The Leasehold owners had not challenged the amounts of the service charges in its case to the Leasehold Tribunal prior to the 2007 Decision, but was now seeking to reopen that issue.

The leasehold owners submitted that the 2007 Decision had not determined the actual service charge amounts in respect of all the three service charge years in question. At the hearing the Leasehold owners conceded that the parties were bound by the Compromise
Agreement as decided in the 2007 Decision.

The leaseholders had paid all the service charge payments due under that agreement, albeit that some were paid late. The leaseholders submitted that the freeholder was in breach of the agreement through its failure to pay £30, 000 into a service charge reserve fund, so both parties were in breach of it.

The 2007 Decision provided a formula for deciding which service charge items were reasonable, but had not decided the actual amounts. The leaseholders had not seen service charge accounts, or had the opportunity to examine the underlying documentation.

In response to questions from the Tribunal, the parties confirmed that they agreed that the accounts for the two service charge years from 1st April 2006 to 31st March 2008 were still subject to a service charge dispute and required a decision of the Tribunal at the hearing of the substantive application.

The leasehold owners argued that they had not seen the service charge statements for the years commencing 1st April 2004 to 31st March 2006 The landlord disputed this, and referred to the larger bundle before the Leasehold Valuation Tribunal containing the documents presented to the Tribunal prior to the 2007 Decision.

In the end the  Tribunal considered the legal argumentation. The Tribunal noted that the issue of specific amounts and detailed  service charge accounts summaries for the years in question were in evidence before the Tribunal in 2007, contrary to the leaseholders submission.

The Tribunal made it clear that the appropriate time for the leasehold owners to take any point on them was then, not in proceedings nearly 2 years later.

After considering the terms of the 2007 Decision the Tribunal concluded that the Tribunal's decision making process had been conditioned and limited by the statement in the Directions set out above, as well as the cases put by both parties at the time. The 2007 Decision was made to decide an application brought by the Leaseholoders. The Leaseholers had sought to appeal that decision, and had been refused leave by the Leasehold Valuation Tribunal and the Lands Tribunal.

It had been open to the leasehold owners to raise detailed issues on the service charge dispute at the 2007 hearing, being an application under Section 27A, however the leaseholders had not done so. It was now too late to reopen that matter.

The Tribunal thus decided that the 2007 Decision had to be interpreted as dealing with both reasonableness and the amounts relating to the Service Charge years ending on 31st March 2005, and 2006. It was  now too late for the leaseholders  to attempt to reopen the service charge dispute.