Challenging a Predecessor’s Service Charges

Whether the First-tier Tribunal can determine service charges paid by previous tenant

The background

In Gateway Holdings (NWB) Ltd v McKenzie and Greenfield [2018], the respondent tenants brought a claim in the First-tier Tribunal for determination of service charges payable. Mrs McKenzie, the first respondent, owned the long leasehold of a flat which was acquired in June 2016 when she assumed the lease from her father who had died a number of months beforehand. The appellant owned the freehold interest in the building and was Mrs McKenzie’s landlord.

In her application, the tenant requested a determination in respect of the years 2013, 2014 and 2015 but stated that the amounts for each of those years was ‘not in dispute’. She went on to specify 2016 as the year for which she required a determination, noting in particular the sum of £32,412.34 which was the cost of major external decoration works undertaken at the building.

Both tenants appeared to widen the scope of the application to include service charges for years 2011 to 2015. The freeholder argued that, as Mrs McKenzie had described the service charges for years 2013 to 2015 as ‘not in dispute’, they were agreed and she was therefore unable to seek a determination in respect of those sums. The FTT found in favour of the tenants, stating that as she was not the incumbent tenant during the years for which determination was sought, the sums were not hers to admit and giving her the benefit of the doubt to allow her to challenge the earlier years.

The decision

The Upper Tribunal found in favour of the freeholder, allowing its appeal. Mrs McKenzie was found to be liable for service charge amounting to £1161.20 for 2016, and no determination was to be made in respect of earlier years as the leaseholder had no liability to pay service charges before she acquired the lease.

The FTT was unable to make a determination in respect of earlier years as the tenant had no legitimate interest in the property during those years pre-dating her ownership. Her father had paid those sums and neither the tenant nor her father’s estate had any continuing liability in respect of them.

Advice and action for landlords

J B Leitch is pleased to have successfully concluded this element of our client’s appeal. Even though the existing tenant and her predecessor in title were connected in this case, it does not follow that the tenant is able to claim for determination of service charges which were paid without argument for years preceding her ownership of the leasehold interest, nor that any overpayment made by him should be payable to her.

The Gateway decision gives landlords some reassurance that, where they may receive a claim for determination for previous years’ service charge, this may not be considered by the FTT where the lease was registered to a third party predecessor in title and service charges paid without issue during that tenure.