Upper Tribunal upholds appeal

Whether the First-tier Tribunal had jurisdiction to dismiss a freeholder’s application to strike out a leaseholder’s claim

The background

In Marlborough Park Services Ltd v Leitner [2018], the parties were in dispute over unpaid service charges and legal fees relating to two properties for which the leaseholder held a lease. The leaseholder is entitled under the lease to make an application under the Landlord and Tenant Act 1987 for a determination of the amount of service charge payable. Accordingly, he made two applications – one for each property – relating to ‘past years’ (2007 to 2012) and ‘current or future years’ (2013 to 2016). Crucially, the freeholder had already obtained judgments against the leaseholder for unpaid sums.

The freeholder stated that correspondence was sent to the leaseholder making demands for payment, but the leaseholder contended that this was never received and he refused to make payment for a proportion of the sums demanded. The Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 state at rule 9(3) that “the Tribunal must strike out the whole or part of proceedings if the Tribunal does not have any jurisdiction in relation to the proceedings or case…”.

The freeholder stated that the FTT did not have jurisdiction to hear the leaseholder’s application and that it should be struck out. The leaseholder had ‘agreed or admitted’ the whole matter and a significant part of the application had already been determined by the Court. The FTT found that rule 9(3) did not apply, and dismissed the freeholder’s application to strike out.

The decision

The Upper Tribunal separated the application into three parts: service charges payable between 1 April 2012 and 31 March 2013; charges payable before 1 April 2012; and charges payable after 31 March 2013.

The Upper Tribunal allowed the freeholder’s appeal in part. The FTT did not have jurisdiction to determine the leaseholder’s service charges payable in respect of the period prior to 1 April 2013 and this part of the application should therefore have been struck out.

The application relating to charges prior to 1 April 2013 should have been struck out on the grounds that default judgments had already been obtained for this period. The freeholder argued that those service charges were duly certified and an outstanding debt, supported by documentary evidence and an accountant’s certificate. The Upper Tribunal agreed. Further, the leaseholder had paid service charges without protest since 2007; the freeholder argued that his conduct inferred an agreement that he was liable for those charges, and again the Upper Tribunal agreed, finding that the FTT should have struck out this element of the application.

Advice and action for landlords

Our team is pleased to have achieved a favourable outcome for our client. Where a leaseholder has, by conduct over a period of years, inferred an agreement to payment of service charge without qualification, it follows that a freeholder is entitled to rely on convention to recover costs.

Similarly, when charges have been properly documented and determined as payable by default judgment, the First-tier Tribunal’s jurisdiction should not then extend to the determination of liability for payment of that sum under separate proceedings.

Advice for landlords here is to ensure the proper documentation is in place in respect of outstanding sums, and to obtain early default judgment where possible. The monitoring of payment of service charge will allow a landlord to ascertain whether a leaseholder agrees by its conduct to the liability for payment; otherwise, where a leaseholder persistently fails to pay, the landlord should take action early to prevent its own conduct establishing that service charge is not payable.