By Rawdon Crozier
Rawdon Crozier is a barrister and mediator at KBG Chambers, Plymouth. Thanks also to Ibraheem Dulmeer, Barrister, Door Tenant, KBG Chambers, Plymouth & Normanton Chambers, London
Sections 21 and 22 of the Landlord and Tenant Act 1985 (LTA 1985) are among the remedies the LTA 1985 provides leaseholders in relation to service charges; specifically, they allow a leaseholder to obtain information about how service charges are calculated.
While the LTA 1985 appeared, when it was introduced, to provide leaseholders of residential dwellings with a range of significant protections and remedies, the fact that some sections have now been amended as many as seven times and that there are further prospective amendments, some of which have been pending for more than a decade, is a fairly good indication that it is not the most flawless piece of legislation ever passed.
While some of the amendments could be classed as technical or as having been necessary solely to have kept references to other legislation up-to-date, there have been obvious oversights, not all of which have been remedied.
By way of example, there are the following:
(1) the failure to have classed expenditure on improvements as a relevant cost for service charge purposes in the original version of section 18(1) (which made expenditure on retro-fitting cladding unchallengeable under the LTA 1985 – Bedfordshire Pilgrims Housing Association LRX/36/2000 (2002) (Unreported) (an oversight later remedied by Sch.9 para.7 of the Commonhold and Leasehold Reform Act 2002).
(2) the failure to have set out (1) the criteria for exercising the discretion under LTA 1985 sections 20 & 20ZA in relation to non-consultation on major works and (2) the extent of the court’s power in the event that the court decided the discretion should be exercised – Daejan Investments v Benson  UKSC 14. Effectively the Supreme Court had to create the answers from scratch and although it is by no means clear the majority accurately inferred Parliament’s intention (there were compelling dissenting opinions from Lord Hope and Lord Wilson JJSC), there has been no corrective legislation.
(3) the failure to have given the LVT (now the First Tier Tribunal) any power to order “any necessary adjustment” notwithstanding that LTA 1985 s.19(2) provides:
“ … Where a service charge is payable before the relevant costs are incurred, no greater amount than is reasonable is so payable, and after the relevant costs have been incurred any necessary adjustment shall be made by repayment, reduction or subsequent charges or otherwise.”
– Francis v Knapper  UKUT 3 (LC). If Parliament had intended to do more than pass a wan expression of good intention, it has not since the decision given the FTT any power to enforce the good intention.
This article will consider whether sections 21 and 22 are effective tools and what other options are available to a leaseholder.
It is, perhaps, useful to start with the remedies the sections offer. The remedies primarily considered are those available in England, as those in Wales now fall within the purview of the Welsh Government and, although the differentiations are currently small, they exist and are likely to increase over time.
By way of example, there are new ss.21s for England and Wales, both of which are only partially in force (currently, they are in for the purposes of making regulations but not otherwise). Both have been waiting to be put into force for a long time but the Welsh version is (or will be) very much more prescriptive, requiring landlords to supply, within six months of the end of an accounting period, a written statement of account to each tenant by whom service charges are payable, setting out, service charges, relevant costs and the aggregate amount standing to the credit of the tenant and the other tenants paying the service charge at the beginning and end of each accounting period.
The equivalent provision in England will permit the making of regulations (that could, of course, impose broadly similar or more stringent requirements, but one suspects will probably not). If the new Welsh s.21 had been in force across both countries, this would have been a very different article. In any event; those rights as they pertain to England…
The right under section 21 LTA 1985
A leaseholder, or where the leaseholder consents, the Secretary of a Recognised Tenants’ Association (as to the meaning of which see LTA 1985 s.29) has the right to request a summary of service charge accounts from their “landlord”.
The request under LTA 1985 section 21 need not be made directly of the landlord, but be made to a management company or managing agent, as for these purposes:
“ ’landlord’ includes any person who has a right to enforce payment of a service charge
– LTA 1985 s.30, and here one encounters the first infelicity of drafting because LTA 1985 s.21(3) & (4) then provide:
“(3) A request is duly served on the landlord if it is served on—
(a) an agent of the landlord named as such in the rent book or similar document, or
(b) the person who receives the rent on behalf of the landlord;
and a person on whom a request is so served shall forward it as soon as may be to the landlord.”
“(4) The landlord shall comply with the request within one month of the request or within six months of the end of the period referred to in subsection (1)(a) or (b) whichever is the later.”
Read literally, if the agent or person who receives rent on behalf of the Landlord also has a legal right to enforce payment of the charge, is served under s.3, the tenant should receive summaries from both as both are “landlords” under subs (4) by virtue of LTA 1985, s.30, because even where the actual landlord is not in control of the service charge, this can happen inter alia where a receiver or manager is appointed, there is nothing to absolve the actual landlord of the duty to comply with the request. There is, it should be said, nothing to suggest that this quirk has caused any problem in real life.
In relation to the time for responding to a request, LTA 1985, s.1(1) provides:
“ A tenant may require the landlord in writing to supply him with a written summary of the costs incurred—
(a) if the relevant accounts are made up for periods of twelve months, in the last such period ending not later than the date of the request, or
(b) if the accounts are not so made up, in the period of twelve months ending with the date of the request,”
How this works in practice is that if accounts are already made up for a 12 month period, the landlord (or other who counts as a landlord under LTA 1985, s.30) will only have one month to comply unless the “last such period” prior to the date of the request ended less than 5 months prior to the request because then six months from the end of that period will be later than one month from the date of the request. If the state of the account is actually already known, there is no reason why a landlord should avail themself of the extra time to comply with the request but they would be entitled to.
The wording “if the relevant accounts are made up for periods of twelve months” has a ring of ambiguity; it could either mean:
“ if the lease provides/the landlord’s practice has been for the relevant accounts to be made up for periods of twelve months”
“ if the relevant accounts have in fact been made up for a period of twelve months”.
While there is no authority, normal English usage would suggest the former construction. It should be noted too that if the lease provides or the landlord’s practice has been to make up accounts on a quarterly or half-yearly basis, any such account will not fall within LTA 1985, s.1(1)(a) and that providing a written summary based on the last 4 quarterly or last 2 half-yearly accounts would not, strictly, be compliance with the request.
Again, while there is no indication that this has caused any practical difficulty, it is generally better for legislation not to leave room for confusion because, as Lord Neuberger commented in Daejan v Benson (supra):
“ There is obvious value in identifying the proper approach … as it is important that decisions on this topic are reasonably consistent and reasonably predictable. Otherwise, there is a real risk that the law will be brought into disrepute, and that landlords and tenants will not be able to receive clear or reliable advice as to how this jurisdiction will be exercised.”
It is important to note that a leaseholder’s right under section 21 covers the last 12 months only. It does not enable a leaseholder to request a summary of service charge accounts going back more than 12 months ago. The “new Welsh s.21”, if it is ever brought into force, will, of course avoid this problem – in Wales – by requiring such information to be provided automatically each year.
As to what the summary should include, LTA 1985, Section 21(5) provides that the summary should set out the costs in a way:
” … showing how they have been or will be reflected in demands for service charges and, in addition, shall summarise each of the following items, namely—
(a) any of the costs in respect of which no demand for payment was received by the landlord within the period referred to in subsection (1)(a) or (b),
(b) any of the costs in respect of which—
(i) a demand for payment was so received, but
(ii) no payment was made by the landlord within that period, and
(c) any of the costs in respect of which—
(i) a demand for payment was so received, and
(ii) payment was made by the landlord within that period,
and specify the aggregate of any amounts received by the landlord down to the end of that period on account of service charges in respect of relevant dwellings and still standing to the credit of the tenants of those dwellings at the end of that period.”
There are specific provisions about providing information about grant aided works in both LTA 1985 s215 and 5B, which have not been set out.
It should be noted that under LTA 195, S.21(6) If the service charges are payable by the tenants of more than four dwellings, the summary must be certified by a qualified accountant.
The right under section 22 LTA 1985
Section 22 LTA 1985 allows a leaseholder to obtain further information by inspecting accounts and receipts.
A leaseholder looking at the summary of service charge accounts and wanting to know whether or not there is any documentary evidence to support the items and the figures stated within the summary can use the rights under section 22(2)(a) & (b) of the LTA 1985 to request the Landlord to “afford” the tenant
“ …reasonable facilities …for inspecting the accounts, receipts and other documents supporting the summary, and (b) for taking copies or extracts from them.
The tenant can thus establish whether or not such costs were in actual fact incurred and paid by the landlord.
The landlord must within one month of request make such relevant facilities available for leaseholders or secretary of a recognised tenant’s association to attend to inspect for a period of two months.
What if there is a failure to comply with the rights under sections 21 and 22 LTA 1985?
If the landlord does not provide the summary under section 21 of the LTA 1985 or fails to allow the tenant to inspect and copy the relevant documentation under section 22 of the LTA 1985 then, if the failure is without reasonable excuse, the landlord commits a summary offence under LTA 1985 S.25 and is liable for a fine on level 4 (up to £2,500) if convicted.
A local authority landlord is exempt from prosecution but other social landlords, such as housing associations, are not.
The Local Housing Authority has a discretionary power to start legal proceedings against the landlord, or the tenant can bring a private prosecution.
In practice, if the housing authority is unwilling to prosecute, it may be expensive to take on a private prosecution of the landlord. That there is one reported instance of a prosecution in the law reports is likely to be an indication that there have not been many.
Neither the low level of the fine for a breach, which a recalcitrant landlord might well decide to bear as being cheaper than complying with a request, nor the one reported instance, R v. Marylebone Magistrates’ Court, ex p. Westminster C.C. 32 H.L.R. 1999, will necessarily fill would-be prosecutors with confidence.
In the case, the stipendiary magistrate had stayed the summons on the basis that he was satisfied that the offence allegedly committed was so trivial that it did not justify bringing proceedings and the subsequent judicial review, which reached the Court of Appeal, failed, albeit partly on the technical ground that the appeal should have been brought not by judicial review but by way of an appeal by case stated.
That will probably mean nothing to most of the non-lawyers reading this, but most lawyers reading the last sentence will be wondering why the appeal was pursued by what they would instinctively regard as the wrong route. There were probably good reasons, which are not apparent from the judgment. While the Court of Appeal did not endorse the stipendiary magistrate’s decision, it did not wholly dismiss his reasoning. Collins J. giving the leading judgment said this:
“ In those circumstances, it seems to me that the magistrate was wrong. The basis of his decision is at page 3 of the transcript with which we have been provided. Having indicated that the details given substantially complied in his view with the requirements of legislation, he says:
“ …I go back to the judgement already quoted of Roch LJ at the top of page 11. These are criminal proceedings and I underline the word criminal which could result in a criminal conviction. They are intended for a wilful and inexcusable failure on the part of a landlord to produce documents.…”
Pausing there, that, with great respect, is clearly wrong. Section 21 is not intended for a wilful and inexcusable failure to produce documents. Section 22 is, but not section 21 . The magistrate continued:
“ …The criminal law is not to be used for trivial or technical breaches, proceedings which serve no purpose and which waste considerable amounts of time and money. I agree…that these proceedings are an abuse of the court’s process and should at this stage be dismissed.…”
While one has some sympathy with the magistrate’s view that the criminal law should not be used for trivial or technical breaches, the fact is that if Parliament has specified that something must happen and has made it a criminal offence to fail to provide that it does happen, it is difficult, in my judgment, to say that a breach should not be prosecuted.
… One recognises that this case is now somewhat stale and there is some force in the magistrate’s view that essentially the tenant has obtained the information that is necessary and that his further remedy, if he wishes to pursue it, would be to seek sight of the documents which go to support the charges which are demanded.”
If Section 25 is a little used and relatively ineffectual stick to use against a landlord for failing to comply with section 21 and 22 LTA 1985, what other means are there?
Civil proceedings based on LTA 1985, ss.21 & 25 are not an option – Morshead Mansions Ltd v Di Marco (No 2)  EWCA Civ 96,  1 W.L.R. 1799. In that case the landlord had failed to provide his service charge information going back to 2002. The tenant made an application for an injunction requiring Morshead Mansions to provide the correct service charge statements based upon the breach of ss.21, 22 & 25.
At the first instance the case was dismissed however the tenant won the appeal and the matter went by way of a further appeal to the Court of Appeal, which held that since the enactment of sections 21 and 22 of the Landlord and Tenant Act 1985, Parliament had made many changes to the statutory regime for the regulation of residential service charges, creating in substance a statutory code, and had introduced a variety of civil remedies for tenants whose landlords failed to comply with statutory requirements, but it had not given a tenant the express right either to sue in damages nor to seek a mandatory injunction for a
failure to comply with sections 21 and 22. Moreover:
(1) a failure to comply with section 21 or 22 would not cause personal injury, damage to property or give rise to any claim for economic loss;
(2) the question of reasonable excuse was only available as a defence in criminal proceedings. The statutory duty itself was strict, which made it less likely that Parliament would have intended to create a civil liability shorn of that defence;
(3) the fact that the local housing authority is a prosecuting authority was some indication that Parliament expected that authority to enforce compliance.
(4) many lessees would have contractual rights to the provision of information; thus for most tenants of there was no need for a statutory remedy, since the contract would suffice and nothing in the judgment should be taken as expressing a view about the availability of relief based on breach of contract
(5) where Parliament had provided that the maximum punishment for the offence was a fine not exceeding level 4 on the standard scale it was unlikely that Parliament also intended the landlord (and its directors) to be potentially liable, at the suit of a private individual, to a fine of an unlimited amount or, in an extreme case, up to two years imprisonment as a sanction for failing to comply with an injunction.
The tenant was thus not entitled to ask the court to grant a mandatory injunction to compel the landlord to comply with its obligations under LTA 1985 sections 21 and 22.
Injunction proceedings based on a contractual entitlement to information under the lease thus remain a possibility and, indeed, one of the authors has been involved in an action to obtain one. There are two points to be made about the remedy, however:
(1) such proceedings are unlikely to be any less expensive than bringing a private prosecution and
(2) leases will vary as to the exact level of detail they require a landlord to give about the calculation of individual service charges; returning to the same case of one of the authors, the lease in question did not require as much detail as Section 21 provides for, so there may be a disjunction between the information the LTA 1985 requires a tenant to be given and what can be obtained from a landlord under the terms of a lease.
Part 2 of the Landlord and Tenant Act 1987 (“LTA 1987”) makes provision for tenants of flats to apply to the appropriate tribunal for an order appointing a manager to assume responsibility for their building. In England, the appropriate tribunal is the First-tier Tribunal; in Wales, it is the leasehold valuation tribunal: s.21(8).
The power to apply only extends to tenants of flats and the appropriate tribunal may only appoint a manager in specified circumstances and, in all cases, only provided it is just and convenient to do so.
The circumstances under LTA 1987 s.24 include the landlord’s being in breach of an obligation under the lease and having levied unreasonable service or administration charges. Section 24(4) provides that an order may make provision with respect to such matters relating to the exercise by the manager of his functions under the order, and such incidental or ancillary matters, as the tribunal thinks fit; and, on any subsequent application made for the purpose by the manager, the tribunal may give him directions with respect to any such matters. Failure to provide service charge information under a lease could amount to a breach of obligation but, whether in relation to a single breach it would be regarded as just and convenient is another matter. An exposition of the law in relation to this would, really, require another article. And the remedy only applies to tenants of flats.
Tenants other than tenants of flats could, theoretically, apply for the appointment of a receiver under Section 37 of the Senior Courts Act 1981, although the “just and convenient” test would probably be even more difficult to surmount. Also, because it would involve issuing proceedings in the High Court, it would not be cheap.
In “Fixing our broken housing market”, which was published over 3 years ago, it was said that the Government was committed to “consult[ing] on a range of measures to tackle all unfair and unreasonable abuses of leasehold”. The remedies currently afforded by sections 21 and 22 (and 25) are currently imperfect and changes that removed some of the quirks and imperfections would greatly benefit the leasehold sector.