Section 20B: Joseph and Esther Gurvits too late to get £3,387 service charges after an RTM

The Upper Tribunal has upheld an appeal by a lay applicant against leasehold sector professionals Joseph and Esther Gurvits who served a demand for funds after 18 months had passed.

Two leaseholders at a three-flat Victorian terrace at 4 Concanon Road, Brixton, in south London, lost in the First Tier Tribunal, but one went on successfully to appeal in the Upper Tribunal which ruled that £3,387.48 was not payable.

The block, where the freehold is owned by Joseph and Esther Gurvits’ company Assethold Limited and managed by their property management company Eagerstates Limited.

It went right to manage on October 9 2016, but Assethold Limited successfully argued at the FTT that there were outstanding service charges including for a major works.

These were accounted for in the service charges of 2015/16 and part of 2016/17. The leaseholders quized their reasonableness and payability, and questioned whether “the 18 month rule” of section 20B of the 1985 Act applied to some or all of the amount.

The Upper Tribunal noted that Section 20B of the 1985 Act says:

“(1) If any of the relevant costs taken into account in determining the amount of any service charge were incurred more than 18 months before a demand for payment of the service charge is served on the tenant, then (subject to subsection (2)), the tenant shall not be liable to pay so much of the service charge as reflects the costs so incurred.

“(2) Subsection (1) shall not apply if, within the period of 18 months beginning with the date when the relevant costs in question were incurred, the tenant was notified in writing that those costs had been incurred and that he would subsequently be required under the terms of his lease to contribute to them by the payment of a service charge.”

At the FTT, Assethold Limited had argued:

“We do not understand the notion that the 18-month rule should apply. The final accounts were provided to the RTM company when they took over the management and well within the 18 months of the expenditure.”

However, the Upper Tribunal ruled that the landlord’s bill was not served correctly. It referenced another case, Skelton v DBS Homes (Kings Hill) Limited [2017] EWCA Civ 1139 paragraph 18: “it is not enough under section 20B that the tenant has received the information that his landlord proposes to make a demand”.

The Upper Tribunal ruled. “The FTT’s decision is set aside, and the Tribunal substitutes its own decision that nothing is owed by the appellant to the respondent by way of service charges for the period 25 March 2016 to 9 October 2016.”

It also ordered that Assethold Limited reimburse the appellant the amount of the tribunal’s fees, unless it could come up with a reason “why such an order should not be made”.

The full ruling is here: https://www.bailii.org/uk/cases/UKUT/LC/2020/115.html

It is considered by the Nearly Legal website here:

Service charges – too late and too varied – Nearly Legal: Housing Law News and Comment

A couple of Upper Tribunal appeal decisions on service charge issues, with the second of particular significance. Cookson v Assethold Ltd (LANDLORD AND TENANT – SERVICE CHARGES) (2020) UKUT 115 (LC) An appeal on section 20B Landlord and Tenant Act 1985. In this case, the service charge year ran from 25 March.