28 October 2015
Residential landlords – legal formalities matter
Managing residential property is a legally complex task and is not for amateurs. In one case which proved the point, benevolent landlords found themselves having to take court action after dispensing with formalities in order to save their tenants money.
The case concerned a block of flats, held under standard leases which contained the common requirement that service charge demands must be certified by an accountant. That requirement was not complied with by the landlords before the end of the relevant financial year and the tenants therefore denied any liability to pay. Their arguments prevailed before the First-tier Tribunal, which found that the certification requirement was a condition precedent and that the demands were invalid.
In upholding the landlords' challenge to that decision, the Upper Tribunal (UT) found that the tenants were under a 'primary obligation' to pay the charges. On a true interpretation of the leases, certification by an accountant was not an essential prerequisite and the landlords were not precluded from claiming service charges properly due. The requirement was that certification should take place as soon as was practicable after the end of the relevant financial year and that could still be achieved.
The UT also accepted the landlords' plea that, in a spirit of benevolence, they had agreed with successive tenants that the certification requirement would be dispensed with. This had caused no difficulties over a period of almost 20 years and tenants, who would otherwise have had to pay the accountancy bills through their service charges, had been saved thousands of pounds. In those circumstances, the UT found that the tenants had waived their right to have their service charges certified.
The court is not the place to resolve such issues. Had the leases simply been altered, the dispute would not have arisen.