Russell Stewart Lacy v Homeselect Finance (No.3) Limited
[2023] UKUT 231 (LC)
G & A Gorrara Ltd & Ors v Kenilworth Court Block E RTM Co Ltd
8 April 2024
[2024] UKUT 81 (LC)
Upper Tribunal
A flat owner stopped paying service charges after realizing they weren't properly calculated. The court decided that simply paying bills without complaint doesn't automatically mean you agree to everything; the owner needs to know all the charges before agreeing. Also, the management company's claim that the owner was stopped from complaining because of a 'gentlemen's agreement' failed because the company didn't prove they ever relied on anything the owner said or did.
Key Facts
- •Appeal concerning service charges levied on appellants for Flat E3, Kenilworth Court, from 2012/13 to 2019/20.
- •Kenilworth Court comprises five blocks of flats with shared communal gardens, managed as a single unit.
- •Appellants paid interim service charges without protest for several years before challenging the charges.
- •Lease stipulates service charge payments in advance based on estimates, with yearly reconciliation.
- •No reconciliation was carried out for many years; surplus funds transferred to a reserve fund.
- •Appellants dispute the amount of final service charges, as the balancing exercise was never performed.
- •Appellants also claim set-off for breach of repairing covenants due to disrepair in Block E.
- •FTT initially determined preliminary issues, including lease interpretation, apportionment, and agreement/admission of service charges.
- •This is the second appeal before the Upper Tribunal.
Legal Principles
RTM companies can manage only a single self-contained block and appurtenant property used solely by that block.
Triplerose Ltd v Ninety Broomfield Road RTM Co Ltd [2015] EWCA Civ 282; FirstPort Property Services Limited v Settlers Court RTM Co Limited [2022] UKSC 1
Section 27A of the Landlord and Tenant Act 1985 governs the FTT's jurisdiction to determine service charges. Payment alone does not constitute agreement or admission under section 27A(4); other circumstances are needed.
Landlord and Tenant Act 1985, section 27A
Section 19 of the 1985 Act limits service charges to those reasonably incurred and of a reasonable standard.
Landlord and Tenant Act 1985, section 19
Estoppel by convention requires a shared common assumption, communication of expectation of reliance, actual reliance, subsequent mutual dealing, and detriment or unconscionable assertion of the true position.
Commissioners for HMRC v Tinkler [2021] UKSC 39
Outcomes
Appeal succeeds on the issue of admission or agreement of service charges.
The FTT misconstrued section 27A(5) of the 1985 Act, finding agreement based solely on a series of payments without protest, ignoring the lack of information about final charges and the absence of a balancing exercise.
Appeal succeeds on the issue of estoppel by convention.
The FTT's finding of estoppel was flawed due to lack of reliance by the respondent on any communication from the appellants, and because the “convention” didn't accurately reflect the respondent's actual management practices. Furthermore, the estoppel couldn't override the provisions of the 2002 Act.