A recent decision of the Upper Tribunal has held that residents are unable to make applications to prohibit landlords from seeking to recover the cost of legal proceedings through the service charge on behalf of other residents, without their consent or authority, in accordance with Section 20C of the Landlord and Tenant Act 1985 (the “Act”).

Leases commonly provide that landlords can recover their legal costs arising out of a dispute with leaseholders through the service charge. If a lease contains such a clause, the leaseholder may make an application to the court or First-tier Tribunal that the landlord cannot rely on the wording of the lease in order to recover some or all of the legal costs of the dispute.

The relevant court or Tribunal to which the application is made may make an order on the application if it is just and equitable to do so in accordance with Section 20C(3) of the Act.

The case – Plantation Wharf Management Limited v Fairman [2019] UKUT 236 (LC)

Plantation Wharf Management Company Limited (“PWMC”) was a management company responsible for providing services to an estate of thirteen blocks of flats. The flats were all let on long-leases. Under the terms of those leases, PWMC was entitled to recover legal and professional costs incurred in the management of the estate from the leaseholders by way of service charge.

PWMC was in dispute with a group of leaseholders on the estate concerning the apportionment of service charge levied to the respective leaseholders in accordance with the terms of their leases, and subsequently made an application to the Tribunal for a determination that the service charge was payable by the leaseholders in accordance with Section 27A of the Act.

The Tribunal held that the service charges in dispute were not due for payment from the leaseholders. One of the leaseholders made applications under Section 20C of the Act that PWMC be prohibited from including the legal costs arising out of the dispute in the service charge. The leaseholder made an application on his own behalf and a further application on behalf of all other leaseholders at the thirteen blocks.

The Tribunal granted both Section 20C orders, finding that it was not “just and equitable” for the cost of the Tribunal proceedings to be claimed by PWMC as part of the service charge.

PWMC appealed to the Upper Tribunal in respect of the second order on the basis that the leaseholder had no authority to act on behalf of all the other leaseholders and had no right to apply for an order on their behalf.

Held

The Upper Tribunal allowed an appeal. The judge considered the meaning of the word “specified” for the purpose of Section 20C of the Act, finding that the word in this context did not simply mean “named”.

The Upper Tribunal found that the Tribunal would only have jurisdiction to make an order under Section 20C in respect of persons other than the applicant, if the person or persons “specified” in the application have consented or authorised the making of the application.

In this case, as the leaseholder did not have the authority to act on behalf of all leaseholders at the thirteen blocks, the Upper Tribunal held that the order made by the Tribunal under Section 20C relating to all leaseholders at the thirteen blocks should be set aside, save as it provided protection to the leaseholder himself.

Comment

This decision will be welcomed by landlords facing Section 20C applications from residents who claim to act on behalf of other residents but who have not sought the requisite authorisation or consent to the making of the application from the “other residents”.

It is crucial to note, however, that if a resident making the application does indeed have the express consent or authority from their fellow residents, then the court or Tribunal will have the jurisdiction to make an order under Section 20C in respect of all persons “specified” in the application.

For more information

For advice on service charges and other housing management matters, please contact Penny Bournes.