Landlord misses out on service charge increase after making late demand

rental,contract

SHARE

A landlord has failed to collect an increased interim service charge after being late in issuing a demand. The case turned on the concept of whether time ‘was of the essence’ – which is an important factor in landlord and tenant law.

When time is ‘of the essence’ for the purposes of following a timetable – such as a rent or service change review – any failure to follow the timetable means the opportunity is lost.

Ms Boakye held a 125-year lease on a flat. Under the terms of the lease, she was obliged to pay the landlord, Kensquare Limited, an interim service charge of £360. The landlord was allowed to revise the amount of the service charge if it gave notice of the change not less than one month before the start of the financial year.

Kensquare failed to follow the timetable and sent an increased service charge demand several months after the start of the financial year. Ms Boakye refused to pay the increased amount.

In the High Court Ms Boakye lost her case. The judge decided there was nothing in the wording of the lease which made time ‘of the essence’, and previous case law had created a presumption against time being of the essence in favour of the landlord.

However, at appeal the court ruled in Ms Boakye’s favour. The court decided that the wording in the lease that notice should “be served on the Lessee not less than one month prior to…” was sufficient to make time of the essence, given that it applied to an interim service charge rather than a final service charge. As a result, the landlord lost the opportunity to collect the increased interim payment and will need to wait to the year end to receive the outstanding amount.

In an Insight column, law firm Osborne Clarke highlighted that the loss of an interim charge can cause major cash flow difficulties for landlords. “The key takeaway from this case is that landlords should pay careful attention to the service charge machinery and ensure compliance wherever possible,” the firm added.

James Burgoyne of Brunel says: “It is inevitable that on some occasions landlords and their agents will be late in issuing their service charge changes. To be confident that they can collect the charges requested they should ensure that the machinery of service charging caters for this; it may seem a small point – but it can make all the difference to being paid on time or not, and therefore professional property managers avoiding complaints from their clients.”

Reports about the case have been published by Browne Jacobson, Selborne Chambers and Osborne Clarke.

Professionalindemnity.com is owned by Brunel Professions, which is a leading professional indemnity insurance broker in the UK. Click here to get a quote or call 0345 450 1074 to speak to a broker.

Menu