Limitation proves no bar to lessee

23rd March 2015

Mr Parissis is the long lessee of two flats, each with obligations to pay service charge reserved as rent. He has something of a history of raising challenges to service charges, having queried charges arising from major works undertaken in 2007 and from CCTV works in 2009. His most recent challenge [1] was an application, made under section 27A of the Landlord and Tenant Act 1985, for a determination of the amount of service charge properly payable, going back to 2001. The Leasehold Valuation Tribunal (LVT) decided that this application was time-barred and cited “unconscionable delay”. However, on appeal the Upper Tribunal (Lands Chamber) (UT) reviewed all potentially relevant limitation laws and concluded that Mr Parissis’ application could proceed. Whilst the Judge in the UT stressed that he was not providing a detailed analysis of the law relating to limitation and how it applies to Section 27A applications, the reasoning adopted provides some useful guidance, as follows:

• Statutory trust monies. Section 21 of the Limitation Act 1980 (LA) specifies the limitation period for claims relating to monies held on trust. There was no suggestion in this case, however, that the service charge monies had ever been collected or held for any purpose other than to pay for works (i.e. the monies had never been held or used for the landlord’s use), and so s. 21 was found not to apply.
• Laches. The doctrine of laches is an equitable maxim which disallows claims where there has been unreasonable delay. The LVT’s reference to “unconscionable delay” suggests that it thought that equitable principles applied to bar Mr Parissis’ application. However, the UT stated that the doctrine could not apply as this was not a claim for equitable relief; it was, instead, the exercise of a statutory right.
• Recovery of rent. The landlord tried to argue that section 19 of the LA (which places a 6 year time limit on the bringing of recovery of rent claims), applied as the service charge was reserved as rent by the leases. The UT disagreed – this was an application for a determination by a tenant; it was not a claim for recovery of rent.
• Similarly, section 9 of the LA did not apply to prevent Mr Parissis’ application because it was not a claim for recovery of a sum pursuant to an enactment. Even if the LVT had determined he had paid too much, any subsequent court claim brought to recover the overpayment would be a claim based on an equitable remedy (restitution) and it would not therefore be based on statute;
• in the same vein, the UT decided that it was not a claim based on simple contract for the purposes of section 5 LA (if monies had been overpaid by mistake a different section of the LA would apply (section 32), where commencement of the limitation clock was based on the date of knowledge of the mistake. In addition, a successful s. 27A application would not always lead to a claim based on restitution – other remedies could be sought, such as the right to appoint a manager over the building); and
• even if section 8 LA (claims based on a breach of a specialty – of which a statute is a form) applied, it would not bar Mr Parissis’ application as it concerned amounts falling due within the relevant twelve year limitation period.

WM Comment

Landlords will not be pleased to learn that they may find themselves exposed to the uncertainty of s. 27A applications which could go back over many years. To add insult to injury, it is worth noting that many of these limitation loopholes will be available to tenants only and landlords’ arrears claims are likely to be more definitively limited.

It seems from comments within the Parissis judgment, however, that a future hearing (the UT has remitted it back to the First-Tier Tribunal (Property Chamber) for further consideration) may focus on whether or not the application is “frivolous or vexatious or otherwise an abuse of the process of the tribunal” under its own rules of procedure, as an alternative means of challenging Mr Parissis’ delay. Walker Morris will review and report in due course.

____________________

[1] Andrew Parissis v Blair Court (St John’s Wood) Management Limited [2014] UKUT 0503 (LC)