Residential service charge challenges: Court or Tribunal?

6th October 2015

In Cowling v Worcester Community Housing Ltd [1], errors by the court have left a tenant in difficulties in a recent residential service charge challenge. Walker Morris’ Housing Litigation specialist Karl Anders explains.

The Law

Section 19 (1) of the Landlord and Tenant Act 1985 (the LTA) provides that a residential tenant of a long lease is only liable to pay a variable service charge to the extent that it is reasonable. An application may be made to the County Court or to the First Tier Tribunal (Property Chamber) (the FTT) to determine reasonableness and therefore the amount a tenant has to pay. However, the FTT has no jurisdiction to hear an application in respect of a matter where a court has already determined the sum payable [2].

The Facts

In November 2013, the respondent landlord issued County Court proceedings against the appellant tenant, Mrs Cowling, seeking a money judgment for service charge arrears (amongst other things). On 7 January 2014, the matter was heard before a District Judge, who took the view that the issue of reasonableness was properly the domain of an application to the FTT. It subsequently became common ground between the parties that the District Judge had erred: the County Court also has jurisdiction to determine reasonableness. Alternatively, as is commonly done, the District Judge could have stayed the county court proceedings in so far as they related to the determination of the amount of service charge to be paid, while that question was referred to the FTT. However, he did not do so. He instead found that a service charge was payable under the lease and made an order for the full amount claimed, without considering reasonableness.

Mrs Cowling appealed that judgment to a Circuit Judge and also issued an application at the Leasehold Valuation Tribunal (now the FTT) for a determination of reasonableness. Unfortunately for Mrs Cowling, this time the Circuit Judge made a mistake. He decided that the service charge in question was fixed, and was therefore not a variable charge which could be subject to a section 19 LTA determination (the service charge was, in fact, variable).

By the time the matter came before the FTT, there remained a County Court money judgment in place. The FTT decided that it had no jurisdiction to hear the reasonableness challenge because the amount payable had already been determined by a court, as evidenced by the money judgment.

Finally, the FTT’s decision was appealed to the Upper Tribunal (Lands Chamber) where His Honour Judge Gerald, whilst acknowledging that the position was somewhat unsatisfactory, felt bound to dismiss the appeal. He concluded that, whilst a further appeal via the courts to the Court of Appeal might change things for the tenant, the FTT had been right to find that it could not entertain a challenge to the service charge when there was already a court order specifying the amount required to be paid.

WM Comment

The tenant was clearly aware that it was possible to challenge the amount of service charge on the ground of reasonableness. Unfortunately, the errors made by the County Court Judges have resulted in an unsatisfactory outcome for her.

Following the decisions in Cowley the law in this area is clear: the FTT cannot hear a section 19 challenge in respect of the reasonableness of services charges when the court has already made an order in respect of the amount payable. In that situation, the only options for a tenant to seek redress would be to appeal to a more senior Judge or court or (in circumstances where it is appropriate) apply to have the original order set aside.

___________________

[1] [2015] UKUT 496 (LC)
[2] Section 27A LTA