Getting demands correct can prove a real headache for many, especially as the terms of residential leases can vary greatly. As well as stating the notice period correctly in the demand, it is also easy to forget that one needs to consider time for service of a demand to ensure that the tenant does receive a valid service charge demand as the lease intended.
In the recent case of H Stain Ltd v Richmond [2021] UKUT 66 (LC), the Upper Tribunal (Lands Chamber) (UT) decided that the landlord had not provided the correct notice period in the service charge demand and so the demand was not valid.
The amount demanded was, in this case, not a huge sum, being £2,255.77, but year on year amounts can soon add up.
In the H Stain Ltd case, the lease at clause 3(6), set out that the tenant was to be given “not less than one month’s notice of such advance payment or contribution…” On the face of it, that does not appear too complicated, but it did not all go to plan. The managing agent, did not, in the demand or the covering letter, refer to the actual clause of the lease 3(6), but at the bottom of the demand included the wording “Payment due 30 days after date of demand, arrears by return”.
The demand for payment was not paid by the tenant as there was a dispute over the maintenance of the building and so the landlord ultimately brought proceedings which were transferred to the First-tier Tribunal (FTT).
The FTT considered the wording of clause 3(6) in the lease and the notice period required to be given by the landlord to the tenant, being not less than one month’s notice. As with so many cases regarding the validity of notices, the case of Mannai Investments Co Ltd v Eagle Star Assurance [1997] UKHL 19, was argued. In line with that case, the landlord argued that the reasonable recipient of the invoice would understand that clause 3(6) in the lease entitled them to a full month’s time to pay. The landlord argued that the effect of clause 3(6) was simply that the tenant was not liable to pay anything until a month after the demand was made.
In this case it was not clear exactly when the demand was received by the tenant and the landlord may only have given 29 days’ notice of its demand, or even less. The FTT held that the pre-requisite for demanding the advance service charge was not satisfied and this failure could not be saved by the Mannai “reasonable recipient” test. Therefore, the demand was not valid.
This decision was appealed but the UT also found in favour of the tenant. The lease required not less than one month’s notice and, whilst in some months, 30 days’ notice may be sufficient, in other months it would not. In this case, the landlord, via their agent, had not given the correct amount of notice. If the lease wording is clear, the court will not usually interfere with the meaning of contractual terms.
What may seem like a simple requirement can be a costly mistake if you misunderstand the meaning. Take care when considering the notice periods defined in a lease and always remember that you may also need to think about the time it takes to serve a service charge demand as well!
If you would like advice on interpreting clauses and notice requirements or any other aspect of residential property, please contact Nicola Stewart on 0207 689 7252 or via email nstewart@rooksrider.co.uk.
