2.           A number of issues were raised in relation to these service charges which, by the time of the hearing, had been distilled to six issues that were listed in the LVT decision.  Of the issues determined by the LVT, the following are the subject of this appeal:

(a)    Whether demands complying with section 21B of the LTA 1985 were served on the respondents in relation to the 2008 and 2009 service charges and, if so, when.

(b)    Whether the service charges are payable by the respondents annually or quarterly.

(c)    Whether the LVT erred in its conclusion that the full sum of £11,116.36 is not payable by the lessees in relation to the refurbishment of the children’s play areas within the park.

(d)    Whether the LVT erred in its decision under section 20C in directing that no part of the appellant’s costs of the proceedings should be added to the respondents’ service charges.

3.           I will deal with these in turn.  Before I do so I should note that leases other than those granted in recent years contain in Part I of the Fourth Schedule the following provision relating to the payment of the service charge (referred to as “the Management Fee”):

“8. The Lessee shall if requested by the Lessor pay to the Lessor on January 31 in each year or (if later) the date upon which such request is made such sum in advance and on account of the Management Fee for such year as the Lessor or its agents shall specify at its discretion to be a fair and reasonable interim payment.”

Although this provision provides for the payment of an annual sum, it has been the landlord’s practice, over, it appears, a number of years, to serve quarterly rather than annual demands, and the newer leases provide for quarterly payments.

5.           Under section 21B(1):

“(1) A demand for the payment of a service charge must be accompanied by a summary of the rights and obligations of tenants of dwellings in relation to service charges.

(2)  The Secretary of State may make regulations prescribing requirements as to the form and content of such summaries of rights and obligations.

(3)  A tenant may withhold payment of a service charge which has been demanded from him if subsection (1) is not complied with in relation to the demand.”

6.           Pursuant to subsection (2) the Service Charges (Summary of Rights and Obligations, and Transitional Provision) (England) Regulations 2007 have been made, and these set out the summary that under subsection (1) has to accompany the demand.  Regulation 3 provides:

“3. Where these Regulations apply the summary of rights and obligations which must accompany a demand for the payment of a service charge must be legible in a typewritten or printed form of at least 10 point, and must contain –

(a)             the title ‘Service Charges – Summary of tenants’ rights and obligations’; and

(b)            the following statement –”

There then follows the text of 12 paragraphs comprising the statement.

9.           The LVT concluded on this point as follows:

“41. The Tribunal accepts Mr Lane’s arguments [for the lessees] that Section 21B of the 1985 Act as being absolutely clear in that a demand for payment of service charges must be accompanied by a summary of the rights and obligations of tenants.  The respondent has de facto conceded that the 2008 demand was not accompanied by such a summary and a similar admission was made in part in respect of the 2009 demand although the time line is disputed.  Mr Newborough [for the lessor] argues for July 2009 and Mr Lane for November 2009.  The Tribunal, applying the civil standard is satisfied that the summary of rights and obligations was not in fact sent until November 2009.  There is no credible evidence that this was done in July 2009.  The Tribunal rejects any notion of ‘substantial compliance’ with the Act.  To adopt such an approach would negate the clear purpose of the legislation and would itself be ultra vires.

42. In practical terms this means that any County Court actions begun against any of the Applicant’s prior to November 2009 were premature and therefore an abuse of process.  Further any legal costs in respect of these matters are not recoverable against the Applicant’s if they took place before November 2009.”

11.        Further or alternatively, Mr Rosenthal relies on the letters dated 1 July 2009 sent to the lessees and the copy of the Regulations that was sent with them.  He submits that the only respect in which the requirements were not strictly complied with was in relation to the heading: but the words of the heading were in the Regulations, and this, he says, was sufficient.  He also relies on the defences served by the five county court defendants, each of which said:

“The claimant did not issue a Summary of Rights and Obligations (Section 21B Landlord and Tenant Act 1985) with any demand for service charges until July 1^st 2009.”

Mr Rosenthal says that this was an admission that a summary complying with the Act was served on 1 July 2011 and that it was ignored by the LVT.

16.        Issue (b), as stated, is whether the service charge is payable annually or quarterly.  The case for the applicants before the LVT was that this was really a question of future payments (paragraph 12 of the decision).  It is common ground between the parties that the LVT had jurisdiction to determine this matter under section 27A.  The LVT recorded Mr Lane’s submissions that the lease in terms assumed the payment on more than one occasion of interim payments prior to the final account; that the more modern leases confirmed the quarterly interim payments actually employed by landlord from 1995; and that, if the lease did not allow a right to quarterly payments, there was an estoppel by convention that prevented the landlord from denying that it did.  The LVT expressed its conclusion on this issue as follows:

“43. The Tribunal finds itself in agreement with Mr Lane that the older style leases may, by referring to interim payment(s) (in the plural) imply a right to quarterly payments.  I any event the Tribunal is satisfied that an estoppel by convention has arisen where quarterly payments have been made and indeed encouraged to have been made.  This has been the arrangement for a number of years and the Tribunal are satisfied that when the present Respondent took ownership of the Park, they were happy to continue with this.  The Tribunal is fortified in its belief by the terms of the new type of lease which allows for quarterly payments in any event.  The Tribunal finds as an evidential fact that an estoppel has arisen by custom and convention.”

17.        The provision on which the LVT apparently relied for its conclusion that the older style leases “may…imply a right to quarterly payments” is paragraph 9 of Part I of the Fourth Schedule, which provides:

“9. As soon as practicable after the signature of the Certificate, the Lessor shall furnish the Lessee with an account of the Management Fee payable by the Lessee for the financial year in question due credit being given therein for all interim payments made by the Lessee in respect of that financial year…”

19.        The other way in which the LVT justified its decision on quarterly payments was estoppel.  The question only arose in relation to future payments, and, as Mr Lane acknowledged, the principle of estoppel by convention does not apply to future dealings.  That is clearly established by a number of authorities, the point being succinctly put in the judgment of Lord Donaldson of Lymington MR in Hiscox v Outhwaite (No1) [1991] 3 All ER 124:

“…once a common assumption is revealed to be erroneous, the estoppel will not apply to future dealings.”

Thus the LVT’s reliance on estoppel as the basis for a conclusion that the tenants would be entitled in future to make payments on a quarterly basis was simply misconceived.  The appeal therefore succeeds on issue (b).

20.        Issue (c) concerns an amount in the 2009 service charge accounts relating to expenditure on the play area.  The respondents argued before the LVT that they were not liable to contribute to this amount, £11,116.46, because planning permission for the works to the children’s play area had been refused and in the absence of planning permission the expenditure was not reasonably incurred.  The LVT (at paragraph 54) accepted this contention and said that, in any event, even if in due course planning permission were to be obtained on appeal, the lease “only permits for maintenance, repair and decoration and not improvement”.  It went on:

“55. In the Tribunal’s opinion the play area as observed is of a wholly different character to the limited amount of play equipment that was previously there.  Indeed the previous level and amount of equipment could hardly be described as a play area at all and the new equipment seems to have transformed this area of the park.  Therefore even if planning permission were to be granted, the Tribunal are of the opinion that any costs can only be charged in respect of repairing or refurbishing what was already there and not the provision of new sets of play equipment.”

21.        The appellant’s case is that in disallowing the sum of £11,116.46 the LVT failed to take into account evidence given on the second day of the hearing by Paul Spriggins, a director of the appellant company, that £3,374.66 of the total sum did not relate to work for which planning permission was required and related to the replacement and repair of parts of the play area which were out of repair.  In refusing permission to appeal on this ground the LVT said:

“…the Tribunal notes its observation in Paragraph 55 of the Decision that the play area is of a wholly different character from what was there before and therefore the sum of £3374.46 is not recoverable because it cannot relate to an existing play area and is inextricably linked to the failed attempt to obtain planning permission.”

Dated 8 August 2011

George Bartlett QC, President