Service charges can be paid and then challenged later. Or can they? The right to challenge after payment is found in the Landlord & Tenant Act 1985. That Act says that service charges cannot be challenged in the courts if the lessee has admitted that they are payable. But s.27A (5) adds that the lessee ‘’is not to be taken to have agreed or admitted any matter by reason only of having made any payment”.
So, I can pay and worry about the matter later? Not quite.
A recent case in the Upper Tribunal, Marlborough Park Services Ltd v Micha Leitner [2018] UKUT 230 (LC), shows that if you are going to pay a service charge that you possibly will one day challenge, then you ought to make it as plain as you possibly can that you are paying under protest as you do not accept that the service charges are payable.
What does paying service charge under protest mean?
The term ‘under protest’ here means that you are acting in accordance with the demand, but you are also making the landlord aware that you are objecting to it. Paying under protest is usually done to avoid a breach of contract and allows you to dispute it at a later date should you wish.
So, paying a service charge under protest means that even where you do not believe you owe a service charge or are unhappy to pay it for another reason, you are still complying with the demand.
What does the Marlborough Park Services Ltd v Micha Leitner case tell us about paying service charges under protest?
Mr Leitner had paid service charges for 10 years but sought to challenge them under s.27A of the above Act. The FTT had dismissed the freeholder’s contention that the payment had amounted to an admission.
However, the Upper Tribunal decided that the FTT was wrong. Although the lessee did not say that the service charges were payable, his actions relating to service charge demands from 2007 to 2012 would lead a reasonable person to that conclusion.
The Upper Tribunal referred to Cain v Islington BC [2015] UKUT 542 (LC), which distinguished what one can infer from a person making a single payment to what we can infer when a person has made a number of payments over a period of time.
What this means is that it would generally be inappropriate to make an implication or inference that a lessee was consenting to service charges on the basis of having made a single payment because it could not be said that the conduct of the [lessee] was sufficiently clear. That said, where there have been repeated payments over a period of time of sums demanded, there may come a time when such an implication or inference is irresistible.
To deny that inference, said the Upper Tribunal, would “offend common sense”.
Does repeated payment of service charges mean you can’t challenge them later?
Not exactly. While the Upper Tribunal found, in the Marlborough Park Services Ltd v Micha Leitner, that it could be reasonably assumed that Mr Leitner had consented to the service charges paid between 2007 and 2012, the Upper Tribunal found for Mr Leitner in respect of service charge demands after March 2013.
The Tribunal looked at the correspondence between the parties and noted that Mr Leitner had asked for an up-to-date statement and, even though in the same letter he had promised the freeholder’s solicitors a cheque by return, it decided that the letter contained no express or implied admission that the sum was actually owing. Accordingly, the right to challenge in the courts the service charge paid after March 2013 remained open to Mr Leitner.
What does this mean for anyone who wishes to dispute a service charge?
The case points to the importance of understanding actions – including the making of statements - in context.
The critical point is to understand that paying a service charge you disagree with once without raising a formal protest will not necessarily be interpreted by a court as having agreed to the service charge.
But, if you repeatedly pay a service charge you do not agree with, without making it clear that you are doing so under protest, then a court may decide that this implies you were consenting to the service charge.
How can you clearly show you are paying a service charge under protest?
If you are asked to pay a service charge that you do not agree with and you think you may one day wish to contest the charge, it is essential that you explain in writing, at the time of payment, that you do not agree with the service charge and you are paying under protest.
If you choose to pay a service charge under protest, ensure a thorough and detailed letter is provided with it. The letter should be clearly dated and signed, as well as include details such as the amount being requested, why you are objecting to the service charge and state that the payment is being made on the following basis:
- That the payment is made under protest
- You do not agree to the service charges
- The payment should not be considered as an agreement
- That you hold the right to dispute the charges in a court or tribunal setting
What happens if you refuse to pay a service charge?
If you refuse to pay a service charge, you could be in breach of a covenant in your lease, and as a consequence, your landlord could issue a claim against you.
However, if you believe the service charge being demanded is unreasonable, you can pay it and still have grounds to contest the service charge so long as you made it clear that you were paying the requested amount under protest.
What are the risks of paying service charge under protest?
Stating that you are paying a service charge under protest does not guarantee that your rights are protected. There needs to be sufficient details and supporting evidence to back your claim.
Get expert advice about paying service charges from our service charge disputes solicitors in London
If you need advice or assistance in relation to challenging a service charge or paying a service charge under protest, then our service charge disputes solicitors can help.
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