Service Charges


There is probably a longer and more considered article to be written on this point but, in the light of the recent High Court decision in Ice Architects, these are my initial thoughts on the current state of the law in relation to knotty issue of whether limitation is affected by the procedural bars on bringing claims for rent and service charges.  

This is something to which I alluded in an article Ibrahhem Dumeer and I wrote in Property in Practice, the Magazine of the Law Society Property Section (Issue 59; June 2017

Under section 19 of the Limitation Act 1980, the limitation period for recovery of rent is six years, but, in relation to claims against guarantors for arrears of rent due from the tenant, the cause of action has been held to arise not when the tenant’s default occurred, but when payment was demanded under the guarantee.

There is a requirement under section 48 of the Landlord and Tenant Act 1987 (LTA 1987) for the provision of the name and address of the landlord, or an address within England and Wales at which documents can be served on the landlord. Neither the ground rent nor the service charges demanded will be payable until this information has been provided.

Under section 166 of the Commonhold and Leasehold Reform Act 2002 (CLRA 2002), a leaseholder under a long lease is not liable to pay ground rent unless the landlord has first given a notice in the prescribed form, which contains information about the dates for payment and consequences of non-payment.

It has not definitively been resolved whether a landlord’s failure to have complied with section 48 of the LTA 1987 or section 166 of the CLRA 2002 might have the incidental effect of delaying the start of the limitation period for the recovery of rent.

Insofar as there is any authority, there is a seeming conflict.

In Wrigley v Landchance Property Management Limited [2013] UKUT 0376 (LC) Judge Huskinson, without subsequently criticising the proposition, summarized a submission put by the respondent’s counsel in the following way:

“Mr Morrell pointed out that the point was in fact of only academic interest bearing in mind the LVT’s finding that sections 47 and 48 of the 1987 Act and sections 21 and 21A of the 1985 Act had not been complied with. The result of this finding is that whatever amounts the respondent may be entitled ultimately to recover by way of service charge had not become due and would not become due until those sections had been complied with. Accordingly time will only start to run from the date when these sections have been complied with.”

On the other hand, in the first instance decision in Eastaugh v Crisp [2006] EWHC 2298 (Ch), in a passage not affected by the subsequent appeal, John Randall QC said, from para 181 et seq:

181 (a) Two preliminary points arise as to the period for which rent is recoverable, and the rate at which it is payable.

182 As for the first, s.19 of the Limitation Act 1980 suggests that only arrears of rent which accrued due within six years before the service of (in this case) the counter-claim, which was on 20 July 2005, are recoverable. However Mr Brett ingeniously seeks to turn the claimant’s reliance on the absence of a notice under section 48 of the Landlord and Tenant Act 1987 to his client’s advantage. He submitted that, by virtue of the service of that notice, the rent in this case is to be treated, and he emphasises the statutory words “for all purposes”, as not being due until 20 October 2005. Thus, he submits, none of the arrears of rent claimed in the action, which go right back to 1972, are statute barred. (See further section C of his opening skeleton argument, at p.6).

183 It is convenient here to note, as I have ascertained for myself, that the case of Dallhold Estates v Lindsay Trading [1994] 1 EGLR 93 CA establishes, first, that s.48 applies to an agricultural holding which includes a dwelling house, and, second, that s.48 does not itself destroy the right to claim rent due before the service of the notice which it requires (see at 97A–B and J).

184 If s.48 is read literally there is some force in Mr Brett’s submission, particularly given the inclusion of the words “for all purposes”. The point has been shortly argued before me without citation from either Hansard, under Pepper v Hart [1993] AC 593 , or the report of the Nugee Committee. However, in my judgment a purposive approach to the construction of s.48 is appropriate to avoid what would otherwise be a considerable hardship to tenants, taking away protection hitherto offered by s.19, Limitation Act 1980 . In Hussain v Singh , a correct reference to which is [1993] 2 EGLR 70 , Beldam LJ giving, in effect, the judgment of the court, said this (at 71D–E and 71J–K):

“The 1987 Act was intended as a sequel to the Landlord and Tenant Act 1985 , with the object of improving the position of tenants by ensuring that proper and full information of the identity of the landlord together with an appropriate address was available should it prove necessary to serve any notices on him — being in part intended to implement the recommendations of the Nugee Committee … In my view it is clear that the provisions of Part II of the Act were intended to be a sanction to persuade the landlord to comply with the provision of subsection (1) — it being a very easy matter for a landlord to give the requisite notice and the rent which he was prevented from recovering until such a notice had been given would then once more be treated as being due.”

185 It would be most undesirable that I should construe an enactment intended to improve the position of tenants, and to apply a persuasive sanction to landlords, in such a way as to expose tenants to a potentially indefinite liability to pay arrears of rent, from which they were previously protected by s.19, Limitation Act 1980 . Looking closely at the words of s.48 I do not find it necessary to do so. I construe the words “otherwise due from the tenant to the landlord” in s.48(2) as excluding from its operation arrears no longer recoverable by virtue of s.19, Limitation Act 1980 .

The recent decision in Ice Architects v Empowering People Inspiring Communities [2018] EWHC 281 (QB), decided on the 16th February 2018, although not directly on point, arguably lends support to the latter view. The case concerned a contractual claim in which limitation had been run to, and, as it turned out, beyond the wire, Proceedings had been issued out of time if limitation ran from the date work was done but in time if the contractual period of grace before payment fell due was taken into account. HHJ Parfitt at first instance had found the claim was time-barred; his reasoning summarized by Lambert J in the subsequent appeal in the following way:

9. …, HHJ Parfitt found, as follows (at paragraph 26 of his judgment):

i) on the authority of Coburn v Colledge [1897] 1 QB 702, in the absence of agreement to the contrary, the starting point is that a provider of services is entitled to be paid once the work has been done and so its cause of action for payment arises at that time;

ii) the agreement reached between the parties in Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] EWCA Civ 814 provided an illustration of an agreement to the contrary;

iii) in Coburn the Court of Appeal identified a material distinction between (as described by HHJ Parfitt) “facts which are a necessary part of the right to be paid and those matters which might bar that right (such as limitation itself but also facts such as a failure to comply with statutory requirements eg statutes about solicitors bills in Coburn).”

10. HHJ Parfitt considered the authority of Legal Services Commission v Henthorn [2011] EWCA Civ 1415, noting the obiter statement of Lord Neuberger MR that, save where it is the essence of an arrangement between the parties that a sum is not to be paid until demanded, “clear words would normally be required before a contract should be held to give a potential or actual creditor complete control over when time starts to run against him”. He considered Levin v Tannenbaum [2013] EWHC 4457, albeit briefly, commenting that the case was an application of the so-called Coburn principle. He then set out the question which he considered was at the heart of identifying the time of accrual of the cause of action: “what has to happen for an entitlement to be paid to arise?”. He said that in a case where the right to payment is based on a demand, or the issue of a certificate, then it was those facts which are essential to the cause of action; when however the entitlement to be paid is based on work having been done then, once that work is done, the entitlement and right to be paid for it arises.

11. It was against this legal framework that HHJ Parfitt considered the construction of the relevant section of the letter of July 2007. He set out in paragraph 30 of the judgment the following: “the invoicing arrangements provided for by the 10th July 2007 letter are to invoice monthly for work completed to date. The issuing of the invoice is not the fact which entitles the Claimant to be paid (although the non-issue of the invoice might provide the Defendant with a defence to the claim) but the fact that work has been done both entitles the Claimant to be paid and the Claimant to issue an invoice”. He concluded that the fact that invoices were to be paid monthly made no relevant difference as the invoices related to work done; nor did it make a difference that the 30 days were given for payment. He considered that this provision may be a matter of “potential defence” but it did not impact on the Claimant’s substantive right to be paid for what it has done. Accordingly, the Judge ruled the Claimant’s cause of action to be statute barred.

Lambert J concluded this reasoning was correct and dismissed the appeal. Strictly the ratio of the decision is that clear words are required before a contractual term can affect the accrual of the cause of action.

Of the cases cited, Coburn v Colledge [1897] 1QB 702 is, perhaps the closest to guidance on the effect of section 48 of the LTA 1987 and section 166 of the CLRA 2002 because it concerned the effect of statutory provisions. The Claimant in Coburn was a solicitor who was suing for outstanding fees. He appealed a ruling that his claim time-barred by the relevant statute of limitations on the basis that the effect of Section 37 Solicitors Act 1843, which provided that:

no solicitor shall commence an action for recovery of fees until the expiration of one month from delivery of the bill”

was to delay the accrual of his cause of action until one month following his delivery of the bill of costs and thus  extended the limitation period. Lord Esher MR rejected the argument, observing that in the case of a person “who does work for another person at his request on the terms that he is to be paid for it, unless there is some special term of the agreement to the contrary, his right to payment arises as soon as the work is done”. Lord Esher said that section 37 did not delay the accrual of the cause of action but rather set up a procedural bar to the right of the solicitor to bring an action directly the work was done; it did not “take away his right to payment for the work, which was the cause of action”.

It is of note that when Lambert J said the following at para 24:

In these circumstances, it seems to me that clear words are needed if the Court is to construe an agreement between the parties in such a way as to give the creditor control over the start of the limitation period and/or to avoid the Courts becoming engaged in determining satellite issues which deprive the limitation provisions of their central purpose: certainty and the avoidance of stale claims. Such clear words do not appear in the letter.

the case from which he derived the proposition was the decision in Coburn on statutory interpretation and, if in that passage, “Act” is respectively substituted for “agreement between the parties” and “letter“, the argument that ss. 48 and 166 do not affect the limitation period would appear to have the edge.