Introduction

The judgment in Davies v Benwell Road RTM Company Ltd [2025] EWCA Civ 368 presents a significant determination concerning the application and timing of service charge arrears and the recoverability of variable administration charges in leasehold disputes. At its heart, the case involves Mr Davies, a lessee of a self-contained townhouse live/work unit, and the Benwell Road RTM Company Ltd, which asserted claims for arrears of service charges and variable administration charges arising from Mr Davies’ 125‐year lease.

This decision, rendered by the England and Wales Court of Appeal (Civil Division) on 2 April 2025, focuses on how the First-tier Tribunal’s (FTT) determinations under section 27A of the Landlord and Tenant Act 1985 and schedule provisions of the Commonhold and Leasehold Reform Act 2002 interact with statutory and contractual requirements for service charge demands. The dispute touches on whether a service charge demand—served in a manner not compliant with the necessary statutory prescription—could give rise to arrears, and whether subsequent determinations of reasonableness may trigger recoverable costs.

Aspects included in this judgment such as the interplay between earlier tribunal decisions (notably the 2014 and 2022 FTT decisions) and the Upper Tribunal’s (UT) review, as well as the technical requirements under sections of the 1985 and 2002 Acts, have a broader impact on leasehold law enforcement, particularly regarding the exact moment when charges become “due” and what processes must be followed before costs can be legally recoverable.

Summary of the Judgment

The court dealt with a multi-layered dispute regarding service charges and variable administration charges under Mr Davies’ lease. Initially, the RTM Company claimed arrears and additional charges assessed under their determination processes. The First-tier Tribunal (FTT) in 2022 found Mr Davies liable for both an outstanding service charge of £616.60 and an administration charge of £3,240, including legal costs.

However, the Upper Tribunal (UT) subsequently modified this assessment by:

• Dismissing the claim for service charge arrears on the basis that it was statute barred.
• Reducing the variable administration charge to only £840, by holding that additional sums linked to the prior 2014 FTT proceedings were not properly recoverable as no arrears existed before 19 November 2014.
• Setting aside the FTT’s costs award where it was erroneously determined based on an assessment of full liability.

Ultimately, all the grounds of appeal by the RTM Company were dismissed by the Court of Appeal, thus affirming that the UT’s reasoning—particularly on the question of when arrears may be said to have accrued—was correct.

Analysis

Precedents Cited

The judgment references earlier tribunal decisions, notably the 2014 FTT decision and commentary from the case of Termhouse (Clarendon Court) Management Ltd v. Al-Balhaa [2021] EWCA Civ 1881, [2022] 1 WLR 1529. In the 2014 FTT, the Tribunal confirmed the RTM Company’s constitution and determined that the interim service charge was reasonable, although it did not establish the precise date on which arrears accrued.

Newey LJ’s observation in Al-Balhaa regarding the FTT’s sometimes declaratory but non-enforceable nature of its assessments influenced the appellate reasoning. The Court of Appeal echoed this limitation, noting that any determinations on "payability" and the timing of charges must be coupled with the proper statutory demands.

Legal Reasoning

At the heart of the Court’s analysis was the statutory framework governing service charges and variable administration charges as provided in the Landlord and Tenant Act 1985 and the Commonhold and Leasehold Reform Act 2002. These statutes require that:

• Service charges are payable only if reasonably incurred, and any administration charge must also be limited to a reasonable sum.
• A valid demand must include a summary of the tenant’s rights and obligations (as mandated by section 21B and related statutory provisions).

The Court reasoned that the FTT’s determination regarding the reasonableness of the service charge did not itself signify that arrears had accrued. Specifically, because the demand served on Mr Davies on 15 May 2014 was defective—failing the method-of-payment requirement and lacking a proper statutory summary—the resulting determination of payability in the 2014 FTT did not trigger arrears before 19 November 2014.

Furthermore, the UT correctly identified that Mr Davies could argue that no arrears existed before that date, and therefore the costs incurred in the 2014 FTT proceedings could not be legitimately recovered as a variable administration charge. The Court ultimately upheld this reasoning, clarifying that the FTT’s interest was limited to declaratory decisions on reasonableness rather than enforceable orders.

Impact on Future Cases and Legal Practice

This decision is likely to influence future leasehold disputes in several ways:

• Clarification of the Temporal Threshold: The ruling reinforces that arrears do not automatically arise the moment a demand is made if that demand fails to comply with statutory requirements. Future litigants will need to closely scrutinize the timing and manner of service charge demands.
• Judicial Distinction between Declaratory and Enforceable Determinations: Courts will be more circumspect in differentiating between FTT declarations of “payability” and the subsequent need for a compliant demand to establish enforceable arrears.
• Consequences for Cost Recovery: Landlords and managing agents may need to review their processes for serving demands to ensure that costs, particularly those treated as variable administration charges, are recoverable.

The decision accentuates the importance of procedural compliance—serving demands in line with both the lease and statutory obligations—to avoid triggering enforceable liabilities and inadvertently increasing the scope of recoverable costs.

Complex Concepts Simplified

Several complex legal concepts featured in the judgment have been simplified through the Court’s commentary:

• Reasonableness of Charges: The Court reaffirms that “reasonableness” is a key threshold for both service and administration charges. Simply put, a charge is only enforceable if it is both incurred reasonably and properly demanded.
• Declaratory vs. Enforceable Orders: While the FTT can determine that a charge is “payable” as a matter of principle, such a determination is not directly enforceable. A proper, compliant demand must follow to convert that declaration into a court-order-obligated payment.
• Timetable for Arrears: The decision highlights that if a defective demand is served, then the arrears do not attach until a proper demand is made—illustrated by the significance of the date 19 November 2014 in this case.

Conclusion

In Davies v Benwell Road RTM Company Ltd, the Court of Appeal has drawn a clear line between the declaratory functions of the FTT and the enforceable judgments of the court. The key takeaway is that a service charge or variable administration charge does not become enforceable simply by a tribunal’s determination of reasonableness; rather, the charge must be properly demanded in accordance with its statutory requirements.

The judgment reinforces the need for landlords and managing agents to adhere strictly to the procedural and formality requirements while issuing service charge demands. In doing so, it sets a new precedent that future cases must consider, particularly with respect to the timing of arrear accrual and how associated costs are recovered.

Overall, the judgment provides significant clarity on the jurisdictional boundaries between tribunal determinations and court-imposed enforceability in leasehold disputes, marking an important evolution in leasehold law and cost recovery practice.