Davies v Benwell Road RTM Company Ltd

Factual and Procedural Background

This case concerns a second appeal involving service charges and variable administration charges payable under a 125-year lease of a self-contained townhouse live/work unit at The City. The Right to Manage (RTM) Company claimed arrears of service charges amounting to £616.60 and a variable administration charge of £3,240, along with interest and costs, against the Defendant. The initial proceedings began in the County Court in May 2021, were transferred to the First-tier Tribunal (Property Chamber) (FTT) in February 2022, and culminated in a decision by the FTT in August 2022 holding the Defendant liable for the claimed sums and additional costs. The Defendant appealed to the Upper Tribunal (Lands Chamber) (UT), which allowed the appeal in part, reducing liabilities and addressing issues of limitation and proper demand. The RTM Company then appealed to the Court of Appeal.

Legal Issues Presented

1. Whether the Defendant was in arrears of service charges before 19 November 2014, affecting the recoverability of costs incurred by the RTM Company in the 2014 FTT proceedings.
2. Whether the RTM Company’s costs of the 2014 FTT could be claimed as variable administration charges under the lease.
3. Whether the RTM Company’s costs of the 2022 FTT proceedings were payable as variable administration charges without a formal demand complying with statutory requirements.
4. The scope of the First-tier Tribunal’s jurisdiction under section 27A of the Landlord and Tenant Act 1985 and related provisions concerning determination of payability and reasonableness of service and administration charges.

Arguments of the Parties

RTM Company's Arguments

• The 2014 FTT had conclusively decided the validity of the service charge demand made on 15 May 2014, based on the Defendant’s admission, and thus the Defendant could not now argue there were no arrears before 19 November 2014.
• The £2,400 claimed as variable administration charges related to the costs of the 2014 FTT and were recoverable as they were incurred "in connection with the recovery of arrears of the Service Charge".
• A formal demand accompanied by a summary of tenants’ rights was not required before the variable administration charge for the 2022 FTT costs became payable; statutory provisions and regulations did not mandate such a demand.
• The 2022 FTT had jurisdiction to assess costs under the Civil Procedure Rules, but its true jurisdiction was to determine the reasonableness of variable administration charges under the lease and relevant legislation.

Defendant's Arguments

• The 2014 FTT only decided the RTM Company’s proper constitution and reasonableness of the service charge demand, not the existence of arrears before 19 November 2014.
• The 15 May 2014 demand did not comply with the lease’s payment requirements nor statutory provisions, so no arrears arose before 19 November 2014.
• The UT was correct to hold that no variable administration charge was payable without a formal demand in the prescribed form, regardless of any perceived illogicality.
• The RTM Company’s application to amend its Appellant’s Notice was made too late and should not be allowed.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court carefully analysed the statutory regime governing service and administration charges, focusing on the interplay between the Landlord and Tenant Act 1985 (as amended) and the Commonhold and Leasehold Reform Act 2002. It emphasized that the First-tier Tribunal’s jurisdiction includes determining the reasonableness and payability of charges but does not extend to issuing enforceable judgments, which remain within the court’s remit.

Regarding the 2014 FTT decision, the Court held that it addressed only the RTM Company’s proper constitution and the reasonableness of the service charge demand, not the existence of arrears prior to 19 November 2014. The 15 May 2014 demand failed to comply with the lease’s stipulated payment method and statutory requirements, notably lacking a summary of the Defendant’s rights, thus no arrears arose before the specified date. Consequently, the RTM Company could not recover costs of the 2014 FTT as variable administration charges linked to arrears recovery.

The Court endorsed the UT’s reasoning that the 2022 FTT’s costs award was flawed because it assumed full success by the RTM Company, whereas the appeal decision limited recovery to £840. It also clarified that costs claimed as variable administration charges must be supported by a formal demand complying with statutory notice requirements; the absence of such a demand precluded enforceability.

The Court rejected the RTM Company’s contention that a formal demand was unnecessary, affirming the statutory framework’s clarity and the tenant’s right to withhold payment if proper notice is not given. The Court further noted the procedural confusion caused by the 2022 FTT’s conflation of costs assessment under the Civil Procedure Rules with the statutory reasonableness assessment of variable administration charges.

Holding and Implications

The Court DISMISSED the RTM Company's appeal in its entirety.

The effect of this decision is that the Defendant is liable only for £840 of the variable administration charges and not for the disputed service charge arrears or the larger administration charges relating to the 2014 FTT costs. The ruling confirms that:

• The First-tier Tribunal’s determinations on payability are declaratory and not enforceable judgments.
• Proper statutory demands accompanied by summaries of tenant rights are prerequisites to the accrual of arrears and enforceability of administration charges.
• Costs claimed as variable administration charges must be reasonable and properly demanded according to the lease and statutory requirements.

No new legal precedent was established beyond the application and clarification of existing statutory provisions and case law.