Default judgment removes tribunal jurisdiction over service charges

Marlborough Park Services Ltd v Leitner [2018] UKUT 230 (LC)

Under Section 27A of the Landlord and Tenant Act 1985, the First-tier Tribunal (Property Chamber) has the power to determine whether a service charge is payable and, if it is, the amount which is payable.  However, the tribunal’s jurisdiction to make this determination can be curtailed in certain circumstances.  Relevant to the present case, Section 27A(4) of the Act states:

“No application… may be made in respect of a matter which-

(a) Has been agreed or determined by the tenant; or

(c) has been the subject of a determination by a court”

Section 27A(5) qualifies the preceding Section as follows:

But the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment

In Marlborough Park Services Ltd v Leitner the freeholder, through their managing agents, alleged that the leaseholder had failed to pay service charges and obtained default judgments against him in the County Court for the sums owed.  The leaseholder was sent a letter seeking payment of the sums owed and enclosing a Section 146 notice.  The leaseholder claimed this letter was the first communication he had received in relation to the service charges for two years (the time at which he had last paid his service charge).  The leaseholder then made an application to the tribunal for determination of the service charges now claimed and past service charges dating back to 2009.  It is important to note at this point that the leaseholder had been paying his service charge between 2007 and 2012 without protest.

The landlord applied to the tribunal to have the application struck out on both Section 27A(4) grounds stated above: (i) the service charges pre-2012 had been agreed by the leaseholder by reason of his payment without protest; and (ii) the service charges had already been determined by the court by way of default judgment.  At first-instance, the tribunal found against the landlord, who chose to appeal the decision not to strike out.

By way of context, Rule 9(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 states:

the Tribunal must strike out the whole or a part of the proceedings or case if the Tribunal-

  • does not have any jurisdiction in relation to the proceedings or case or that part of them

Addressing the argument that the service charges had been agreed, the tribunal considered that payment without protest over a period of years could be taken as a form of agreement.  They cited the previous decision of Cain v Islington LBC [2015] UKUT 542 (LC), in which it was said that “it would offend common sense for a tenant who without qualification or protest has been paying a series of demanded service charges over a period of time to be able to turn around and deny that he has ever agreed or admitted to that”.

With regard to the more pressing issue of jurisdiction, the tribunal found that the default judgments entered against the leaseholder had the effect of determining the service charges for the purposes of Section 27A(4)(c), so the tribunal were obliged to strike out the application as they had no jurisdiction to determine the matter.

This decision sits amongst a small body of case law deciding on when court judgments and tribunal decisions can be used against leaseholders, and the options available to leaseholders facing enforcement action.  Whilst not cited by either party in the present case, this decision chimes with Church Commissioners v (1) Koyale Enterprises and (2) Naresh Thaleshwar Central London County Court, Sept 22, 2011 in which it was held that a default judgment can be taken as a ‘final determination’ prior to exercising the right of re-entry, as required by Section 81 of the Housing Act 1996.  It serves as a salutary reminder that leaseholders must make any objection to excessive service charges well known and early on in order to ensure they are not deprived of the right to challenge them if their landlord acts first.

Written by Associate Solicitor, Chris Last

Contact Chris: 
Call: 0208 667 2286