Dr Rosh Jamal v London Borough of Enfield

Introduction

1. This is an appeal from a decision about leasehold service charges made by the First-tier Tribunal in its jurisdiction under section 27A of the Landlord and Tenant Act 1985. It raises a single issue, namely whether time was of the essence in respect of provision in the lease for the landlord to give notice of estimated service charges payable in advance. The appeal has been decided under the Tribunal’s written representations procedure. The appellant has presented his own case; written representations for the respondent were prepared by Mr Chris Payne of counsel. I am grateful to them both. Background: the lease and the disputed notice

2. The appellant holds a long lease of Flat 123, Dover House, Bolton Road, Tottenham London N18; it was granted in 1988. The respondent is the landlord. The lease requires the tenant: “[to pay] to the council on demand the management charge provided for in clause 3(2)(b) hereof such management charge to be paid at the times and in the manner specifically mentioned therein.”

3. Clause 3(2)(b) provides for the tenant to pay an estimated or interim service charge – referred to in the lease as a management charge, and by the FTT as an “EMC” or estimated management charge – in advance: “'The lessee hereby covenants with the council as follows: 'To pay to the council in respect of each financial year of the term or part thereof such a sum (hereinafter called the management charge) as shall be notified in writing to the lessee by the council's Borough Treasurer/ Director of House Services prior to the commencement of the financial year as representing the proper proportion of the estimated cost which is incurred or is intended to be incurred by the council in carrying out the common repairs and service such management charge to be paid by the lessee in four equal quarterly instalments in advance on the first day of April first day of July first day of October first day of January (hereinafter called the management charge dates) of each financial year or part of the year during the said term ….' (emphasis added)

4. The service charge year, referred to in the lease as the financial year, runs from 1 April each year to the following 1 March. The effect of clause 3(2)(b) is that the tenant is to be notified of the estimated charge before April 1 each year and must then pay it in quarterly instalments. There is provision for a balancing charge to be paid at the end of the year: “To pay to the council on demand in respect of each financial year of the term the amount (if any) by which the proper proportion of the actual cost exceeds the proper proportion of the estimated cost for that financial year.”

5. It has been the respondent’s practice, in accordance with the lease, to send its tenants a notice setting out the estimated management charge for the year ahead, prior to 1 April each year, ready for the first quarterly payment on 1 April. In 2024 it was not able to do so; it had installed new software to manage the mailings but the software had a number of failings. As a result notice was not sent on time. Instead a notice was sent before 1 July 2024; it required payment of only three-quarters of the charge in three instalments, relying on the balancing process at the end of the year for the missing quarter.

6. The appellant did not pay the quarterly payments. The respondent took proceedings in the county court, which were transferred to the FTT for a determination as to whether the charges were payable. The appellant contended that they were not; notice under clause 3(2)(b) is a condition precedent to the tenant’s liability to pay, and time is of the essence under that clause. The lease does not specify what is to happen if notice is not served on time and therefore, the appellant says, nothing happens; the landlord must wait and recover the entire year’s service charge in the end-of-year balancing exercise. The respondent argued that time was not of the essence and that it had had good reason for the delay.

7. The FTT accepted that the procedure adopted by the respondent was contrary to the terms of the lease. It referred to the leading authority on the construction of leases, Arnold v Britton [2015] UKSC 36, and had in mind the requirement to read the ordinary and natural meaning of the words in the lease. It also referred to Kensquare Ltd v Boakye [2021] EWCA Civ 1725, where the Court of Appeal held that time was of the essence in respect of timing provisions for notices in a lease. The FTT set out paragraph 36 of the decision where Newey LJ said: “In short, it seems to me that the presumption against time being of the essence is displaced with clause 4(2/x) the terms of this lease taken in their context clearly indicate that the landlord must serve any notice under clause 4(2/x) not less than one-month prior to the commencement of that financial year if it is to have effect as Peter Gibson LJ noted in Starmark the Court has to be seek to discern the intention of the parties viewed objectively with the aid of the presumption in the present case…” (the emphasis is the FTT’s).

8. The FTT said: “6.6.13 This First tier Tribunal recognises that it was not the purpose of the Court of Appeal to set a precedent in the Kensquare findings that time is of the essence when it comes to all clauses relating to interim service charges. Cases involving interpretation of leases are fact specific and little help is derived from comparing cases with different leases. This Tribunal are unable to identify any specific lease clause in the subject lease which is designed to satisfy an intention between the parties that time is of the essence in giving interim service charges.”

9. It went on to consider in London Borough of Southwark v Woelke [2013] UKUT 0349. The Tribunal (the Deputy President, Martin Rodger QC) said: “… in considering each of those matters it is not appropriate to adopt a technical or legalistic approach; the service charge provision of leases are practical arrangements which should be interpreted and applied in a business-like way. On the other hand, precisely because the payment of service charges is a matter of routine, a businesslike approach to construction is unlikely to permit very much deviation from the relatively simple and readily understandable structure of annual accounting, regular payments on account and final balancing calculations with which residential leaseholders are familiar. When entering into a long lease the parties must be taken to intend that the service charge will be operated in accordance with the terms they have agreed leaseholders should be able to work out for themselves whether a sum is due to be paid by reading the lease and comparing the process it describes with the information provided in support of the demand by the landlord without the involvement of lawyers or other advisors.'

10. The emphasis is the FTT’s; it commented that the respondent in the present case had indeed interpreted the lease in a practical and business-like way in adapting the notice procedure to the circumstances and sending a late notice requiring payments for just the latter three quarters. The FTT also referred to London Borough of Southwark v Akhtar and Stel LLC [2017] UKUT 150 (LC) where the Tribunal found that a notice could be served after the date given in the lease. The FTT concluded: “6.6.20 The Respondent delivered the EMC late but in the opinion of the Tribunal still satisfied the key functions of clause 3(2) (b) and associated clauses. The Tribunal accepts this action did not hold fast to the lease terms, but despite this are unable to identify any prejudice or detriment caused to the parties. The Tribunal notes the first quarter service charge collections were waived by the Respondent until the reconciliation date. This action is perceived as a further attempt to mitigate any inconvenience or loss to the leaseholders by late issue of the EMC.”

11. The FTT concluded that time was not of the essence in clause 3(2)(b) and that therefore the charges demanded pursuant to the notice were payable.

12. The appellant appeals that conclusion with permission from this Tribunal. The arguments in the appeal

13. As the respondent has said, this appeal is about just one issue. The respondent agrees that the service of a notice under clause 3(2)(b) was a condition precedent to the tenant’s liability to pay the estimated service charge. No notice, no liability. But it maintains that time was not of the essence for service of that notice, as the FTT found.

14. The appellant has referred to a plethora of authorities, but in my judgment it is scarcely necessary to go beyond Kensquare v Boakye, a decision of the Court of Appeal on precisely the present point in relation to a lease with very similar terms. The lease required the landlord to service notice of the forthcoming interim service charges no more than a month before the end of the service charge year; the notice was served late; the tenant argued that she did not have to pay.

15. The Court of Appeal agreed, and its reasoning was specific to interim service charges. Newey LJ said at paragraph 33: “Of themselves, the matters mentioned in the previous paragraph [namely, the provisions for notice of the estimated charges] might not suffice to displace the presumption against time being of the essence which applies in relation to rent reviews and also, it seems to me, final service charges … However, parties should, I think, more readily be taken to have intended time to be of the essence in the context of interim service charges. In United Scientific, Lord Diplock highlighted the detriment to the landlord if he lost the right to a reviewed rent and Lord Fraser said that he could not believe that the parties could have intended such an "inequitable" result. Similarly, the parties to a lease should not lightly be assumed to have intended that a landlord should lose any right to recover service charges for a year. In a case such as the present one, in contrast, there is no question of the landlord being deprived of all ability to levy service charges. The dispute is essentially as to timing. Is the landlord restricted to collecting final service charges (which, under the terms of Ms Boakye's lease, it is supposed to do as soon as practical after the end of the financial year)? Or is it also open to it to require the tenant to pay interim service charges? In such circumstances, it is much more likely that the parties meant the time limits specified in their lease to be strictly complied with.” (The reference is to United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904)

16. That was what his lordship meant in his later paragraph 36, quoted by the FTT (paragraph 9 above), when he referred to the intention of the parties.

17. The FTT thought that the Court of Appeal did not intend to say that time is always of the essence in relation to notices of interim service charges (the FTT’s paragraph 6.6.13, set out at paragraph 10 above). That is correct, because of course each case turns on its own facts and on the terms of the lease in question; but the decision is authoritative, and in reaching a different conclusion the FTT needed to say what it was about the present lease that compelled it to a different conclusion despite the rest of the Court of Appeal’s reasoning.

18. The respondent seeks to argue that if timing is strict it cannot possibly comply, because the Fifth Schedule to the lease requires the landlord to calculate the estimated charge by reference to the costs incurred in the previous year. I do not think that argument has substance; there is no requirement that the estimated advance charges match precisely the amount spent in the previous year, only that reference is made to those charges of which the landlord would be aware by the time it came to give the notice required.

19. In any event, the argument does not reflect the fact that it was the respondent’s practice to comply with the timing requirement in clause 3(2)(b) and it had intended to do so in 2024; it failed not because it could not work out what to charge but because of the IT problems. The respondent’s argument takes us no further in terms of the construction of clause 3(2)(b). The respondent’s IT problems could not be a relevant factor in construing the lease. It may be that the FTT thought that, in these circumstances, the original parties to the lease would have taken a pragmatic approach. But if the parties intended that, the lease would either have set out circumstances in which the notice could be late, or stated that time was not of the essence.

20. That is what the parties to the lease in Akhtar and Stell LLC did. The schedule containing the provisions for notices of interim service charges stated: “(2) Time shall not be of the essence for service of any notice under this Schedule”

21. The lease in question in London Borough of Southwark vWoelke contained exactly the same provision. Accordingly neither case can support the FTT’s conclusion. Neither was a decision about whether time was of the essence (since that point was definitely settled by the lease); both were about compliance with other requirements – and both formed part of the Court of Appeal’s reasoning in Kensquare. Indeed, the FTT’s in relying on Woelke emphasised one step in the Deputy President’s reasoning and did not consider the words that followed: “a businesslike approach to construction is unlikely to permit very much deviation from the relatively simple and readily understandable structure of annual accounting, regular payments on account and final balancing calculations with which residential leaseholders are familiar.”

22. The “businesslike approach” to which the Deputy President referred was not one of flexibility and adaptation to circumstances, but rather an adherence to the clear provisions of the lease. In that case the lease required the landlord to give the tenant a “reasonable estimate” of the service charges for the coming year; it had done so, but had omitted one substantial cost which it knew it was going to incur. It purported to serve a separate notice about that item later. The Deputy President held that it could not do so; it had been required to give an estimate, which meant that it had to set out the expenditure which it knew was going to be incurred. If it chose not to do so, it could not serve a separate notice for the other item. It had to wait, and recover that expenditure in arrears. The precise provisions of the lease had not been complied with; the expenditure in question was not recoverable.

23. There is no authority supporting the FTT’s flexible approach to construction in this case. There is nothing in the lease in question here that could lead to a different conclusion about the timing requirement in clause 3(2)(b) from that reached in Kensquare v Boakye. Moreover, one provision reinforces that conclusion, namely the requirement: “[to pay] to the council on demand the management charge provided for in clause 3(2)(b) hereof such management charge to be paid at the times and in the manner specifically mentioned therein.' (emphasis added)

24. That clause emphasises the importance of specific timing. The tenant is to pay exactly as required by clause 3(2)(b); and that clause specifically requires him to pay if he has had a notice of the estimated charges before the end of the previous service charge year. That in my judgment reinforces the conclusion that time is of the essence in that clause. Conclusion

25. Time is of the essence of the requirement in clause 3(2)(b) of the appellant’s lease that he be notified of the estimated management charge prior to the commencement of the financial year. The notice given in 2024 was given before 1 July but after 1 April 2024; the estimated service charges were not therefore payable in advance by the appellant. He will of course have become liable to pay the actual charges after the end of the year Judge Elizabeth Cooke 5 March 2026 Right of appeal  Any party has a right of appeal to the Court of Appeal on any point of law arising from this decision.  The right of appeal may be exercised only with permission. An application for permission to appeal to the Court of Appeal must be sent or delivered to the Tribunal so that it is received within 1 month after the date on which this decision is sent to the parties (unless an application for costs is made within 14 days of the decision being sent to the parties, in which case an application for permission to appeal must be made within 1 month of the date on which the Tribunal’s decision on costs is sent to the parties).  An application for permission to appeal must identify the decision of the Tribunal to which it relates, identify the alleged error or errors of law in the decision, and state the result the party making the application is seeking.  If the Tribunal refuses permission to appeal a further application may then be made to the Court of Appeal for permission.