When a leaseholder challenges the reasonableness of their service charge in the Tribunal, it is common for them to also seek orders under section 20C of the Landlord and Tenant Act 1985 (section 20C) and under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 (paragraph 5A). Those provisions prevent a landlord from recovering its legal costs of proceedings as service or administration charges, even though the provisions of the lease might otherwise allow them to do so.
In its recent decision of Birch v Meredith [2026] UKUT 6 (LC), the Upper Tribunal (UT) overturned orders granted by the First Tier Tribunal (FTT) under section 20C and paragraph 5A, as well as an order that the landlord reimburse the leaseholder's Tribunal fees, on the basis that the FTT had made an error of law.
The leaseholder had applied to the FTT for a determination as to whether the service charges in respect of the service charge year 2023-24 were payable. Those charges of £46,918.26 were for drainage works, legal fees, pointing and scaffolding.
The FTT made two findings:
- Firstly, that because the service charge demands did not include an address for the landlord, as required by section 47 of the Landlord and Tenant Act 1987 (section 47), they were invalid.
- Secondly, it considered whether the costs would be payable if properly demanded. The FTT found all the costs to have been reasonably incurred, save for imposing a small reduction of £417.37 to the legal fees.
The FTT made the costs orders sought by the leaseholder on the basis that the leaseholder “had achieved complete success in challenging the service charges as demanded in invalid demands” and stated that the landlord had "just about scraped through in respect of most of the costs incurred being reasonable".
However, the FTT was incorrect about the effect of section 47 which provides that where a written demand does not contain the name and address of the landlord, then any service charges demanded “shall be treated for all purposes as not being due from the tenant to the landlord at any time before that information is furnished by the landlord by notice given to the tenant.”
The effect of section 47 is merely suspensory. It does not invalidate the demand or mean that the service charges cannot be demanded. It simply provides that the charges are not due until the relevant information is supplied. Therefore, the FTT was wrong in its conclusion that the leaseholder had achieved complete success.
Regarding the issue of whether the service charges were payable, Judge Cooke concluded that the landlord was "overwhelmingly successful" as the reduction of just over £400 had been "tiny" against the overall cost. Therefore the costs orders were set aside.
There are no firm rules as to when orders under section 20C and paragraph 5A should be granted; each case will turn on its facts. If a landlord believes the FTT has erroneously granted such an order, it may wish to consider appealing that decision.
