Cases - OM Property Management Ltd v Thomas Burr

Record details

Name

OM Property Management Ltd v Thomas Burr

Date

[2012]; [2013]

Citation

UKUT 2(LC), LRX/64/2011; EWCA Civ 479

Legislation

Landlord and Tenant Act 1985

Keywords

Service charge – Landlord and Tenant Act 1985 section 20B – ‘costs’ are ‘incurred’ when ‘expended’ or ‘become payable’ – tenant liability

Summary

This case concerns when costs are ‘incurred’ for the purposes of section 20B of the Landlord and Tenant Act 1985.

A managing agent paid an incorrect gas supplier for the period 2001 to 2007. The correct supplier notified the managing agent in November 2007 of the error and presented a substantial bill. The leaseholders were demanded to pay a contribution in the accounts for 30 April 2008. A leaseholder objected on the basis that the gas charges pre-dated the time he acquired his interest.

The LVT found that liability to pay for the gas incurred when it was consumed. Since this was more than 18 months before payment was demanded section 20B prevented recovery. The managing agents appealed.

While liability to pay for the gas may have been incurred when it was consumed that does not mean that the cost of the gas was incurred at the same time. The 1985 Act concentrates on when a cost is incurred. When a cost is incurred has to be decided on a case by case basis.

Costs are ‘incurred’ on the presentation of an invoice or on payment; but whether a particular cost is incurred on the presentation of an invoice or on payment may depend upon the facts of the particular case.

The LVT erred in law. The cost of the gas was ‘incurred’ at least until the bill was presented in November 2007. It was included in the service charge demanded in April 2008, well within the time limit set by section 20B. The appeal was allowed.

Therefore, it is the cost that must be incurred under section 20B of the Landlord and Tenant Act 1985. A liability does not become a cost until it is made concrete, either by being met or paid or possibly by being set down in an invoice or certificate under a building contract.

Tenants seeking assistance from section 20B of the Landlord and Tenant Act 1985 must be aware of the dates of bills/invoices provided as well as the dates of the services provided.

[2013]

Between 2001 and November 2007, the Respondent managing company, OM, paid gas bills incurred in heating a communal swimming pool contained in the building. Due to a number of errors, OM only served demands on leaseholders for payment for gas consumed over this period in the April 2008 service charge account. The Appellant lessee argued that pursuant to section 20(b) of the LTA 1985 that he was not liable for costs incurred more than 18 months before a demand of payment of service charges was served on him.

The appeal concerned the issue of when costs were incurred for the purposes of the Landlord and Tenant Act 1985, section 20(b).

In dismissing the lessee’s appeal, the Court of Appeal held:

• That as a matter of ordinary language there was an obvious difference between a liability to pay and the incurring of costs. A liability must crystallise before it becomes a cost.
• The difference between a liability to pay and the incurring of costs was recognised within section 20(b) itself. It was significant that the phrase 'relevant costs' was defined in section 18(2) as 'the costs or estimated costs incurred or to be incurred'.  It was not defined as 'the liability or estimated liability for costs.'
• Section 19(2) provided strong support for the view that costs were incurred only when they were paid (or when an invoice or other demand for payment was submitted by the supplier or service provider) and not when services were provided or supplies were made. The significance of section 19(2) in relation to relevant costs that had been incurred was that it entailed the existence of an ascertained or ascertainable sum which was capable of being adjusted by repayment, reduction etc. The mere provision of services or supplies did not without more entail anything which was capable of being adjusted in this way.
• Costs were not incurred within the meaning of section 18, 19 and 20(b) on the mere provision of services or supplies to the landlord or management company.