[2024] UKUT 120 (LC)

For these eight years the residential lessees paid the gym costs, without protest once the arrangement about the rent, recorded in paragraph 17, had been put in place. The respondent relies upon section 27A(4) of the 1985 Act, which states:

“(4)

No application under subsection (1) or (3) may be made in respect of a matter which—

(a)

has been agreed or admitted by the tenant…”

Sub-section (5) then says:

“(5)

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

In Cain v Islington the Tribunal (HHJ Nigel Gerald) held that that proviso referred only to single payments, and that if more than one payment had been made then from that alone it could be inferred that the leaseholders had agreed the charge in question.

In G & AGorrara Ltd and others v Kenilworth Court Block E RTM Co Ltd [2024] UKUT 379 (LC), published since the FTT’s decision, I expressed respectful disagreement with that decision; section 27A(5) is relevant as much to repeated payments as to single payments; payment alone is not enough to indicate agreement. At paragraph 44 of that decision I said:

“A series of unqualified payments only does not indicate agreement, but it may do so, depending on the circumstances. Imagine a tenant who has paid the service charge without protest for twenty years until 2020. In 2022 she discovers - and could not have known before - that the heating system has not been serviced since 2015, despite the fact that the landlord has paid for the annual servicing and the service charge includes a sum in respect of that payment. She is of course entitled to challenge the charge, because she did not know and could not have found out about the problem.”

With that in mind I turn to the FTT’s decision and the appeal on this point.

The FTT said this:

“24.

It is clear from Cain v Islington [2016] L & T R 13 … that a single payment of service charge would not be regarded as an agreement or admission but ‘where there have been repeated payments over a period of time of sums demanded, there may come a time when such an implication or inference [ie of agreement or admission] is irresistible’. In the present case the Applicants’ ‘payments’ appear to have been made without demur since 2013 when the gym lease was first granted and continued to the present day despite unilateral alterations to the terms of gym usage in both 2013 and further in 2020. This lengthy pattern of undisputed payments inclines the Tribunal to conclude that the implication or inference of agreement or admission is indeed irresistible and precludes the jurisdiction of the Tribunal under a s27A application at least in so far as it relates to charges levied up to 2020.

There is some ambiguity there about the scope of that finding, but I take it to be a finding in respect of the years 2013 to 2020 only. Some of the leaseholders (including the two appellants), withheld part of their service charge from 2021 onwards in protest at the requirement to pay the gym costs, and in saying “at least insofar as it relates to charges levied up to 2020” it seems that the FTT accepted that things changed after 2020.

Even so, the FTT’s finding that the payments had been made “without demur” during that period is not right; it is not in dispute that the leaseholders did “demur” soon after the gym lease was granted and that as a result the respondent agreed to contribute to the service charge the £5,000 per annum that the gym tenant paid by way of rent. So the matter had been discussed and the residents’ concerns made known.

The appellants in their grounds of appeal said that nevertheless they could not be taken to have agreed the gym charges for that period because they did not know how much they were paying – and indeed did not know until after the commencement of the FTT proceedings, when the respondent disclosed its service charge accounts. Mr Sandham also argued that the FTT’s finding was not founded on the evidence, because the FTT did not analyse what the two appellants themselves had done.

Mr Morris in response argued that this ground of appeal is a challenge to the FTT’s findings of fact, and that therefore there is only very limited scope for an appeal. I do not think it is as simple as that; there was a finding of fact that the appellants had “paid without demur”, but the challenge is to the inference the FTT drew from that.

However, in my judgment this ground of appeal fails. From 2013 to 2020 the two appellants paid their service charge, which they knew included their share of the whole of the gym costs less the respondent’s contribution of £5,000 per annum. That contribution was agreed following discussion with the leaseholders. It was open to the appellants and to any of the leaseholders to challenge the service charge, informally or by issuing proceedings, at any time during those eight years and they did not do so. They did not need to know the amount they were paying for the gym in order to make that challenge and indeed (as Mr Morris pointed out) the present proceedings were commenced while the appellants still did not have the requisite figures; their application form in the FTT simply said that it was “not fair and reasonable for the Freeholder to recover 100% of the gym costs in aggregate from the residential leaseholders.”

That was not what the respondent was doing before 2021; it was contributing the £5,000 rent and thereby reducing what the leaseholders were paying. That was an arrangement with which the residential leaseholders agreed and it was not challenged until these proceedings were commenced. It could have been challenged earlier, without the need for actual figures. That indicates that the appellants agreed to pay that element of their service charge that included the Gym costs, from 2013 to 2020; the FTT drew the right conclusion. This ground of appeal fails.