18-month rule and invalid demands

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    18-month rule and invalid demands

    I would appreciate opinions on this situation, please:

    - Demands for service charge and ground rent for 2018 were sent in December 2017
    - Delays in auditing accounts for 2018 caused the landlord's agent to send 20b notices in June 2019, predicting a £30k shortfall
    - The demands for 2018 did not comply with s47 of the L&T Act, and were therefore invalid

    With the 18-month rule in mind, if the LL re-issues valid 2018 demands in December 2019, can it still recover all costs incurred in 2018?

    Let me know if you need more detail.

    Thank you.

    You will need to provide further details before anyone can answer your query.

    if the actual spending that the landlord (freeholder) seeks to recover is £30k short of what was initially demanded, whether the entire amount can be recovered will likely depend on whether the section 20B notice was adequate to cover the full amount.

    All sums included in the original demand will be payable, as long as they comply with lease terms and aren't successfully challenged as unreasonable, and any other charges will still be payable if a final demand is received within 18 months of the invoices being received by the landlord. The only sums that might not be payable are for invoices received over 18 months before you receive a final invoice for the year and are over the original estimates.
    So, if the section 20B notice is incorrect, it may only be possible for the landlord to recover the estimated amounts for any items they were invoiced for before June 2018, but they still have time to issue a demand for sums that weren't included on the estimate at all, but which they weren't invoiced for before the end of June 2018.


      Thanks for your reply.

      The actual spending that the landlord seeks to recover is more than what was inititally demanded.

      Here is the information I think you're asking for:

      The initial demand for 2018, sent to leaseholders in December 2017, stated the estimated expenditure was £158694.00, but also included £80000 for the reserves, giving a total demand £238694.00.

      As the audit of the 2018 accounts was outstanding, a s20(b) was sent to leaseholders in June 2019, headed "Summary of Costs for the period 1st January 2018 to 31 December 2018", and stated:

      "Service Charges Receivable" was £157997.00 (which doesn't match the initial demand)
      "Expenditure" was £189517.67
      "Surplus/(Deficit)" was £-31520.67

      Closer inpection of accounts during 2019 discovered that some invoices from 2018 were paid in error, meaning approx £15000 has since been refunded, so the predicted deficit for 2018 is closer to £15000.

      Because the audit of the 2018 accounts was still not complete, the demands for 2020 included a £15000 charge as an estimate to balance the 2018 accounts.

      Please let me know if you need more detail.

      Thank you for your time.


        It is still not possible to answer your question - and it may not be possible to provide an answer until you have actually received a demand for the final sum.

        It sounds like your service charges are accounted for using calendar years, so the year in question runs from 1-Jan-2108 to 31-Dec-2018 (inclusive). Is this correct?
        If this is the case, there is still time for the landlord to produce a final invoice + demand without any of the costs that the landlord received invoices for in the second half of 2018 being outside the 18 month limit.

        Once you receive a final invoice, and an account summary for the year - if you are provided with one, you should ask to see the invoices that support the year's accounts. The only invoices that might not be payable in full are the ones that are dated over 18 months earlier than the date on which you receive a demand that details the service charges for the year.

        If any invoices are dated over 18 months earlier than the end of year demand, you will need to look at whether or not the costs for these items is above the estimated costs that you were invoiced for prior to the start of 2018. Any costs that are lower than what was estimated may still be payable even if the invoices for those particular costs are over 18 months ago.

        You also need to check whether the section 20B notice was valid. If this notice was correct, all costs are probably payable in full, regardless of when the final invoice is produced.
        To be valid as a section 20B notice, the notice has to include the following:
        (1). Actual costs for the service charge year (although estimated costs may be allowed under some circumstances). Ideally these costs will be itemised, but a FTT may rule that it isn't necessary to be particularly specific.
        (2). The sums being demanded need to be in accordance with the terms of the lease, and should not include sums that aren't payable.
        (3). It must state that costs have been incurred and that the leaseholder will be required to pay a share of these costs.

        Whether the landlord can request payment of the £15,000 that they say is owed before they have produced proper 'balancing invoices' for the 2018 year is another matter, and may depend on precisely what is stated in your lease.


          Thank you for taking the time to reply, I appreciate it.


            Originally posted by MartynSE5 View Post
            Thank you for taking the time to reply, I appreciate it.
            Hopefully my posts made at least some sense. I'm sorry that I couldn't actually give you a proper answer.

            If you are a leaseholder in this situation, and you decide to pay whatever your share of the additional sums, I would suggest that you make it clear that you reserve your right to challenge any. or all, of the sums demanded at a later date (it doesn't make a lot of difference, but if you can produce an email and/or letter that shows that you didn't admit that you accepted the charges, it prevents a freeholder from claiming that you agreed to the charges).

            If you are the freeholder (or a representative of an RTM company) you need to get the final invoice for the 2018 year finalised and sent out ASAP - even if you are certain that the S20B notice was fully compliant and will allow you to recover all charges. You should also (IMO) provide copies of all relevant invoices, if they are requested, as soon as possible after they are requested (if they are requested) - regardless of whether or not there is anything in the lease, or any legal obligation, to do so. Failure to produce supporting invoices after they have been requested by a leaseholder won't prevent the FTT ruling against you if you are passed the 18 month time limit and might make it easier for a leaseholder to claim that you have acted unreasonably.


              What are you hoping to achieve here - I see from your other posts that this is a lessee owned company. If some lessees do not pay - bankruptcy will be inevitable, the freehold will revert to the crown. The Directors (of which you appear to be one) may be sued. Is the intent to raid the reserve to fund the shortfall?


                Originally posted by AndrewDod View Post
                I see from your other posts that this is a lessee owned company.
                Presumably you mean posts involving other questions, and you are assuming that these refer to the same property as those threads? Although you may be correct, I would say that isn't a reasonable assumption to make - unless you've seen a very good reason to think that the property referred to is definitely the same.

                If you are correct, I would also wonder what the OP is hoping to achieve.
                Where leases are managed by companies that all leaseholders have a share in there is little point in challenges based on failure to follow the correct processes, and efforts should instead concentrate on getting appropriate people in charge of managing the building.


                  To comply with the 18 month rule, the FH just has to send a "demand" or in reality a note to say that costs have been incurred, this initial note doesnt have to comply with anything, it could be on the back of a fag packet, its just to let you know that costs have been incurred and that you will (in future) have to pay them..of course subsequent actual demands have to comply with s20b and s47, etc.....so if the original note has been sent then the FH has 6 or maybe 12 years to send valid demands.
                  Advice given is based on my experience representing myself as a leaseholder both in the County Court and at Leasehold Valuation Tribunals.

                  I do not accept any liability to you in relation to the advice given.

                  It is always recommended you seek further advice from a solicitor or legal expert.

                  Always read your lease first, it is the legally binding contract between leaseholder and freeholder.


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