Interpretation of Time Limitation of Arrears under the Lease

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    Interpretation of Time Limitation of Arrears under the Lease

    I understand there is a limitation of 6 years for Freeholder to claim arrears under the Lease (Limitation Act 1980).

    Any input on how the following situation in a block of flats where the Freehold is owned by the Lessors would be interpreted would be helpful:
    One leaseholder in a block of flats pays only half (say) the service charge on an ongoing basis, and keeps getting notified about the higher arrears through the quarterly demands. Directors have been too busy to take action for the past 10 years.

    Now, after 10 years, can Freeholder argue that the first 5 years of service charges have been paid, and that the arrears are for the remaining 5 years (and go to court to recover that)?

    Or, would LVT / County Court take view that 50% of every year's service charges have been paid, therefore Freeholder can claim for 50% of last 6 years' demands (assuming demands are fair / presented properly etc)?

    #2
    I don't think there is a problem

    The lessee has been notified of the debt each year and by making some payments is acknowledging the debt still exists.

    If you are raising a demand for the first time for ground rent you can go back 6 years. For service charges the same applies but subject to the 18 month rule. If you have advised of the costs but not served a valid demand you can go back on servic charges for 6 years as well

    Comment


      #3
      Originally posted by flatpackman View Post
      I don't think there is a problem

      The lessee has been notified of the debt each year and by making some payments is acknowledging the debt still exists.
      Thanks - this seems logical to me. A friend of mine who sits on board of another building where she lives had a similar issue and said she thought we would have a problem having asked a property solicitor. But maybe the lessee in that building paid nothing.

      Comment


        #4
        The LH may have a case if he said that he is only paying 50% as he believes that is a reasonable amount for that period and he wishes to dispute the rest, although after 10 years it maybe to late to apply to the FTT (although many do allow upto 12 years), but I suspect he hasn't done that, so I suspect the Limiatiion Act wont help him but he could of course still dispute each year using the reasonableness argument.
        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.

        Comment


          #5
          Is the service charge reserved as rent? If not, the limitation period is 12 years.

          If reserved as rent the position is a bit tricky. Absent any prior agreement to the contrary, where a debtor owes money on more than one account the money must, if the debtor so specifies, be applied to the account specified by the debtor. The principle was expressly confirmed to apply to rent in a case the name of which eludes me. The question is, if the tenant owes rent and then pays following a demand for further rent is the sum he has just paid to be applied to the first or second lot of rent? If the remittance is accompanied by the demand or refers to it then it has to be applied to the rent referred to in the demand.

          If in this case payment is made following a demand which includes arrears then, absent any designation by the tenant, I think it can be argued that the sum paid goes towards the oldest outstanding rent.

          Comment


            #6
            Thanks for all your answers. Seems to me this is slightly grey area. Freehold company will have to pay for solicitor's advice on our particular case. Over the years we have received the odd missive complaining about service charges and their unreasonableness. I will post any updated, if / when I have them. No point in going to court until the leaseholder owes a substantial amount, i guess, otherwise it will be heard by the lower tier and no costs will be awarded.

            Comment


              #7
              Originally posted by flatpackman View Post
              The lessee has been notified of the debt each year and by making some payments is acknowledging the debt still exists.
              Part payment does not start the clock running again when it comes to rent. See section 29(6) Limitation Act 1980:

              A payment of a part of the rent or interest due at any time shall not extend the period for claiming the remainder then due, but any payment of interest shall be treated as a payment in respect of the principal debt.

              Comment


                #8
                But we are talking about servuice charges here not rent (unless SC is reserved as rent).

                There are plenty of cases of LH's bring claims for service charges upto 12 years BUT cant recall any claims where FH has bought a claim for alleged arrears so Im not sure whether it is 6 or 12.
                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.

                Comment

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