Upper Tribunal finds time was of the essence in notification of estimated service charges payable in advance

Judge Elizabeth Cooke found leaseholder Rosh Jamal would become liable for a full year’s charge in spring 2027 but was not yet liable as the demand was incorrectly served.

Mr Jamal appealed against a decision by the First-tier Tribunal (FTT) under section 27A of the Landlord and Tenant Act 1985 on whether time was of the essence in respect of a landlord giving notice of estimated service charges payable in advance.

His lease requires him to pay the service charge quarterly “such as shall be notified in writing to the lessee by the council's Borough Treasurer/ Director of House Services prior to the commencement of the financial year” with a balancing payment at the year end should expenditure exceed the original estimate.

Enfield normally issues the estimated management charge for the year ahead prior to 1 April each year, ready for the first quarterly payment.

But it could not do this in 2024 due to failings in new software. It instead issued notices before July 2024 for payment of three-quarters of the charge in three instalments, relying on the balancing process for the missing quarter.

Mr Jamal did not pay and contended that since the lease does not specify what is to happen if notice is not served on time, therefore nothing happens and the council must wait and recover the entire year's service charge in the balancing exercise.

The FTT concluded time was not of the essence in the relevant clause and so the charges were payable.

Judge Cooke said she had been sent “a plethora of authorities” but felt she need not go beyond Kensquare v Boakye, which addressed “precisely the present point” and had found in favour of a tenant where a notice was served late.

She said the FTT thought the Court of Appeal did not intend to say that time is always of the essence in relation to notices of interim service charges, “but the decision is authoritative, and in reaching a different conclusion the FTT needed to say what it was about the present lease that compelled it to a different conclusion despite the rest of the Court of Appeal's reasoning”.

Enfield argued that if timing is strict it cannot possibly comply because it is required to calculate the estimated charge by reference to the costs incurred in the previous year.

“I do not think that argument has substance; there is no requirement that the estimated advance charges match precisely the amount spent in the previous year, only that reference is made to those charges of which the landlord would be aware by the time it came to give the notice required,” Judge Cooke said.

“In any event, the argument does not reflect the fact that it was [Enfield’s] practice to comply with the timing requirement in clause 3(2)(b) and it had intended to do so in 2024; it failed not because it could not work out what to charge but because of the IT problems.”

Judge Cooke concluded: “There is no authority supporting the FTT's flexible approach to construction in this case. There is nothing in the lease in question here that could lead to a different conclusion about the timing requirement in clause 3(2)(b) from that reached in Kensquare v Boakye.“

She added: ”Time is of the essence of the requirement in clause 3(2)(b) of the appellant's lease that he be notified of the estimated management charge prior to the commencement of the financial year.

“The notice given in 2024 was given before 1 July but after 1 April 2024; the estimated service charges were not therefore payable in advance by the appellant. He will of course have become liable to pay the actual charges after the end of the year.”