When a leaseholder seeks to argue against a liability for service charges in the Court or Tribunal, they can ask the Court/Tribunal to make an order under Section 20C of the Landlord and Tenant Act 1985 which, if made, will prevent the landlord/RTM/RMC from recovering through the service charge all or any of the costs incurred in running that dispute. The leaseholder can also seek an order under Paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002, preventing the landlord/RTM/RMC from recovering any of its costs from the leaseholder as an administration charge (e.g. as a direct recharge).

Here, the Court or Tribunal has a wide discretion to “make such order as it considers just and equitable in the circumstances of the case”.  In most cases where a leaseholder is successful in disputing their liability, making a Section 20C (or Paragraph 5A) order might seem to be the correct outcome.  

However, as the recent case of Birch -v- Meredith [2026] UKUT 6 (LC) shows, there are instances where a win is not necessarily an actual victory for a leaseholder, and thus it is not "just and equitable" to penalise the landlord with a Section 20C order.

The FTT’s decision

The leaseholder had sought a determination as to whether service charges in respect of the service charge year 2023-24 were payable. The service charges in issue amounted to £46,918.26.  The charges were for four items: drainage works, legal fees, pointing and scaffolding.

The FTT made two substantive decisions: -

1. It found that because the service charge demands did not include an address for the landlord, as required by Section 47 of the Landlord and Tenant Act 1987, they were invalid.

2. The FTT went on to consider whether the service charges would have been payable if properly demanded. It appears that the landlord had, prior to the hearing or perhaps just after it, provided, retrospectively, the information required by Section 47 by re-serving the demands.  The FTT considered the work done under each of the four heads, and found all the costs to have been reasonably incurred save for the smallest item, the legal fees, as to which it imposed a reduction of £417.37. The total amount that would have been payable by the leaseholder was therefore £46,500.89, if the demand had been valid.

Having ruled in favour of the leaseholder the FTT then went on to consider the leaseholder's Section 20C application and a request for reimbursement of the fee the leaseholder had paid in making his application to the Tribunal.

The FTT found that both applications should succeed and so made an order under Section 20C preventing the landlord from recovery his costs via the service charge, and ordering that the initial application fee incurred by the leaseholder should be paid (likely £114).   This was on the basis that the leaseholder "had achieved complete success in challenging the service charges as demanded in invalid demands"

The Upper Tribunal’s decision

The landlord appealed to the Upper Tribunal (“UT”), who overturned the FTT’s costs order. 

The UT considered that, just because the leaseholder had identified a technical defect in the demands which prevented the landlord from recovering immediately all charges due, this did not amount to a win in any meaningful sense.  The landlord’s error was the failure to include in the demand a valid Section 47 notice without which the demand was unenforceable (see here our guidance on what a Section 47 notice is for and how to get it right).

However, the UT found that a failure to serve the Section 47 notice with the demand did not, as the FTT found, invalidate the demand, but merely suspended its enforceability. Accordingly, whilst the leaseholder had prevented immediate recovery, the reality was that as soon as the error was corrected (which, by the date of the UT hearing, had occurred), the leaseholder was due to pay the overwhelming part of the service charges. In other words, this was no more than a temporary win for the leaseholder. On that basis the landlord had, in substance, proved its case and so the UT found that it was not right that a Section 20C order should have been made - not least because the sum of the claim disallowed by the FTT was a “tiny” sum in comparison to the value of the claim.  

The win therefore was neither substantial nor, in real terms, a win at all for the leaseholder.

Conclusion

The case highlights that :-

• A failure to comply with Section 47 and provide the correct landlord details on a demand does not invalidate a demand per se, but merely suspends the payability or enforcement of the same until the correct notice is provided.

• This technical non compliance will not automatically entitle a leaseholder to a Section 20C order;

• If the Tribunal orders that certain sums are not lawfully recoverable as service charge but those sums in the context of the debt are nominal (in this case, less than 1%) it is not necessarily appropriate for the Tribunal to make a Section 20C order.

Plainly the lesson for the landlord is to ensure the basics;  that demands are in correct form at the point of service on the leaseholder and, at the very least that the demand is checked prior to, or at the point of, entering into litigation to enforce the same (see here guidance on getting your service charge demands right first time). Doing that simple thing will address the issue before the matter starts.

Disclaimer

This Legal Update describes the position in law as at the date of this article and care should be taken to note any subsequent amendments to the position as set out above.  The Legal Update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole.