Estoppel Where the Method of Apportioning Service Charge was Incorrect

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In the case of Admiralty Park Management Company Limited v Ojo [2016] UKUT 421 (LC) the Upper Tribunal (Lands Chamber) considered whether a tenant was required to pay service charge where the management company had used a different method of apportioning service charge from what was prescribed in the lease.

For several years, the management company had mistakenly used a different method of apportionment from what was prescribed in the lease. Instead of following the lease, the management company apportioned the service charge by referring to the costs of maintaining all of the blocks in the estate of which the property was a part of. However, the management company should have been apportioning the service charge by referring to the costs of maintaining just the tenant’s block rather than the whole estate. The tenant did not raise any objection to this.

In the first instance, when trying to determine the tenant’s liability to pay service charges, the First-tier Tribunal where the ones who initially queried why a different apportionment method was used, despite the tenant not raising any issues with the payments. The management company argued that the tenant was estopped by convention as the tenant did not object to the method used and was therefore liable to pay the outstanding service charge.

However, the First-tier Tribunal said that the management company could not raise this argument at this late stage and held that the tenant’s liability was nil for the relevant period. The Upper Tribunal held that the First-tier Tribunal were entitled to query why a different method of apportionment was used. However, both the tenant and the management company should have been given the opportunity to make submissions in response. As a result of this, the Upper Tribunal held that despite the terms of the lease, the tenant was estopped by convention from objecting to the method of apportionment used. In reaching this decision, the Upper Tribunal took into account the fact that the tenant had agreed to pay the service charge for several years and had not raised any previous objection.

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