Jetha v Basildon Court Residents Company 
27 February 2017 by Jordan-Ray Bennis
Estoppel by Convention and Service Charges
It is common for leases to provide for the payment of a service charge. As the name suggests, this type of charge is payable by a tenant to a landlord or a management company for the provision of services. Where, under the terms of a lease, the landlord is required to repair, clean or otherwise maintain the structure, exterior or common parts of a demised premises, the associated costs or a fair proportion thereof may fall on the tenant. In some cases, the tenant’s liability will be linked to the satisfaction of a special condition or requirement. If the condition is not so satisfied, a tenant may seek to deny the payablity of the service charge.
It is not always possible to assert this position, however. Where, by virtue of the parties’ conduct, it would be inequitable to withhold payment, a tenant may be estopped by convention from relying on a condition precedent.
Estoppel by convention is an equitable remedy, which may arise where the following circumstances are found to exist:
- a common assumption is shared by the parties;
- the person alleged to be estopped bears some responsibility for the assumption;
- the person claiming the benefit of the estoppel has relied on the assumption, which must have occurred in connection with a subsequent mutual dealing between the parties; and
- the party alleging the estoppel has suffered a detriment, or alternatively the person alleged to be estopped receives a benefit so as to make it unconscionable for him to as assert the true legal position. (HMRC v Benchdollar Ltd  EWHC 1310 (Ch) (Briggs J))
In the recent case of Jetha v Basildon Court Residents Company Ltd  UKUT 58 (LC), on appeal from the FTT (PC), the Upper Tribunal (Lands Chamber) issued guidance on the applicability of estoppel by convention in situations where a tenant refuses to pay a service charge that has not been administered in accordance with the terms of the lease.
The appellants, Mr and Mrs Jetha, were long leaseholders of flats in a prestigious mansion block in London, known as Basildon Court. Pursuant to their tenancy agreements, the appellants covenanted with the Basildon Court Residents Company (BCRC) to pay, inter alia, a proportion of the total service charge in respect of the common parts ‘in advance or arrear’ and in ‘such sums…as [the BCRC] shall at its annual general meeting by majority agree.’
When the appellants failed to make payments for the accounting years 2014 and 2015, the BCRC issued County Court proceedings to recover the arrears. In their defence, Mr and Mrs Jetha argued that service charge and sinking fund contributions had not been agreed at the annual general meeting (AGM). The matter was transferred to the First Tier Tribunal (Property Chamber), which held that the appellants were liable for the arrears on the basis that they had paid the charge for several years without having previously questioned the BCRC’s failure to agree the contributions at an AGM.
On appeal to the Upper Tribunal (Lands Chamber), Judge Behrens disagreed with the FTT(PC) on the point of estoppel by convention and set aside the decision. In determining that the doctrine was not made out, particular weight was attributed to the potential for the parties to be operating under different assumptions and the lack of any clear responsibility on the part of the appellant for a common assumption.
Crucial to the judgment however, was the fact that the relevant covenants contained no time limit so as to prevent the BCRC from passing resolutions in respect of service charge payments for the 2014 and 2015 accounting years. The service company could not, as a consequence, be taken to have suffered any ‘real detriment’ because Mr and Mrs Jetha would nonetheless be liable for the arrears on the passing of ‘appropriate’ resolutions.
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