Q&As

A tenant was awarded a refund of service charge monies following an FTT decision. The lease, between landlord and tenant, stipulates that any overpayment should be held as credit and used against the next periods of service charge rent. Is the landlord required to refund the overpayment back to the tenant and can the tenant use the credit against payment of ground rent? Section 42 of the Landlord and Tenant Act 1987 indicates that to return monies would be a breach of trust—how does this section interact with the FTT’s decision?

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Produced in partnership with Desmond Kilcoyne
Published on LexisPSL on 20/12/2017

The following Property Q&A Produced in partnership with Desmond Kilcoyne provides comprehensive and up to date legal information covering:

  • A tenant was awarded a refund of service charge monies following an FTT decision. The lease, between landlord and tenant, stipulates that any overpayment should be held as credit and used against the next periods of service charge rent. Is the landlord required to refund the overpayment back to the tenant and can the tenant use the credit against payment of ground rent? Section 42 of the Landlord and Tenant Act 1987 indicates that to return monies would be a breach of trust—how does this section interact with the FTT’s decision?

To begin with, the terms of any relevant contract will dictate the remedies available to the tenant. Leases commonly provide that, where the interim (or advance) charges paid by a tenant exceed the annual sum due (ie once the final annual figure has been calculated), the excess due to the tenant shall be either: (i) reimbursed to the tenant; or, (ii) applied by the landlord as a credit towards the tenant’s service charge liabilities in the following year. The language of the lease which deals with the matter of an excess may be narrow (ie it only applies in the simple situation where the total of the interim payments exceeds to the total annual sum due) and therefore will not apply to cases where the overpayment arises for different reasons (eg where the First-tier Tribunal (FTT) has ruled that a charge paid by the tenant is not lawfully due or unreasonable in amount). Conversely, the language may be wide enough to cover ‘any’ overpayment; in which case, the terms of the lease will be determinative.

Similarly, whatever the position under the lease, where there is a dispute about a tenant’s liability to pay the charge dem

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