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Service charges – estoppel?

Suppose service charges have been raised for many years in a way that does not properly accord with the wording of the lease; if T subsequently questions those service charges, can L argue that there is an ‘estoppel by convention’ (ie a shared assumption that now prevents T from reneging on that assumption)?

Such an estoppel claim is possible, but difficult. There are four reported cases:

  • Accounts had not been properly certified (as required by the lease). It was held that estoppel applied because of a 19-year-old oral agreement, as a result of a meeting at which the former Ts had decided that certification of the annual service charges was not required (Clacy [2015]).
  • There was a complex formula for apportioning service charge percentages in a development of 16 flats plus another 9 flats. L’s agents had used what now appeared to be an incorrect formula since as long ago as 2009 (but possibly 1993). It was held that estoppel applied – the apportionments were set out clearly each year, and none of the Ts had objected (Ojo [2016]).
  • The lease required service charge accounts to be certified, but that had not been done. There had been previous proceedings where this point had not been raised, and the situation had continued for at least 11 years. The FTT decided that there was an estoppel by convention, but that was overruled by the UT. Unlike in Ojo [2016], there was no clear evidence of a meeting between the parties at which it was agreed that different procedures would apply.
  • The lease did not provide for service charges to be collected in advance. Despite that, L’s agent had been doing so since 1996, without any complaint from Ts. It was held that there was no estoppel by convention (Jetha [2017]).

At the end of the day, it is impossible to reconcile these four decisions. Clearly, estoppel by convention is a line of last argument. What does seem clear is that a mere failure to object to a course of dealing will not, of itself, be sufficient to amount to estoppel. For a commentary on the cases see article in [2018] NLJ 2 February 13.

 

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