LB Southwark v Ms Bee A Smith [2012] UKUT 295 (LC)

In this case, HHJ Karen Walden Smith examined the detail and ambit of sections 125, 125A and paragraph 16B of Schedule 6. My own examination of their abundant knots and undulations will appear in the near future on my Pointer Pages, but the principles emerging from the decision can be summarised as follows:

1. A landlord’s section 125 notice does not guarantee that works or costs referred to in it will be carried out or incurred within a particular period;
2. A landlord is entitled to charge for unplanned repair work which is not itemised in the section 125 notice, but paragraph 16B of Schedule 6 limits the amount which can be recovered;
3. After the expiry of the statutory period, if the landlord carries out works, the statutory limitations on the tenant’s liability to pay for the works fall away, irrespective of whether the works are referred to in the section 125 notice;
4. “Straddling” costs over a period that falls within and outside the reference period is capable of being an acceptable method of dealing with the costs of works incurred both within and outside the statutory period;
5. On the particular facts of this case, the landlord was estopped by an estoppel by representation from recovering the service charge costs demanded.

Ms Smith was the assignee of a right to buy lease. The lease had been granted on 04 June 2001. Southwark’s section 125 notice provided that the total estimated service charge for repairs for the reference period was £1,580.21.

The lease was assigned to Ms Smith on 30 July 2004. In 2005 and 2006, Southwark consulted under section 20 of the Landlord and Tenant Act 1985 in respect of major works.

The LVT found that Ms Smith had been assured in August 2006 by one of Southwark’s employees that her liability for the costs of the works would be limited by the section 125 notice. In September 2006, Ms Smith was informed in writing that, with the benefit of the section 125 notice, the amount chargeable to her was £1,568.23.

The major works began on 26 February 2007. The reference period expired on 31 March 2007. The works were completed on 12 March 2008. The defects period expired on 12 March 2009.

Ms Smith’s invoice was sent out in July 2009. It totalled £4,758.87: of the 54 weeks of the contract, Ms Smith was charged at the section 125 rate for the 4.71 weeks which fell within the reference period, and at the full rate for the 49.29 weeks falling outside. She applied to the LVT.

The central issue for determination before the LVT was whether the method of determination used by Southwark for the apportionment of cost was valid in view of the terms of the section 125 notice.

Ms Smith, who was acting in person, argued that Southwark was bound by representations it had made that she would not be charged more than the amount set out in the section 125 notice.

The LVT found that:

• the effect of a section 125 notice was that, for a period of five years,
  • certain planned capital work could be carried out at limited cost to the tenant, and
  • unplanned work was not chargeable at all;
• Southwark’s tendering and consultation process was too protracted;
• Some months of delay were solely the result of Southwark’s own procedures, and
• While the formula used by Southwark in straddling cases was not unreasonable, the decision to apply the straddling formula had not been reasonable.

HHJ Walden Smith, having ploughed the misty furrows of the Housing Act, held that (1) was incorrect as a matter of law. She noted that the LVT had not taken issue with the method of apportioning costs which had straddled the reference period, and made the helpful points set out at the head of this post.

She then considered Ms Smith’s argument that she would not have bought the lease, had she not been informed that her liability for service charges was so limited.

On the evidence – and making it clear that her finding was “limited to the particular circumstances of this case” – she held that Southwark was estopped from claiming any costs exceeding the amounts set out in the section 125 notice.

The Tribunal’s decision on section 125 and its brethren is, to my mind, correct. I have to confess however to having some reservations about the estoppel aspect of the case.

Ewan McKendrick’s Contract Law (9^th ed., para. 5.23) has a short, handy section on estoppel by representation: “the basic principle is that a person who makes a representation of existing fact which induces the other party to act to its detriment in reliance upon the representation will not be permitted subsequently to act inconsistently with that representation”.

In her summary of the facts, HHJ Walden Smith said that she was satisfied that Ms Smith did seek assurances from Southwark “about the extent of the protection that she was to enjoy by reason of the section 125 notice if she were to purchase the premises”, and that she received those assurances.

At paragraph 42 of her decision however, HHJ Walden Smith also referred to the LVT’s finding that Ms Smith had been assured by Southwark’s Carla Blair in August 2006 that the section 125 notice protection was still in place and that “she would be covered”. The same paragraph also records the LVT’s acceptance of the “general thrust of Ms Smith’s submission that “she had made fairly strenuous efforts to discover what her costs were likely to be…”.”

Three points follow from this.

First, could anything that was said be properly described as a representation of existing fact?

Second, it must be important to a defence of estoppel by representation that the representation giving rise to the estoppel is clear and unambiguous. In this case however the substance of the pre-purchase assurances is not made clear. Did Southwark in fact say to Ms Smith that, no matter when the works subject of the section 125 notice were carried out, she would not have to pay more than was estimated in the notice?

Finally, the estoppel requires that the recipient of the representation relies on it. By the time Carla Blair made her representation in August 2006, Ms Smith had already bought her flat. I struggle to identify the reliance and detriment which she might pray in aid. If the Carla Blair conversation is not the source of the estoppel, I come back to my first point – what was said when Ms Smith was contemplating the purchase of her flat?