A recent ruling in the Upper Tribunal (Lands Chamber) decided that a landlord of a residential estate could not lawfully use the service charge to recover the costs it paid to a tenant in settlement of a dispute, or for the legal charges associated with it. The Upper Tribunal stated that this was because the costs the landlord was seeking to recover were associated with its own breach of obligations under the terms of the lease (failing to make a repair quickly enough). Using the service charge to pay for the cost of the remedial work was not the issue in contention. The costs being recovered were not related to the management or administration of the building, but were costs incurred by the landlord to protect itself.
