Anyone responsible for issuing service charge demands will be familiar with the importance of complying with the statutory requirements. One area that continues to generate unnecessary disputes, however, is compliance with Sections 47 and 48 of the Landlord and Tenant Act 1987.

These provisions are relatively straightforward but are frequently misunderstood, particularly where managing agents, resident management companies and Right to Manage (“RTM”) companies are involved.

The first question is not whether a demand contains the correct information. Instead, it is a simpler one:

Who is making the demand?

The answer to that question determines whether Sections 47 and 48 apply at all.

What do Sections 47 and 48 require?

Although often referred to together, Sections 47 and 48 impose two distinct obligations.

Section 47 – The landlord’s name and address

Section 47 requires a written demand for rent or service charges to contain:

• the landlord’s name; and
• the landlord’s address.

The purpose is straightforward. A leaseholder should know precisely who their landlord is and who is demanding payment.

For the purposes of the 1987 Act, the landlord is generally the immediate landlord under the lease and that is, the person or company entitled to the immediate reversion i.e. the freeholder or head lessor.

Section 48 – An address for service in England and Wales

Section 48 requires the landlord to provide an address in England and Wales at which notices (including legal proceedings) may be served.

This is particularly important where the landlord is based overseas. Even if the landlord’s registered office is outside England and Wales, an address within England and Wales must still be provided for the service of notices.

What happens if the requirements are not met?

A common misconception is that a defective demand is invalid. That is not the case.

Where Sections 47 and 48 apply, a failure to comply simply means that the service charge does not become payable until the required statutory information has been provided.

The defect can usually be remedied by subsequently supplying the missing information.

However, the consequences should not be underestimated. Until the charge becomes due, it may affect:

• entitlement to contractual interest;
• administration charges arising from late payment;
• the commencement of debt recovery proceedings; and
• any subsequent forfeiture action.

A relatively minor administrative omission can therefore have significant practical consequences.

Managing Agents

One of the most common mistakes is that the managing agent’s details are used and believed to be sufficient. They are not.

Where Sections 47 and 48 apply, the landlord must still be identified.

The Upper Tribunal confirmed this in Beitov Properties Ltd v Martin [2012] UKUT 133 (LC). The fact that a tenant knows who manages the building does not satisfy the statutory requirements.

Likewise, it is generally insufficient merely to identify:

• the managing agent;
• a director of the landlord company;
• a company secretary; or
• another representative.

The landlord itself must be clearly identified.

Where several entities existfor example, a freeholder, a management company, an RTM company and a managing agent it is essential that the demand makes it abundantly clear who the landlord is for the purposes of the lease.

Individual Landlords

The same principles apply where the landlord is an individual rather than a company.

The demand should clearly identify the individual landlord by name together with a compliant address in England and Wales for the service of notices.

Simply identifying the managing agent without properly identifying the landlord will not satisfy the statutory requirements.

As a matter of good practice, the address provided should be one at which notices intended for the landlord will be properly received and acted upon.

Resident Management Companies

The position is different where the lease requires service charges to be paid directly to a resident management company.

In Pendra Loweth Management Ltd v North [2015] UKUT 91 (LC), the Upper Tribunal held that Section 47 applies only where the demand relates to sums payable to the landlord.

Where the lease instead requires payment to be made directly to a resident management company in its own right, Sections 47 and 48 will generally not apply because the demand is not one made by or for the landlord.

This distinction is frequently overlooked.

Accordingly, before considering whether a demand complies with Sections 47 and 48, it is first necessary to consider what the lease actually says.

If the lease requires payment to the landlord, the statutory requirements apply.

If the lease requires payment directly to a resident management company, they generally do not.

That said, it remains good practice for a management company to clearly identify itself, its registered office and the capacity in which it is making the demand.

Right to Manage Companies

RTM companies occupy a different position.

Unlike resident management companies, an RTM company derives its authority from the Commonhold and Leasehold Reform Act 2002, not simply from the lease.

Importantly, Schedule 7 to the Commonhold and Leasehold Reform Act 2002 modifies Sections 46 to 48 of the Landlord and Tenant Act 1987 so that references to the landlord include an RTM company.

Accordingly, where an RTM company issues a service charge demand in the exercise of its statutory management functions, it should ensure that its demands comply with Sections 47 and 48.

In practical terms, an RTM company should ensure that its demands clearly state:

• the RTM company’s name;
• the RTM company’s address; and
• an address in England and Wales for the service of notices.

This is an important distinction from the position of a resident management company and one that is often misunderstood.

A practical compliance checklist

Before issuing any service charge demand, ask yourself:

• Who does the lease require payment to be made to?
• Is the demand being made by the landlord, a resident management company or an RTM company?
• If Sections 47 and 48 apply, have I correctly identified the landlord or RTM company?
• Have I included a compliant address in England and Wales for the service of notices?
• Where a managing agent is involved, have I made it clear in what capacity it is acting?

Spending a few minutes checking these points before issuing a demand can prevent avoidable disputes later.

Practical example

Where Sections 47 and 48 apply, a compliant demand might read:

“Landlord: Made up Estates Limited (Company No. 12345678)
Address for the purposes of Sections 47 and 48 of the Landlord and Tenant Act 1987:
1 High Street
London
SW1 1XX”

Where an RTM company is making the demand, the RTM company’s details should be substituted accordingly.

Our Practical Recommendation

Whilst the legal position will always depend upon the terms of the lease and the identity of the party entitled to demand payment, when advising clients we generally recommend adopting a more practical approach.

In our experience, there is little to be gained by providing only the minimum information required by statute where additional clarity can avoid unnecessary disputes. Accordingly, even where we are acting for a RMC or a RTM, we recommend that service charge demands clearly identify all relevant parties involved in the management of the building.

As a matter of best practice, this should include:

• the freehold landlord, together with its registered address;
• the Resident Management Company or RTM company, together with its registered address (where applicable); and
• the managing agent, identifying that it is acting purely as managing agent on behalf of the relevant entity.

By adopting this approach, leaseholders are left in no doubt as to the identity of the landlord, the management company (if any) and the organisation responsible for the day to day administration of the development.

We appreciate that some property management software and case management systems do not readily accommodate multiple parties on a single demand. Nevertheless, where possible, we encourage clients to provide this additional information.

Doing so removes unnecessary ambiguity and significantly reduces the scope for technical arguments being raised by leaseholders or the courts during recovery proceedings.

Example

“For the Purposes of Section 47 & 48 of the Landlord and Tenant Act 1987:

Freehold Landlord
Made Up Estates Limited
1 High Street
London
SW1 1XX

Right to Manage Company
Made Up RTM Company Limited
1 High Street
London
SW1 1XX

Resident Management Company (if applicable instead of, or in addition to, an RTM company)
Made Up  Management Company Limited
1 High Street
London
SW1 1XX

Managing Agent

Made Up Property Management Limited
1 High Street
London
SW1 1XX

(Acting as managing agent on behalf of the above.)”

Whilst this approach may go well beyond the minimum statutory requirements in some cases, we consider it to be the most transparent and pragmatic method of issuing service charge demands.

In our experience, providing comprehensive information at the outset is far preferable to having to deal with technical challenges once recovery proceedings have commenced.

Final thoughts

Sections 47 and 48 are often regarded as little more than administrative requirements. In reality, they play an important role in ensuring transparency between those responsible for managing residential buildings and the leaseholders who contribute towards their upkeep.

The key is to identify who is entitled to demand payment in the first place. Once that question has been answered, it becomes much easier to determine whether Sections 47 and 48 apply and what information must accompany the demand.

As with many aspects of leasehold management, a few moments spent checking the statutory requirements before issuing demands can save considerable time, expense and litigation later.

If you are unsure whether your service charge demands comply with the statutory requirements, or require advice on recovering service charge arrears, we would be delighted to assist.