www.newlawjournal.co.
uk | 2 February 2018
An estoppel case review
Brooke Lyne provides a master class in recent case law on
estoppel by convention in residential service charge disputes
IN BRIEF
ff Landlords need evidence of
communications that ‘cross the line’ rather
than relying on the mere failure to object to a
course of dealing.
ff The effect of binding successors in title will
be a matter that requires proper argument &
consideration in future cases.
T
here have been a number of decisions
in the Upper Tribunal (Lands
Chamber) in the last couple of years
where the doctrine of estoppel by
convention has been raised in the context of
residential service charge disputes. In these
cases, landlords have sought to raise estoppel
by convention to avoid the strict terms of a
lease. Readers will know that even minor
failures to comply with the requirements of a
lease can have disastrous consequences for a
landlord; including rendering service charges
irrecoverable altogether. Usually the variation
of the terms of a lease will only be effective if
done by deed, but estoppel by convention is
an equitable remedy that can be used to avoid
potential unfairness when there has not been
a formal variation.
Estoppel by convention involves parties
acting on the basis of a shared assumption
of facts or law. The estoppel precludes one
party from denying the assumed facts or
law if it would be inequitable for them to
do so. In Republic of India v India Steam
Ship Co [1998] AC 878 at [913-914], Lord
Steyn described the doctrine as follows: ‘[A]
n estoppel by convention may arise where
parties to a transaction act on an assumed
state of facts or law, the assumption being
either shared by them both or made by one
and acquiesced in by the other. The effect of
an estoppel by convention is to preclude a
party from denying the assumed facts or law
if it would be unjust to allow him to go back
on the assumption. It is not enough that each
of the two parties acts on an assumption not
property LEGAL UPDATE
© IStockphoto/yattaa
communicated to the other. But… a concluded
agreement is not a requirement.’
Clacy v Sanchez
Clacy v Sanchez [2015] UKUT 0387 concerned
a block of four flats held on long leases. The
issues to be determined by the Upper Tribunal
were:
ff(a) whether the certification of accounts
was a condition precedent of a valid
service charge demand; and
ff(b) whether an estoppel by convention
had arisen, which prevented the lessees
from denying their liability to pay service
charges even though the landlord had not
provided certified accounts.
In relation to the first matter, the tribunal
held that on a proper construction of the
lease, certification of accounts was not a pre-
condition of a valid service charge demand.
As to the second matter, an estoppel had
arisen because of a 19-year old agreement, at
a meeting where the former leaseholders had
decided that certification of the annual service
charge was not required. The Upper Tribunal
concluded that either an estoppel had
arisen through the course of conduct, which
precluded the leaseholders from asserting that
certification was required, or the leaseholders
(and their predecessors in title) had waived
the right to require or enforce certification of
the accounts.
Admiralty Park Management Co Ltd
v Ojo
Admiralty Park Management Co Ltd v Ojo
[2016] UKUT 421 concerned incorrect service
charge apportionment, an issue which was
first raised by the First Tier Tribunal (FTT).
The block contained 16 flats, which was on an
estate with nine other blocks that were owned
by the same landlord. The lease required
leaseholders to pay a percentage of service
charge for the maintenance and insurance of
13
the building and then a different percentage
contribution for the management areas of
the estate. It was clear that the landlord’s
managing agents had not apportioned the
service charges in accordance with the lease
since at least 2009, but possibly 1993 when
the leases were granted.
The tribunal was unable to determine
what the consequences of this failure had
been. Indeed, it was not clear whether the
leaseholder was better or worse off as a result
of the incorrect method of apportionment.
Nonetheless, the landlord contended that
the leaseholder had never objected to the
method of apportionment, even in previous
formal proceedings regarding disputed
service charges, and therefore an estoppel
had arisen. The Deputy President of the
Upper Tribunal, Martin Rodger QC, agreed.
The method of apportionment was clear
from the service charge statements and the
leaseholder had acquiesced in the (incorrect)
manner of calculation used over many years.
A ‘conventional mode of dealing’ existed
between the parties and it would have been
unfair to allow the leaseholder to resile from
that convention.
Bucklitsch v Merchant Exchange
Bucklitsch v Merchant Exchange [2016] UKUT
527, like Clacy, concerned the requirement
for accounts to be certified as a condition
precedent of valid service charges demands.
Again, the issue was first raised by the FTT.
Like Ojo, there had also been a previous
set of proceedings where the matter of the
certification of the accounts had not been
raised. No objection had been raised about the
certification of accounts by the leaseholder
during his 11 years of owning the property.
On this basis, the FTT concluded that an
estoppel by convention had arisen. The Upper
Tribunal overturned the decision on appeal.
HHJ Huskinson did not accept that the facts
were sufficient to give rise to an estoppel by
convention. The case could be contrasted with
Clacy where there had been clear evidence of
a meeting about how that property was to be
managed. The mere failure to object over a
prolonged period was not enough.
Jetha v Basildon
In this final case, Jetha v Basildon [2017]
UKUT 58 the Upper Tribunal considered
all three of the previous decisions I
have referred to and tried—with some
difficulty—to reconcile them. The case
concerned service charges that were
payable pursuant to a deed of covenant
entered into between the tenants and the
landlord. The deeds did not provide for
service charges to be collected in advance.
The only way service charges could have
been charged in advance was if there had
been a resolution agreed by a majority of
14 LEGAL UPDATE property 2 February 2018 | www.newlawjournal.co.uk

the leaseholders at the company’s annual
general meeting. The landlord argued that
they had been demanding service charges
in advance since a meeting that took place
in 1996 and the tenants had paid the service
charges without complaint until 2012 and
therefore an estoppel by convention had
arisen.
HHJ Behrens concluded that there was no
estoppel on the facts. He was not persuaded
that there was any common assumption at
all, rather it was possible that the parties
had both made different assumptions. The
tenants could not be considered responsible
for any common assumption because the
communications had not ‘crossed the line’.
Finally, there had been no real detriment
suffered by the management company
because the service charges could still be
recovered if a resolution was passed and
new demands were issued.
The judge distinguished the present case
from Clacy on the basis that there was no
express agreement. Rather less convincingly,
however, the judge said that Ojo could also
be distinguished because in that case the
management accounts made it clear to
the leaseholders that service charges had
been calculated on an incorrect basis. The
management accounts were communications
that had ‘crossed the line’.
Comment
There are several points to be taken from this
line of Upper Tribunal decisions. First, it is
clear that these cases do not fit well alongside
each other, despite His HHJ Behrens’ best
attempts to reconcile them in Jetha. In
particular, it is hard to distinguish Ojo from
Bucklischt and Jetha. All three cases had the
following features:
fflong periods of acquiescence by
leaseholders;
ffno actual agreement;
ffprevious sets of proceedings where the
issue of failing to follow the strict terms of
the lease had not been raised.
Nonetheless, there was only an estoppel in
Ojo.
Another astonishing aspect of these cases
is the failure to consider the assignment of
leases and the effect this has on whether
the incoming leaseholder is bound by an
assumption of his predecessor in title. Even in
Clacy, which is perhaps the strongest case in
terms of there being evidence of an agreement
between the leaseholders and the landlord,
there is no real consideration of the fact that
in the 19 years since the agreement, the leases
had been assigned on numerous occasions
and each incoming leaseholder had been
bound by an agreement to which they were
not a party. The effect of binding successors
in title will be a matter that requires proper
argument and consideration in future cases.
On a more general level, these cases
demonstrate the importance of landlords
and managing agents properly reading and
applying the strict terms of their leases.
Nonetheless, estoppel by convention is an
important tool that is often the last resort that
can save your client’s case.
Landlords looking to raise estoppel
by convention should consider precisely
what the assumption is that they say is
shared between the parties and how that
assumption was established. Further,
landlords should look for evidence
to support positive agreement or
communications that ‘cross the line’. It is
unlikely that mere failure to object to a
course of dealing will be enough. Finally,
detriment will not be assumed, so landlords
should look for evidence showing the loss
that has actually been suffered in reliance
upon an assumption. If the landlord would
suffer minimal loss by simply complying
with the terms of the lease and then
reissuing the demands, then this option is
worth serious consideration.  NLJ
Brooke Lyne, barrister, Arden Chambers
(www.ardenchambers.com).

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