A leaseholder has a 125 year lease for a flat but has allowed service arrears to build up. Unfortunately, the debt dates back many years. The landlord has approached the leaseholder for payment but they have said that the debt is over 6 years old so no legal action can be taken against them to recover the arrears. Is this correct? Has the landlord lost the opportunity to recover these arrears as a result of the passage of time?
The leaseholder is right that there are time limits within which legal action must be taken. If those time limits are missed then the opportunity to take legal action is lost. These time limits are imposed by the Limitation Act 1980. Under the Limitation Act 1980, legal action based on a contract must be brought within 6 years of the date when the cause of action arose. In this case that would be when the service charges should have been paid. It seems that this is the provision that the leaseholder is relying on.
However, the lease will have been executed as a deed. This means that it will be sealed and witnessed when completed. As a consequence of that, the timeframe the Limitation Act 1980 provides for the limitation period is 12 years. This is because a deed is a “specialty” for the purpose of the Limitation Act 1980 and a specialty has a limitation period of 12 years rather than 6 years. Therefore, so long as the arrears accrued within the last 12 years the landlord will be able to pursue legal action against the leaseholder.
Of course, the landlord should make sure that the sums due were demanded properly in accordance with the lease and that the demands were made within 18 months of the landlord incurring the costs. The lease will also need to provide that the Service Charges are not part of the rent. Assuming that is the case, the length of time the arrears have been outstanding will not prevent the landlord from taking legal action to pursue the arrears so long as they are no more than 12 years old.
For further information, please contact Neil Lawlor, Partner in the Housing Management Team.