By a judgment dated 22nd September 2011 HHJ Dight sitting at Central London County Court in the case of “Church Commissioners for England v Koyale Enterprises Limited and one other” decided that a leaseholder can lose their flat due to arrears of service charges even though their liability to pay the charges has not been tested at a full hearing.
In March 2011 the Church Commissioners obtained a default judgment for unpaid service charges against a leaseholder and then issued possession proceedings. This claim was dismissed by the district judge but upheld on appeal by HHJ Dight who decided that a default judgment could be regarded as a “final determination” within the meaning of Section 81 of the Housing Act 1996.
Section 81 of the 1996 Act (as amended) states that before a forfeiture notice can be served there must be a “final determination” that the service charge is payable. The determination can be made by the Leasehold Valuation Tribunal, an arbitrator or a court. Alternatively the flat owner can admit the sum is payable.
Following the issue of proceedings in the county court for arrears the landlord can enter a default judgment when no response or defence is filed by the leaseholder.
When faced with a county court claim, leaseholders should ensure that they file a defence on time if they wish to challenge service charges and avoid possible possession proceedings.