In OM Property Management Ltd v Burr (2013), the Court of Appeal decided that costs were incurred for the purposes of section 20B of the Landlord and Tenant Act 1985 either

  • When the supplier presented their invoice; or
  • When the invoice was paid.

Costs were not incurred on the mere provision of services or supplies to a landlord or management company.

This definition is at odds with the accruals basis of accounting. The Institute of Chartered Accountants of England & Wales (ICAEW) best guidance on residential service charge accounts (TECH 03/11) advises that all leaseholders should receive an annual service charge statement prepared on the accruals basis unless the lease provides otherwise.

The difficulty is that the lease is not always clear and therefore it is important that the service charge accounts, including the section 21 written summary of relevant costs, state the basis on which the accounts have been prepared.

Take a look at our Residential Service Charge Accounts page for a range of other blogs on this topic – covering requirements around leases, certification and summary of relevant costs.


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