But, s17 applies to any ‘fixed charge’, and that includes service charges. Accordingly, there is now enormous uncertainty as to whether or not the formalities (or farce, as some see it) of serving s17 notices also has to be done in the context of unascertained service charge figures. In particular, if a finalised service charge is treated in the same way as an uplift in rent following a rent review, then there is a danger that an s17 notice served within six months of the demand for the balance of the service charge will be too late. If so, then Ls would need to consider serving s17 notices as part of their quarterly arrears collection procedure.

The wording of the service charge provisions will obviously be fundamentally important. If payments are described as payments on account of the liability to pay the service charge expenditure then this can arguably distinguish them as being outside Raguz. But, there will be leases where the description of the service charge liability is such that the service charge becomes due on the quarter days. In that situation L would need to serve an s17 notice on a former T or guarantor within six months of the quarter day in order to maintain the ability to claim against it. The real answer is for L to serve s17 notices during the service year as a normal part of its quarterly arrears procedure. But, that does seem an absurd administrative burden, and one that will do nothing for the peace of mind of T, former Ts, or their guarantors. But, on a strict application of Raguz, it would seem inevitable.

As a note in the Property Law Journal points out, the safest course of action where T’s solvency is in question will be to serve s17 notices within six months of the dates for payments on account and balance on charges, at least until there is some judicial guidance in this area.

Those drafting leases may also want to look carefully at how they phrase service charge clauses, perhaps describing payments during the service charge year as payments on account, and specifying that the date when the balance on charges is demanded is the date when that charge becomes due. The whole situation seems an absurdity. However, it is not one that can be ignored. For an article on the service charge implications of Raguz see [2007] 188 Property Law Journal 2. © Practical Lawyer