The Upper Tribunal (Lands Chamber) held on 3 March 2026 that, under one long lease, a balancing charge at year end is not payable without audited accounts and a certificate signed by external auditors.
Key facts
- Who: Leaseholders and landlords or managers of the flats in the building concerned in this appeal, and anyone with a service charge dispute involving an audit requirement in a lease.
- From: 3 March 2026 (judgment date)
- Source: Milon Miah & Anor v Anchor Court Management (Ipswich) Limited [2026] UKUT 98 (LC)
Background
Anchor Court in Ipswich is a Victorian building converted into six flats. Milon Miah and Holly Ramsey are the leaseholders of Flat E, which they hold under a 999-year lease granted in 2015. They became the lessees in 2019. The freeholder, Anchor Court Management (Ipswich) Limited, is understood also to act as manager.
The lease requires leaseholders to pay an interim service charge in advance each year. If necessary, they then make a balancing payment at the end of the year once the freeholder has produced audited accounts.
The leaseholders applied to the First-tier Tribunal (Property Chamber) under section 27A of the Landlord and Tenant Act 1985 to decide which service charges and administration charges were payable. That tribunal limited its decision to the years ending 30 September 2021 onwards.
The question
The appeal, decided on written representations by Judge Elizabeth Cooke, raised a short point of construction of the lease: what does it require by "audit", and is an audit a precondition of paying a balancing charge under clause 3.11?
The decision
The Upper Tribunal held that the auditing of the accounts and the production of a certificate signed by the auditors, stating what is payable, is a precondition to the liability of any individual leaseholder to pay a balancing charge at the end of the service charge year.
The reasoning
The First-tier Tribunal appeared to have decided that the audit requirement could be met by something the landlord did itself, by reference to its own accounts. Judge Cooke said that "cannot be right". An audit is external scrutiny, and auditors are by nature external, not employees of the company or person concerned. They would usually be accountants and cannot be members of the landlord's staff.
Considerations of proportionality were "not to the point", because the original parties to the lease decided that an audit was required.
She also referred to Powell and Co Investments Limited v Aleksandrova [2021] UKUT 10 (LC), where a Chartered Accountant's certificate showing what the leaseholder owed was found to be a condition precedent to liability for the balancing charge.
The First-tier Tribunal had also found that the lease requires audited accounts and a certificate even where no balancing payment is demanded, and that finding was not cross-appealed. On that basis, the judge said for the avoidance of doubt that a failure to have the accounts audited could not affect the leaseholders' liability to pay the interim service charge. She explained that this liability is set out in clause 3.9 and does not depend on audited accounts or a certificate.
Effect in this case
The rest of the First-tier Tribunal's decision stands. It had accepted that in every year the amount paid on account was higher than the sums actually paid. No balancing exercise was required, so the audit point had no practical consequence for its decision.
What this means for leaseholders and landlords
- Check the wording of your own lease. This ruling construed the clauses of one lease.
- Under that lease, a balancing charge is not payable without audited accounts and a certificate signed by the auditors, who are external to the landlord.
- The judge observed that interim charges payable in advance under that lease do not depend on an audit.
- Any party has a right of appeal to the Court of Appeal on a point of law, but only with permission. An application must generally be received within one month of the decision being sent to the parties. If a costs application is made within 14 days, the one month runs from the costs decision. If you face a service charge dispute, get advice before a deadline passes.
Sources
- Milon Miah & Anor v Anchor Court Management (Ipswich) Limited [2026] UKUT 98 (LC), Upper Tribunal (Lands Chamber), 3 March 2026: https://caselaw.nationalarchives.gov.uk/ukut/lc/2026/98