First-tier Tribunal Adopts Points Based Method for Garden Rate Apportionment

OUTCOME: Allowed

1

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case references : LON/00BK/LLE/2021/0002 LON/00BK/LLE/2021/0003 LON/00BK/LSE/2021/0211 HMCTS Code :

V: CVPREMOTE

Property : [ADDRESS], London, W2 First Applicant : [redacted] : [COUNSEL] (Counsel) instructed by [COUNSEL] LLP Second Applicant/ Lead Applicant : [redacted] England Representative :

[COUNSEL] (Counsel) instructed by [COUNSEL] LLP

Interested Party : [NAME] : Interests represented by the Second Applicant [NAME] :

13/14 [APPELLANT]; 26/28 [COMPANY]; 44-46 [COMPANY]; [NAME] and [NAME] ([NAME]); 48-49 [COMPANY]; 21 [COMPANY] : [COUNSEL] [NAME] (instructed under the Direct Access Scheme)

2

Interested Parties :

The nine [NAME] of the [NAME] specified at page 22 of the Bundle of Documents

Passive Respondents : [redacted] [NAME] bundle; The six [NAME] at [ADDRESS] specified at page 21 of the Bundle. Type of [NAME] : Apportionment of Estate Charges and Service Charges Tribunal : Judge Robert Latham [NAME] and Venue of Hearing

: 18 and 19 January 2022 at 10 [ADDRESS] [POSTCODE]

Date of Decision

: 21 February 2022

DECISION

Covid-19 pandemic: description of hearing This has been a remote video hearing which has not been objected to by the parties. The form of remote hearing was V: CVPREMOTE. A face-to-face hearing was not held because it was not practicable and all issues could be determined in a remote hearing. The parties have provided a Bundle of Documents (954 pages) and a Bundle of Authorities (114 pages) to which reference is made in this decision. Decisions of the Tribunal (1) The Tribunal determines that the Points Based method proposed by the Active Respondent should be used to apportion [NAME] between the [NAME]. (2) The Tribunal further determines that this method of apportionment should be backdated to 1 January 2021, and that any estate/service charges payable for any period after this date should be apportioned in this manner.

3

The Applications

1. The Tribunal is required to determine three applications relating to the apportionment of the charges payable (“[NAME]”) in respect of [ADDRESS] (“[NAME]”) which is enjoyed by residents of [ADDRESS], London, W2 (“[NAME]”).

2. The Church Commissioners for England (“the Commissioners”) are the freehold owner of [ADDRESS] which is one of six garden squares within the Commissioners’ broader [ADDRESS]. [ADDRESS] contains a total of 28 properties all of which were originally held under leases. There are now 22 enfranchised properties and six properties that remain unenfranchised. Some of the enfranchised properties have in turn been sub-divided and leased as individual units. The enfranchised properties are governed by the terms of an Estate Management Scheme (“the EMS”) approved by the then Leasehold Valuation Tribunal (“LVT”) on 8 September 1998. The unenfranchised properties are governed by the terms of their leases. [NAME] is managed by [NAME], to which powers have been transferred by the Commissioners. [NAME] is an unincorporated body consisting of volunteer owners/occupiers at [ADDRESS], who are themselves elected by the owners/occupiers of the properties at [ADDRESS]. [NAME] has been in existence (in some form) for many years. The Commissioners have represented the interests of [NAME] in these proceedings.

3. The three applications are:

(i) LON/00BK/LLE/2021/0002: On 29 March 2021, [COMPANY] (“[NAME]”) applied for a determination of its liability to pay and the reasonableness of [NAME] management charge, namely [NAME], pursuant to section 159(6) of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”). [NAME] is currently required to pay 47.043% which it contends is no longer a fair proportion of the outgoings. It contends that its charge should rather be 28.712% based on gross external area. This should be apportioned on the basis of building footprint multiplied by the number of floors of each relevant building as outlined in the report of its expert [NAME] [NAME] [NAME] (“the GEA method”). [NAME] ask for this to be backdated to 1 January 2016, namely to the service charge demand made on 31 December 2015. [NAME] named the Commissioners as respondent and [NAME] as an interested party.

(ii) LON/00BK/LLE/2021/0003: On 11 June 2021, the Commissioners applied for a determination as to a fair and reasonable prospective apportionment of [NAME] pursuant to section 159(6) of the 2002 Act. Traditionally, [NAME] has been apportioned on the basis of rateable values. The Commissioners accept that [NAME] needs to be reviewed. They propose that it should be apportioned on the basis of “the Unit Charge method” devised by their expert,

4

[NAME] [NAME], so that each of the 116 contributing units pays 0.862%, with CHFC bearing 33.261% altogether. The Respondents to this [NAME] are the 22 Freeholders of the enfranchised properties. The Commissioners ask for any change to take effect from 1 January 2022, namely the start of the current service charge year.

(iii) LON/00BK/LSC/2021/0211: On 11 June 2021, the Commissioners applied concurrently for a determination as to a fair and reasonable prospective apportionment of [NAME] pursuant to section 27A of the Landlord and Tenant Act 1985 (“the 1985 Act”). The Respondents to this [NAME] are the six [NAME] of the properties at [ADDRESS] which have not been enfranchised. Again, the change should take effect from 1 January 2022.

4. On 25 June 2021, the Tribunal held a Case Management Hearing (“CMH”) at which Directions were given. Pursuant to these Directions, on 9 July, the Commissioners served the following on the Respondents: [redacted] Directions (at p.4) and (ii) Statements of Cases prepared by both [NAME] (p.79) and the Commissioners (p.86) setting out details of their proposed schemes.

5. On 4 August, [NAME] organised a meeting at which these options were discussed (at p.222). [NAME], the then [NAME] of [NAME], opened the meeting by stating that [NAME] was not legally represented in these proceedings and was neutral as to which means of apportionment was adopted. Its role had rather been to facilitate a speedy resolution. Questions were raised as to why an [NAME] to this Tribunal had been necessary and why this could not have been resolved within [NAME].

6. The Directions required the Respondents to complete a questionnaire specifying (i) whether they wished to take an active part in these proceedings; (ii) which scheme they preferred; (iii) whether they wished to propose any alternative scheme or any modification to the proposed schemes; and (iv) whether they considered that the variation should be backdated. The Commissioners received 20 Reply Forms (see p.239). 13 Responses stated that they did not wish to take an active part in these proceedings. 12 Responses supported the Unit Charge method proposed by the Commissioners. All the Responses (save for one where the relevant box was not completed) opposed the backdating of any variation. The responses to the questionnaire are at p.276-295.

7. On 13 August 2021 (at p.242), [NAME] [NAME], a director of 13/14 [COMPANY], proposed a third scheme, namely “the Points Based method” with points assigned to a property depending upon whether it is a House (+2) or a Flat (+1) and whether it has direct accesses onto [NAME] (+1) or not (+0).

8. The Points Based method is now supported by five further freeholders, namely (i) 26/28 [COMPANY]; (ii) 44-46 [COMPANY]; (iii) [NAME] and [NAME] (freeholders of 47

[ADDRESS]); (iv) 48-49 [COMPANY]; and (v) 21 [COMPANY]. We refer to the 5 freeholders who support the Points Based method as “the [NAME]”.

9. Fifteen of the freeholders and the six [NAME] have not participated in these proceedings. These are “the Passive Respondents”.

10. [NAME] of 44-46 [COMPANY] and one [NAME] of [ADDRESS] have applied to be interested parties (their names are listed at p.22). They all support the Points Based method and oppose any backdating.

11. 21 [COMPANY] is the freehold owner of the following properties: (i) [ADDRESS]; (ii) [ADDRESS] (now [ADDRESS]); and (iii) 20 & [ADDRESS]. The [NAME] of these three properties have access to [NAME] at [ADDRESS] and [NAME] at [ADDRESS]. It is accepted that 21 [COMPANY] is obliged to contribute to [NAME] rates for both gardens.

12. Over the subsequent weeks, a number of [NAME] have stated that they now prefer the Points Based method to the Unit Charge method proposed by the Commissioners (see p.296-304). On 12 September 2021, Dr [NAME], a Consultant Cardiologist & Electrophysiologist, wrote to the Tribunal in these terms:

“I have now been in contact with the Fair Points Model Representatives and have had an opportunity to further digest the options and the implications being put to the Tribunal. It was remarkable how little I had understood of the implications of either system proposed, both of which seem either unworkable or grossly unfair particularly to those in flats on the square without direct access to [NAME]. I wish to change my representation to support the proposal of the FPMR: i.e. a points based system that appears workable, fair and provides reasonable apportionment of the costs of [NAME] square. As such I will be participating in proceedings through this group rather than being an independent active participant. May I highlight that I am sure that some other residents may have not fully understood this model or implications of the other models proposed. It appears that some of the explanations provided were obscure to us non-experts and the importance of these legal proceedings not made clear to me certainly.”

13. Pursuant to the Directions, the parties have filed the material upon which they seek to rely:

(i) [NAME]: (a) Supplemental Statement of Case (at p.91-105); (b) Expert Report of [NAME] [NAME] (p.324-348); (c) Witness Statement of [NAME] [NAME] (p.305-319); and (d) a Reply (p.705).

6

(ii) The Commissioners: (a) Statement of Case (at p.106-116); (b) Expert Report of [NAME] [NAME] (p.349-675); and (c) Witness Statement of [NAME] [NAME] (p.320-323).

(iii) The [NAME]: (a) Summary Statement of Case (at p.233- 237); (b) Statement of Case (p.117-232). The Statement of Case has been prepared by [NAME] [NAME] who gave evidence on behalf of the [NAME].

14. Pursuant to the Directions, on 7 December, the experts met. [NAME] [NAME] represented the [NAME]. Their Statement of Agreed Facts and associated Appendices are at p.712-719. The following facts are apparent:

(i) [NAME] consists of 25 houses and 7 blocks. There are 91 flats in the blocks. [NAME] is a purpose-built block of 38 flats. 53 additional flats have been created from conversions within the original Victorian properties. The freeholds of five of the houses have been enfranchised by [COMPANY].

(ii) The 7 enfranchised blocks include [NAME] as part of their block service charge. This will therefore be apportioned to their 91 [NAME] in accordance with the terms of their leases. It seems that this tends to be apportioned on the basis of the GIA (gross internal area) of the individual flats.

(iii) Any lessee of a house or of a block has a right of access to [NAME]. They are also entitled to attend the Annual General Meeting of [NAME] and to be members of the Executive Committee which is responsible for the day-to-day management of [NAME].

(iv) [NAME] have appointed managing agents to manage [NAME], namely [NAME] and Asset Management (“[NAME]”) who previously traded under the name of [NAME] Management (“[NAME]”). They have played no part in these proceedings.

(v) [NAME] manages [NAME] on behalf of the Commissioners. They have played no part in these proceedings.

(vi) 13 of the houses have direct access onto [NAME]. None of the flats have such access. [NAME] [NAME] considers that direct access onto [NAME] is a significant benefit. [NAME] [NAME] or [NAME] [NAME] accept this.

(vii) The houses are significantly larger than the flats. [NAME] [NAME] accepts that he made a number of errors in his [NAME] at p.570. Most significantly, he had included details for “[ADDRESS]” as a house; this rather related to “Flat 3, 13-[ADDRESS]”. It is now accepted that the houses are substantially larger than the flats.

(viii) None of the houses have taken an active role in these proceedings.

7

(ix) There are three caretakers’ flats at [NAME], 26-[ADDRESS] and [ADDRESS]. The caretakers have no access to [NAME], and it is agreed that they should be excluded from the Unit Charge and the Points Based methods. These flats will be included in the GEA method, but the impact is modest.

(x) 50 Gloucester House does not currently have access to [NAME]. Any apportionment would need to be adjusted, were this house to be included.

The Hearing

15. [NAME] [COUNSEL] (Counsel) appeared on behalf of [NAME]. He was accompanied by [NAME] [NAME], from his Solicitors, [NAME] [COMPANY] (“[NAME]”). He adduced evidence from [NAME] [NAME] who is the lessee of 36 [NAME] and from his expert, [NAME] [NAME], [NAME].

16. [NAME] [NAME] has been on the [NAME] since 2011, initially as the [NAME] and, since August 2018, as the [NAME]. He states that throughout his period on the board, there has been disquiet about the disproportionate share of [NAME] borne by [NAME]. However, matters were only brought to a head in 2016, when the Commissioners proposed to reinstate the metal railings which had been removed during the Second World War at a cost in excess of £400k. The Commissioners have contributed £40k to the cost. At this time, the late [NAME] was the [NAME] of [NAME]. His primary concern was whether the railings were an improvement to which [NAME] should not be required to contribute. Apportionment seemed to be a secondary concern. [NAME] [NAME] conceded that [NAME] had not liaised with [NAME] before issuing its [NAME]. The Tribunal notes that two [NAME] [NAME] have been members of [NAME], namely [NAME] and [NAME] [NAME] [NAME] (the Treasurer). Neither were called to give evidence.

17. [NAME] [NAME] is a quantity surveyor, rather than a general practice surveyor. He has not given evidence to a court or tribunal on valuation matters, albeit that he has prepared reports. His first report is dated 24 June 2020 (at p.916). He notes that in the RICS Code of Measuring Practice (6th Edition) Gross Internal Area (“GIA”) is an appropriate means for the apportionment of service charges. However, this is not practical for [NAME] as there is no record of the [NAME] of the 25 houses and 91 flats and it would be disproportionate to measure these. He therefore proposes the GEA method based on Gross External Area (“the GEA method”). He proposes that this is computed by taking the footprint of each block and multiplying this by the number of floors. He notes that the [NAME] adopted this method at [ADDRESS]. However, [ADDRESS] is not uniform. [NAME] [NAME] and [NAME] [NAME] made a number of criticisms as to the manner in which [NAME] [NAME] had computed GEA. In his initial report, dated 24 June 2020, [NAME] [NAME] had suggested that [NAME] should pay 28.862% and 13/[ADDRESS] 6.216% (p.335). In his report dated 14

8

October 2021, he revised these apportionments to 28.712% for [NAME] and 5.497% for 13/[ADDRESS] (at p.344). After the experts met, agreement was reached of 27.946% for [NAME] and 6.282% for 13/[ADDRESS] (“GEA Plot” at p.719). However, [NAME] [NAME] and [NAME] [NAME] argue that this method adversely affects the traditional Victorian properties due to the “tapering effect” (see below). If adjustments are made for this, the apportionment would be 28.135% for [NAME] and 5.360% for 13/[ADDRESS] (“GEA Adjusted” at p.720). This demonstrates the lack of certainty in any system of apportionment based on GEA.

18. [NAME] [COUNSEL] (Counsel) appeared on behalf of the Commissioners. He was accompanied by Ms [NAME] from his Solicitors, [NAME] LLP (“CRS”). He adduced evidence from [NAME] [NAME] who is the lessee of [ADDRESS] and a member of [NAME], and from his expert, [NAME].

19. [NAME] [NAME] is a retired orthodontist. He lives at [ADDRESS] which is one of the town houses which were constructed in 1938 and which has direct access onto [NAME]. He bought the house in 1998. [NAME] [NAME] occupies the house with his son, daughter-in-law and grandchildren. He is a member of [COMPANY], the vehicle established to enfranchise the leasehold interest in Nos. 38 to [ADDRESS]. This is one of the Passive Respondents in these proceedings. [NAME] [NAME] has been involved with [NAME] since 1998. He has been both the Treasurer and the [NAME]. He currently directs the gardeners employed to manage [NAME]. [NAME] has no view on the preferred means of apportionment, but opposes any backdating. He stressed that he was giving evidence in a personal capacity. He stated that [NAME] had had misgivings about the railings project which was proposed by the Commissioners. The Commissioners had threatened to sell keys to [NAME] to other local residents if there was any financial shortfall in the railings project. He suggested that the same would apply were there to be any deficit arising from any decision to backdate the new apportionment.

20. [NAME] [NAME] is a general practice chartered surveyor with considerable experience in Leasehold Reform, rent reviews and service charge disputes. He was instructed by the Commissioners in response to [NAME]’s [NAME] to this tribunal. He has considered eight different apportionment methods, but his preferred methods are the three options which this tribunal is asked to consider. He prefers the Unit Charge method as in his opinion all residents are potentially able to derive the same benefit and use from [NAME] with the costs being split equally. He notes that the GEA method has been adopted at [ADDRESS]. However, he does not provide any evidence as to how this has worked in practice. He rejects the Points Based method as being arbitrary and not reflecting core RICS service charge provisions. He notes that the Grosvenor Estate has adopted a points based system at three of its garden squares, namely [ADDRESS], [ADDRESS] and [ADDRESS]. The points reflect whether it is a flat or a house and whether the house has

9

mews access. He does not explain the rationale for the difference between the flats and house (1:6 at [ADDRESS]; 1:5 at [ADDRESS]). However, this may reflect the number of floors, with each floor having been converted to self-contained flats. He initially rejected [NAME] [NAME] evidence that houses are substantially larger than the flats. However, when the experts met, he agreed that he had made a number of errors in his [NAME] at p.570. On the basis of his revised figures based on four houses and six flats, the average size of a house is 5,164 sq ft and a flat 1,482 sq ft (see 724-5).

21. [NAME] [COUNSEL] [NAME] (Counsel) appeared on behalf of the [NAME]. He is instructed under the Bar’s Direct Access Scheme. He was accompanied by [NAME] [NAME] who has authority to act on behalf of the [NAME]. He adduced evidence from [NAME] [NAME].

22. [NAME] [NAME] is a Financial Services Consultant and is the lessee of Flat 2, 13-[ADDRESS]. [NAME] [NAME] has extensive data analysis skills which he has demonstrated in his extensive report (at p. 117-232). He stated that he had spent some 100-200 hours in preparing this. He made a number of unfortunate references to the “manipulation” of data. The Tribunal is satisfied that both [NAME] [NAME] and [NAME] [NAME] have sought to assist the Tribunal, and are aware of their responsibilities as independent experts. The Points Based method which he advocates assigns points to a property depending upon whether it is a House (+2) or a Flat (+1) and whether it has direct accesses onto [NAME] (+1) or not (+0). He suggests that the points should be tripled should there be any commercial or embassy use of any property. The Tribunal does not consider it necessary to consider any such additional refinement. These properties have been let for residential occupation. If there is any change of use, this is a matter for [NAME]. The Tribunal is satisfied that a supplement would be justified for any commercial user if this was reflected by greater use of [NAME]. This is a matter for the discretion of [NAME], as are such matters as to whether residents can erect marquees in [NAME] for weddings or use [NAME] for social functions.

23. All Counsel provided Skeleton Arguments. They also agreed a List of Essential Reading, a Timetable and a marked Bundle of Authorities. [NAME] [NAME] took the lead on this. We are grateful for the assistance provided by all Counsel.

Issues in Dispute

24. All Counsel agree that all [NAME] (whether the 22 freeholders or the 6 [NAME]) are required to pay a reasonable and fair proportion towards the costs of maintaining [NAME] and that this Tribunal has jurisdiction to determine this proportion. Further, there should be a common means of apportionment for both freeholders and [NAME]. All Counsel agree that the current means of apportionment needs to be adjusted having regard to the change of circumstances since the current

10

Garden Rate was fixed. The current system of apportionment based on individual rateable values was in use prior to 1964, and the apportionment amended when [NAME] was constructed. There was no evidence that the rateable Values used in 1964 were those in the 1963 Valuation List. There were revaluations in later years, but no evidence was adduced to indicate that the apportionment was amended as and when houses were converted into flats or following the later revaluations. In 1990, rates were replaced by the council charge.

25. The first issue for the Tribunal to determine is how [NAME] should be apportioned between the houses and the flats. Three schemes are proposed for the future apportionment of [NAME]:

(a) The Unit Charge method proposed by the Commissioners;

(b) The GEA method proposed by [NAME]; and

(c) The Points Based method proposed by [NAME] [NAME] and the [NAME].

26. The second issue is the date from which the new system of apportionment should apply:

(a) [NAME] asks the Tribunal to back-date any variation to 1 January 2015.

(b) The Commissioners and the [NAME] are proposing that any variation should take effect from 1 January 2022.

27. [NAME] was not separately represented in these proceedings. The Commissioners have represented their interests. Under the six leases, [NAME] is responsible for the management of [NAME]. In about September 1999, the Commissioners transferred its responsibility under the EMS in respect of [NAME] to [NAME]. The Tribunal notes that [NAME] dispute the inferences that should be drawn from the unsigned letter dated 9 September 2019 which the Commissioners produced at the hearing. The Commissioners and their managing agent, [NAME], took the initiative to reinstate the railings in place of the old chain link fencing. The Tribunal was told that the Commissioners did this as agents for [NAME]. The cost of the railings has been passed on to the [NAME] through [NAME]. The Tribunal has not been asked to determine any issue in respect of the payability or reasonableness in respect of the sums charged in respect of the railings.

28. [NAME] is not a legal entity and no step has been taken to identify the members who would bear the legal responsibility for its actions. [NAME] has declined to express any view on the manner in which [NAME] is apportioned, albeit that it is the body to review and determine [NAME]. The Tribunal was not impressed by [NAME] [NAME] comment that he was a mere volunteer on [NAME]

11

Committee who focused on the management of [NAME] staff. The members of the Executive Committee are all [NAME] in respect of the management and finances of [NAME]. The legal liability of members of [NAME] is not a matter which this Tribunal is required to determine.

[NAME], the Leases and [NAME] Management Scheme

29. [NAME] dates back to the 1830s. However, between 1928 and 1940, a number of houses on [NAME] were redeveloped, having neared or reached the end of their original leases. Other buildings have been combined and converted to create flats.

30. In 1938, 18 town houses were constructed at either end of [NAME] and are now Nos. 1-9 and 31-[ADDRESS]. The architect was [NAME].[NAME] who was renowned for designs that maximised the views of gardens. Thirteen of the houses have direct access on [NAME]. These are the most desirable (and valuable) properties on [NAME]. The Tribunal was provided with the sales particulars for [ADDRESS] which recently sold for £10.05m (at p.726). The freehold interest has been enfranchised. The house has been newly refurbished with a patio which leads directly onto [NAME]. The GIS is over 5,500 sq ft, which seems to be slightly larger than the average house on [NAME]. It has five bedrooms over six floors with a lift. A basement has been added with a gym, sauna and wet room.

31. Six of these houses remain unenfranchised and are governed by the terms of their leases. The leases held by the [NAME] are in one of two forms:

(i) “Form 1” (being the form of the leases for [ADDRESS] - a term of 93.75 years from 24 June 1938 at p.796-811; [ADDRESS] - a term of 86 years from 25 March 1946 at p.814-836; [ADDRESS] - a term of 85.5 years from 29 September 1946 at p.840-862; [ADDRESS] - a term of 96.5 years from 24 June 1938 at p. 865-882; and [ADDRESS] - a term of 85.5 years from 29 September 1946 at p.885-892); and

(ii) “Form 2” (being the form of the lease for [ADDRESS] - a term of 90.5 years from 29 September 1969 at p.894-911).

32. [NAME] was constructed between 1962 and 1964 on what was previously Nos.15-[ADDRESS]. It is a luxury block on nine floors with a caretaker’s flat, 24-hour porterage and two lifts. There are 38 flats. [NAME] [NAME] [NAME] (at p.570) gives the [NAME] for three of the flats: Flat 12A: 2,309; Flat 10: 1,024, and Flat 30: 1,110 sq ft. They are thus substantially smaller than the houses. It is necessary to cross a road in order to access [NAME].

33. Nos.13 and [ADDRESS] are original Victorian six storey properties which have been combined to create eight flats. In September 2020, a fifth floor was added (see p.185-189). Any such addition would

12

affect the apportionment under any of the three schemes. [NAME] [NAME] has included Flat 3 in his [NAME] at p.570, the size of which is 1,267 sq ft. These flats have no direct access onto [NAME].

34. All the enfranchised properties are governed by the terms of the EMS (p.769-792) which was approved by an LVT (p.760-768) on 8 September 1998. All Counsel are agreed that:

(i) [NAME] (whether the 22 freeholders or the 6 [NAME]) are required to pay a reasonable and fair proportion towards the costs of maintaining [NAME];

(ii) This Tribunal has jurisdiction to determine this proportion (see [COMPANY] v Wild [2014] UKUT 163 (LC) and [NAME] v [NAME] [COMPANY] [2014] UKUT 561 (LC); [2015] L. &. T.R. 19;

(iii) There should be a common means of apportionment for both freeholders and [NAME]; and

(iv) Any of the three schemes which the Tribunal is asked to consider would provide a lawful means of apportionment.

It is therefore unnecessary to consider the details of either the leases or the EMS which [NAME] [NAME] analyses at Section 6 of his report (at p.358-363).

The Background

35. The starting point of the current dispute is a letter dated 19 April 2016 (at p.315) sent by [NAME], [NAME] of [NAME], to the Commissioners. The [NAME] was concerned about the Commissioner’s proposal to reinstate the metal railings around [NAME] at a cost of some £400k. The Board, having taken legal advice, considered these to be “improvements” which would fall outside the scope of the EMS. Were the Commissioners to proceed with the proposal, [NAME] would consider a legal challenge, whether by arbitration or an [NAME] to this tribunal. Sir [NAME] added that [NAME] reserved their right to challenge the percentage of the costs that it would be required to pay.

36. This is the first time that [NAME] had challenged the percentage which it was required to contribute to [NAME]. [NAME] had been paying 47.043% for many years. This figure is specified in a Schedule, dated December 2011 (at p.346). It seems that it was the proportion payable in 1998 when the EMS was approved, and probably in 1964 when [NAME] was completed. The Tribunal was told that this percentage had been based on rateable values. However, if so, it would seem unduly high compared to the other properties. The Tribunal suspects that the error may have arisen in that [NAME]’s contribution was based on the 1963 Rates Revaluation whereas no adjustment was made for the other properties. In 2011, [NAME] expenditure was some £55k and [NAME] does not seem to have objected to their annual bill of some £26k.

13

37. The Tribunal has not been provided with copies of the subsequent correspondence. The next item of correspondence to which the Tribunal was referred was an email, dated 14 October 2017 (at p.317) sent by [NAME] [NAME], the then [NAME] of [NAME], to [NAME], the Treasurer. It was copied to the other members of [NAME], namely [NAME] [NAME] (the Secretary), [NAME] [NAME], [NAME] [NAME], and [NAME]. The header read: “Re: Railings/Church – [ADDRESS]”. The email read:

“No point in moving forward if [NAME] are opposed and I am not prepared to go down the path of changing the allocations. We agreed at the AGM that you and [NAME] should have a meeting with [NAME]/[NAME] to try and find a way forward. I am not going to waste my time unless they are on board in principle”.

38. On 15 October 2017, [NAME] forwarded a copy of the email to Sir [NAME]. [NAME] and [NAME] [NAME] were [NAME] at [NAME]. The Tribunal has not been provided with a copy of the Minutes of the AGM of the [NAME]. It would have been open to any [NAME] (or indeed any of the [NAME] who are treated as members of the unincorporated association) to propose that the method of allocation should be reviewed.

39. On 18 January 2018 (at p.914), [NAME] invoiced [NAME] £33,177 for their 47.043% share of [NAME] expenditure of £70,524 which was budgeted for 2018. The charge was payable on 1 January 2018. The budget did not include any expenditure in respect of the railings. [NAME] paid the sum demanded.

40. On 12 December 2018, [NAME], on behalf of the Commissioners, served a Stage 1 Notice of Intention in respect of their proposal to reinstate the railings. On 10 June 2019, [NAME] served the Stage 2 Notice of Estimates, having obtained two estimates in the sums of £464k and £551k. We were told that the Commissioners were acting as agents for [NAME]. The Tribunal has not been provided with copies of the consultation documentation. The proposal to reinstate the railings was not merely aesthetic. We were told that there had been problems of prostitution, drug taking and rough sleeping as the chain fencing around [NAME] was not secure.

41. On 19 July 2019 (at p.920), [NAME] [NAME] ([NAME]’s Solicitors) wrote to CRS (the Commissioners’ Solicitors). They had previously been in communication with [NAME]. They repeated the proposed railings were “improvements”. However, [NAME] might be willing to pay if (i) there is a repayment plan; and (ii) the apportionment is modified. They stated that [NAME] is currently liable for a “disproportionately large part of the works at 47.043%”. They could not see “any ordinary basis for calculation could justify this percentage”. They proposed discussions about “a more appropriate means of distributing the liability for the maintenance of [NAME] and the associated costs”.

14

42. On 7 August 2019 (at p.922), CRS responded. Addressing the issue of apportionment. They stated:

“Any suggestion of varying the percentage of those contributing via [NAME] Management Scheme (if this is what is suggested) is not something our client can consider”.

43. Thereafter, [NAME] paved their way for their [NAME] to this Tribunal:

(i) On 28 January 2020 (at p.935), [NAME] [NAME] wrote to [NAME] requesting details of the current method of apportionment.

(ii) On 2 March 2020 (at p.924), CRS provided a spread sheet of the current percentages. They stated: “we understand that the apportionment attributable to [NAME] has been applied since as long ago as 1964 and [NAME] has been demanded and paid for by the residents for a period of nearly 50 years”.

(iii) On 24 June 2020 (at p.916), [NAME] obtained a report from [NAME] [NAME]. He noted that [ADDRESS] had adopted an apportionment based on building footprint x number of floors. He suggested that a similar model be adopted for [ADDRESS].

(iv) On 13 July 2020 (p.928), [NAME] [NAME] served [NAME] [NAME] report on CRS. They pointed out that any method of apportionment should be regularly reviewed. Given that it was no longer practical to use rateable values as the means of apportionment, the Commissioners were asked to adopt the [NAME] apportionment method. If the Commissioners were unwilling to recalculate the method of apportionment, [NAME] would need to apply to this tribunal to determine what should be a fair proportion for the relevant Estate Charge year.

(v) On 31 July 2020 (p.937), [NAME] settled in full a demand of £14,936, dated 7 July 2020. This was the first of 16 quarterly demands issued by [NAME] in respect of the railings.

(vi) On 13 August 2020 (p.932), CRS responded to [NAME] [NAME]. They stated that the Commissioners were acting as agent for [NAME] in respect of the railings project only. All powers in respect of [NAME], including the apportionment of [NAME], had been delegated by the Commissioners to [NAME]. [NAME] would need to take this up with [NAME].

(vii) On 31 October 2020, Knight Frank issued the second quarterly demand of £14,936 for the railings.

15

(viii) On 23 December 2020 (p.937), [NAME] wrote to [NAME] stating that [NAME] were only willing to pay 27.415% of the sum demanded, representing [NAME] [NAME] assessment of a reasonable charge. They further sought a refund of £6,232 in respect of the sum paid in July.

(ix) On 8 January 2021 (at p.933), CRS wrote to [NAME] [NAME] in response to the letter sent to [NAME]. They pointed out that under the EMS, [NAME] had covenanted to pay “a fair proportion from time to time determined by [NAME] Owner or Surveyor … such proportion (if in dispute) to be determined by the Surveyor”. It was therefore not open to [NAME] to unilaterally determine its contribution. If [NAME] intended to pay this proportion, it would need to make an [NAME] to this tribunal. The Commissioners were not willing to reimburse any alleged overpayment.

(x) On 9 February 2021 (at p.953), [NAME] sent a draft budget for 2021 in the sum of £66,826. This did not include any charge in respect of the railings.

(xi) On 29 March 2021 (p.23), [NAME] issued their current [NAME] to this Tribunal. The Commissioners are named as the respondent; [NAME] as an interested party. [NAME] ask this tribunal to determine the “fair proportion” of [NAME] which it is required to pay. [NAME] do not challenge their liability to contribute towards the cost of the railings.

Issue 1: Apportionment of [NAME]

44. The Tribunal is required to determine how [NAME] should be apportioned between the houses and the flats. Three schemes are proposed:

(a) The Unit Charge method proposed by the Commissioners;

(b) The GEA method proposed by [NAME]; and

(c) The Points Based method proposed by [NAME] and the [NAME].

45. Before considering the method of apportionment, it is constructive to consider how each will impact upon the different properties within [NAME]. No. [ADDRESS] is a house with no direct access onto [NAME].

[NAME]: Methods of Apportionment

Current Scheme (p.573) GEA (Plot) (p.719) GEA (Adjusted) (p.720) Unit Charge (p.715) Points

(p.716)

1 Gloucester 1.123% 1.552% 1.620% 0.862% 1.299%

16

Square [ADDRESS] 1.004 1.910 1.798 o.862 1.961 13-[ADDRESS] 5.638 6.282 5.260 7.759 5.844 [NAME] (Nos. 15-25) 47.043 27.496 28.135 32.759 24.675

46. It is to be noted that under all the three methods, [NAME] will pay less. Indeed, they would pay least under the Points Based method (a 48% reduction). Whilst the current system is said to be based on rateable values, [NAME]’s contribution would seem to be unduly high compared with the other properties. This error would not have been identified, but for the Commissioners’ decision to restore the railings, the cost of which caused [NAME] to question their historic apportionment.

47. All Counsel are agreed that our starting point should be the RICS Code of Practice – Service Charge Residential Management Code and Additional Advice to Landlords, [NAME] and Agents and highlight the following passage in the Foreword (at p.411) (emphasis added):

“Depending on the terms of the lease, the basis and method of apportionment, where possible, should be demonstrably fair and reasonable to ensure that individual occupiers bear an appropriate proportion of the total service charge expenditure that reflects the availability, benefit and use of services.”

48. In considering the three options, the Tribunal also considers the following factors to be relevant:

(i) Simplicity of operation: All Counsel agree that it is not proportionate to obtain the [NAME] for all the flats and houses on [NAME]. It is for this reason that [NAME] [NAME] relies on GEAs.

(ii) Transparency: The method of apportionment and the manner in which it is implemented should be understood by the [NAME]. This should avoid future challenges.

(iii) Ease of amending the apportionments in the light of changing circumstances: It is accepted that any method of apportionment needs to be kept under review. The more complex the method of apportionment, the greater the difficulty in refining the apportionment if extra flats or additional floors are added.

49. The Tribunal is satisfied that the Points Based method best meets these criteria. It now seems that this is the preferred method of a majority of the [NAME].

Direct Access onto [NAME]

17

50. The Points Based method is the only one which adds a premium if a property has direct access onto [NAME]. Both the Unit Charge and the GEA methods could be adapted to take this into account, but neither [NAME] [NAME] or [NAME] [NAME] were willing to indicate what weighting should be given to this. [NAME] [NAME] is a quantity surveyor and this may have been outside his expertise. [NAME] [NAME] rather sought to suggest that direct access to [NAME] adds value to the capital value and that it would be wrong to double count this by an addition to the service charge. We disagree. A purchaser is willing to pay more for a house with direct access to [NAME] because its location is more desirable. This reflects the “availability, benefit and use” of [NAME], attributes which should also be reflected in the service charge. We consider this to be a very substantial benefit. The houses have patios which lead directly onto [NAME]. They are likely to make more use of it with their families and friends. A property which is directly adjacent to a garden, is more desirable than one which is adjacent to the road. It is much safer for [NAME]. The Points Based method gives a 50% uplift. We accept that this is appropriate.

The GEA Method

51. [NAME] argue that their GEA method is the fairest and reflects professional guidance. The RICS Code of Measuring Practice (6th edition) advises surveyors to use gross internal floor area or net internal floor area. This is impractical in the case of [ADDRESS]. [NAME] [NAME] selects the GEA method as the ‘pragmatic alternative’. The GEA best matches the need to reflect the availability, benefit and use of [NAME]. This is the only option that calculates apportionment with any reference to floor area (or its equivalent) and therefore to the potential use that the Owner or occupier of any accommodation unit might make of [NAME]. The GEA is a practical solution which has been refined to reflect the current situation. It can be adapted to reflect any future changes, as any external extension must be notified to the Commissioners as it will require planning consent. The GEA method is consistent with that adopted on the [ADDRESS] estate. This demonstrates that the method is practicable and presents no insuperable difficulties in calculation or management. The leases speak of, for instance, proportions based on relative frontages, so that GEA therefore marries well with that principle in the leases. It is also arguable that this method is closest to the original apportionment based on rateable values.

52. The major disadvantage of the GEA method is its complexity. [NAME] [NAME] and [NAME] [NAME] argue that this makes the model wholly impractical. [NAME] [NAME] original formulation was to take the building footprint multiplied by the number of floors (“GEA Plot”). However, the storey height at the front of the buildings (used as the indicator of number of floors) does not necessarily reflect storey height at the rear. Further, the “footprint” has been taken from the Ordnance Survey map which has been shown to be inaccurate. It is also assessed at ground floor level, and would not reflect any basement extension which may be larger. Further, it will be difficult to ascertain from external inspection alone if roof spaces have been converted/are habitable. The proposed method (unless amended)

18

does not address the effect upon size of tapering in some of the older properties at the Square. This method therefore favours a modern block such as [NAME] which is uniform and makes maximum use of the available space.

53. [NAME] has proposed an alternative methodology (“GEA Adjusted”) to address this (at p.720), this merely adds to the complexity of the scheme. Further GEA is not an accurate indicator of the GIA of the houses/flats as it includes (i) both internal and external walls; (ii) communal areas with the flats and (iii) any caretaker’s flat. The Tribunal suggested that this was a “tapestry” to which ever more refinements could be added. If a roof terrace is added, should this be taken into account? If so, why not balconies? If not, what is the rationale for including a basement with a swimming pool, gym and sauna? [NAME] [NAME] explored the extensive refinements which could be made in his extensive report.

54. [NAME] [NAME] further argues that this method is unfair. Take the example of a five storey house. Were it to be converted into five self-contained flats, there would be no increase in the GEA of the property. However, there would be four additional households enjoying [NAME].

55. As a result of the difficulty of obtaining the necessary measurements, it would fall at the further hurdles of transparency and ease of adjustment. It was argued that there is always scope for dispute as to what should, or should not, be included in computing GEA, albeit that the RICS provide Chartered Surveyors with detailed guidance on what should be included. Further, the apportionment would need to be adjusted whenever there is any change to the GEA of any property. Many of these changes, such as the size of a basement or a roof top addition would not be apparent from a visual inspection.

The Unit Charge Method

56. At the opposite end of the spectrum, the Unit Charge method has the great merit of simplicity. [NAME] [NAME] refers to the core principles set out in the RICS Service Charge Residential Management Code (3rd edition) and argues that this represents best practice. This requires that individual payers, where possible, should bear an appropriate proportion of the total expenditure that reflects the availability, benefit and use of services. The Unit Charge method fairly reflects this: it is based upon the premise that each unit has the potential to derive the same (unlimited) benefit and use from [NAME] (with each [NAME] paying a percentage that corresponds to the number of units within its property). The Unit Charge method provides a straightforward apportionment methodology, which is simple to understand and implement; especially for a volunteer committee like [NAME]. The scheme is also easy to amend/update should any other properties subsequently be granted the right of access/use of [NAME]

57. [NAME] [NAME] and [NAME] [NAME] argue that the Unit Charge method is unfair and wholly inappropriate for a development such as [ADDRESS]

19

because the buildings are of such different ages and construction. The properties that have access to [NAME] are not uniform, or even roughly approximate, in size. It is inequitable for the lessee of a flat to pay the same sum as the owner of a house when the 25 houses are on average some 108% larger than the flats (the average adjusted GEA for houses is 481 sq m, compared with 231 sq m for the flats – see Figure 4-2 at p.751). The larger the property, the greater the number of people who will benefit from and use [NAME]. They note that it is the houses which benefit from this scheme and pay less than under the current scheme.

58. [NAME] [NAME] argues that the fact that some properties have direct access and that some do not voids the foundational assumption of this scheme. Should an adjustment need to be made for this, the Unit Charge method becomes a Points Based method.

59. Both Counsel argue that this method departs from the RICS Codes and assumes that all [NAME] have the potential to derive the same benefit and use from [NAME]. Manifestly, they do not.

The Points Based Method

60. The Points Based method is a compromise between these two extremes. [NAME] [NAME] argues that this method is simple and avoids the complexities of the GEA method. It is also more equitable in that it addresses the two main shortcomings of the Unit Charge method: (i) the fact that houses are substantially larger than the flats and (ii) the houses with direct access to [NAME] benefit more and have greater use of [NAME]. He notes that this method has widespread support from [NAME]. No [NAME] outside [NAME] supports the GEA method. A number of those who had supported the Unit Charge method, now consider this method to be fairer. This method is also adaptable to future changes. It is easy to monitor the number of flats and houses on [NAME] and identify those which have direct access to [NAME].

61. [NAME] [NAME] and [NAME] [NAME] argue that the Points Based method is subjective and arbitrary. [NAME] [NAME] argues that different weightings between flats and houses have been adopted at [ADDRESS] and [ADDRESS] (see [20] above). However, he has not investigated the reason for this, which may merely reflect how many floors the houses have.

62. [NAME] [NAME] argues that other factors could be included in the assessment of points, such as (i) the number of windows facing [NAME]; (ii) obstructed and unobstructed view; and/or (iii) the number of metres from the gate into [NAME]. The Tribunal is not impressed by this argument. The more factors which are taken into account, the more complex a Points Based method becomes. [NAME] [NAME] considered a points system as one of his three preferred methods of apportionment in his original report, he has not sought to suggest how he would construct such a scheme.

63. The Tribunal is satisfied that the Points Based method is premised on two highly relevant factors:

20

(i) The houses are substantially larger than the flats, on average they are 108% larger (see [57] above). The larger the property, the greater the number of people who are likely to benefit from and use [NAME]. Two points are therefore allocated to a house and one to a flat. Whilst the flats in a block may vary in size, this will be reflected in the manner in which the block passes down the charge to its [NAME]. The Tribunal understands that this is based on the [NAME] of the flats within the block. Thus, [COMPANY] will pass its charge on to its 38 [NAME] and 13/14 [COMPANY] will pass it on to its 9 [NAME]. At [129] of his report, [NAME] [NAME] sought to challenge [NAME] [NAME] assessment of the respective size of the houses and flats. When the experts met, he agreed that his [NAME] (at p.570) was wrong.

(ii) A house with direct access onto [NAME] is likely to benefit more and make greater use of [NAME] than a house/flat with no such access. Three points will be allocated to a house with such access, rather than 2 to a house with no such access. We reject [NAME] [NAME] opinion that this should solely be reflected in the capital value of the house, rather than in the service charge that should be payable.

64. The Tribunal recognises that the Points Based method will increase the proportion of the service charge borne by the houses. On the other hand, [NAME] will face a 48% reduction. This reflects the fact that historically it has been overcharged. 13-[ADDRESS] will face a 4% increase, whilst it would pay less under the GEA (Adjusted Scheme). These [NAME] accept that this method is fair. No. [ADDRESS] (a house with no direct access) will face a 16% increase, whilst No.6 (a house with direct access) will face a 96% increase. The Tribunal is satisfied that this reflects both the greater benefit that these properties derive from [NAME] and the greater use that they make of it.

Issue 2: Backdating

65. The Tribunal is required to determine the date from which the new system of apportionment should apply:

66. [NAME] [NAME] argues that there is no bar to the Tribunal’s jurisdiction to backdate the variation under either the 1985 or the 2002 Acts. The [NAME] is for the reasonableness and payability of the service/estate charge and not a claim to recover these charges or for restitution (see [NAME] v Islington LBC [2015] UKUT 542(LC); [2016] L&TR 181, per HHJ Nigel Gerald at [34]). He also argues that [NAME] is in manifest breach of its duty to periodically review the fairness of the apportionment.

21

This is not a once-and-for-all-time exercise (see [NAME] v [NAME] (1980) 254 EG 871). Dillon J was considering apportionment based on rateable values in a building where there had been additions and subdivisions and the addition of a penthouse flat. However, [NAME] [NAME] restricted his claim to 1 January 2015, namely the six year limitation period.

67. [NAME] [NAME] and [NAME] [NAME] argue that this position is wholly impractical. Any apportionment determined by the Tribunal only reflects the current situation. For example, in 2020, there was one less flat on [NAME] (see p.716). Further, if there was any over or underpayment, this would be a liability between the membership of [NAME] and the [NAME] at the time of the under/over payment. Section 20B of the 1985 Act may prevent [NAME] from recovering any underpayment of service charges from a [NAME] after 18 months. This may also impact on any enfranchised freeholder seeking to recover an underpayment of a service charge from a lessee of a flat. [NAME] [NAME] suggests that confronted by these difficulties, the Executive Committee of [NAME] would resign. It has been suggested that the Commissioners might seek to meet any shortfall by selling keys to [NAME] to other local residents. [NAME] [NAME] suggested that any adjustment could be achieved by credits and debits to future bills. The Tribunal does not accept that this is how any backdating would work (see [COMPANY] ([COMPANY]) [COMPANY] v McKenzie [2018] UKUT 371 (LC)). It would rather be necessary to reopen the accounts for each relevant year.

68. In the closing submissions, [NAME] [NAME] took the lead in opposing any backdating, his submissions being adopted by [NAME] [NAME]. [NAME] [NAME] noted that only one [NAME], [NAME], supported backdating. In 2016, [NAME] had only raised its concerns about apportionment obliquely, when it had complained about the cost of the railings.

69. [NAME] [NAME] argues that [NAME] is estopped from contending that the apportionment should be backdated, relying on estoppel by convention. He relies on Republic of India v [NAME] Co [COMPANY] [1998] AC 878 and the speech of Lord [NAME] at 913E:

“It is settled that an estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared by them both or made by one and acquiesced in by the other. The effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption… It is not enough that each of the two parties acts on an assumption not communicated to the other. But it was rightly accepted by counsel for both parties that a concluded agreement is not a requirement for an estoppel by convention.”

[NAME] [NAME] argues that since at least 1998, both [NAME] and [NAME] have acted on the assumption that [NAME]’s contribution to [NAME] is 47.043%.

22

70. [NAME] [NAME] contends that [NAME] only challenged “in earnest” the system of apportionment on 13 July 2020 (at p.928) when it served a copy of [NAME] [NAME] report on the Commissioners. He refers the Tribunal to the judgment of Hildyard J set out in [COMPANY] v Bass [2015] EWCA Civ 1023); [2017] Ch 389 (CA) at [73]:

“If and when the common assumption is revealed to be mistaken the parties may nevertheless be estopped from departing from it for the purposes of regulating their rights inter se for so long as it would be unconscionable for the party seeking to repudiate the assumption to be permitted to do so.”

[NAME] [NAME] argues that, having received [NAME] [NAME] report, [NAME] needed a reasonable time to devise and implement a new method of apportionment. A new scheme could not reasonably have been put in place before 1 January 2022.

71. [NAME] also relies on section 159(9)(a) of the 2002 which provides that no [NAME] may be made to the tribunal for a determination as to whether an estate charge is payable in respect of a matter which “has been agreed or admitted by the person concerned”. Section 159(10) qualifies this by adding: “But the person is not to be taken to have to have agreed or admitted any matter by reason only of having made any payment”. These provisions are mirrored in section 27A (4) and (5) of the 1985 Act.

72. [NAME] [NAME] referred the Tribunal to the following passages of the judgement of HHJ Nigel Gerald in [NAME] v Islington LBC:

“[15] Absent subsection (5) [of the 1985 Act] and depending upon the facts and circumstances, it would be open to the F-tT to imply or infer from the fact of a single payment of a specific sum demanded that the tenant had agreed or admitted that the amount claimed and paid was the amount properly payable, a fortiori where there is a series of payments made without challenge or protest. Part of the reason for this is that people generally do not pay money without protest unless they accept that that which is demanded is properly due and owing, and certainly not regularly over a period of time. Whilst it would generally be inappropriate to make such an implication or inference from a single payment because it could not be said that the conduct of the tenant was sufficiently clear, where there have been repeated payments over a period of time of sums demanded, there may come a time when such an implication or inference is irresistible.”

“[18] Looking at the reasoning behind this provision, no doubt the reason why the [NAME] of a single payment on its own, or without more, would never suffice is that such will often be insufficiently clear but also, in the peculiar area of landlord and tenant, it is common enough for tenants to pay (even expressly disputed) service charges so as to avoid the risk of forfeiture and preserve their home and the value of their lease. But the reason why a series of unqualified payments may, depending on the circumstances, suffice is because the natural

23

implication or inference from a series of unqualified payments of demanded service charges is that the tenant agrees or admits that which is being demanded. Putting it another way, it would offend common sense for a tenant who without qualification or protest has been paying a series of demanded service charges over a period of time to be able to turn around and deny that he has ever agreed or admitted to that which he has previously paid without qualification or protest. Self-evidently, the longer the period over which payments have been made the more readily the court or tribunal will be to hold that the tenant has agreed or admitted that which has been demanded and paid. It is the absence of protest or qualification which provides the additional evidence from which agreement or admission can be implied or inferred.”

73. [NAME] [NAME] responds that there has been no common assumption that 47.043% was a fair contribution for [NAME] to pay towards [NAME]. There was no sufficient evidence that [NAME] had agreed to the apportionment. He referred the Tribunal to [COMPANY] v Leitner [2018] UKUT 230 (LC); [2019] HLR 10; [ADDRESS] Company [COMPANY] v [NAME] [2016] UKUT 421 (LC) and [NAME] v [COMPANY] [2016] UKUT 527 (LC). In the latter case, HHJ Huskinson approved the following passage from the judgement of [NAME] in Stena Line v [NAME] [NAME] [2010] EWHC 1805 (Ch) at [134]:

“(i) It is not enough that the common assumption upon which the estoppel is based is merely understood by the parties in the same way. It must be [expressly] shared between them. The crossing of the line between the parties may consist either of words, or conduct from which the necessary sharing can properly be inferred.

(ii) The expression of the common assumption by the party alleged to be estopped must be such that he may properly be said to have assumed some element of responsibility for it, in the sense of conveying to the other party an understanding that he expected the other party to rely upon it.

(iii) The person alleging the estoppel must in fact have relied upon the common assumption, to a sufficient extent, rather than merely upon his own independent view of the matter.

(iv) That reliance must have occurred in connection with some subsequent mutual dealing between the parties.

(v) Some detriment must thereby have been suffered by the person alleging the estoppel, or benefit thereby have been conferred upon the person alleged to be estopped, sufficient to make it unjust or unconscionable for the latter to assert the true legal (or factual) position.”

24

74. [NAME] [NAME] asserts that [NAME] have been challenging the fairness of the apportionment since April 2016. Further, there has been no “unconscionability” in [NAME]’s conduct. [NAME] has been under a duty to keep the fairness of the apportionment under review. It has been in manifest breach of its duty to do so. At no time has it carried out such a review. Rather, it has refused to do so. The need for [NAME] to issue their [NAME] only arose because [NAME] and the Commissioners could not agree whose responsibility it was to review the apportionment. The issue which brought this to a head was the Commissioners’ decision to restore the railings at a cost in excess of £400k which was to be passed on to the [NAME] through an apportionment which was manifestly unreasonable.

75. The Tribunal notes that it is not the various additions, subdivisions, basements and penthouses on [NAME] that have primarily caused the current system of apportionment to be unfair. The unfairness rather dates back to at least 1998 (when the EMS was approved) or 1964 (when [NAME] was completed). This unfairness, which is now readily accepted by all parties, only became apparent when the spreadsheet of the current percentages was shared in March 2020.

76. The Tribunal is not impressed by the position adopted by either [NAME] or the Commissioners. [NAME] are not mere volunteers; they are [NAME] with responsibility for the management and finances of [NAME]. We note the email from the then [NAME] of [NAME], dated 14 October 2017 (see [37] above) when he stated that he was not prepared to revisit the apportionment of [NAME]. We are satisfied that [NAME] should have taken a more proactive role in revisiting the apportionment when it became apparent that the current system was unfair.

77. Despite taking the initiative to reinstate the railings, the Commissioners have sought to hide behind [NAME]. On 7 August 2019 (see [42] above), the Commissioners stated that they were unwilling to consider the issue of apportionment. This issue only arose because of their desire to reinstate the railings. [NAME] [NAME] stated that [NAME] had misgivings about this proposal. He stated that the Commissioners had threatened to sell keys to other residents in the area if there is any shortfall in [NAME]. The Commissioners cannot have it both ways. If they wish to delegate responsibility for [NAME] to [NAME], they must give them the freedom to determine how it is managed and who is permitted to have access to it. They must also make clear to [NAME] the legal responsibilities that this entails.

78. Having regard to the evidence and the submissions that have been made to us, we are satisfied that the new apportionment should be backdated to 1 January 2021, and that any estate/service charges payable for any period after this date should be apportioned in this manner. The Tribunal reach this decision for the following reasons:

25

(i) [NAME] have been paying their contribution of 47.043% for many years without complaint. The only proper conclusion is that [NAME] had admitted that this was a fair proportion towards [NAME] (see section 159(9)(a) of the 2002 Act).

(ii) Alternatively, [NAME] are estopped from denying that this was a fair contribution towards [NAME]. There was a shared assumption between [NAME], [NAME] and the Commissioners that 47.043% was the appropriate apportionment. [NAME] and the Commissioners have acted on the basis of this shared assumption for many years. It would be unjust and unconscionable for [NAME] to be allowed to resile from this position as a result of which [NAME] would need to re-compute all [NAME]/service charge contributions dating back to January 2015 and to seek to recover additional sums from many of the [NAME].

(iii) [NAME] paid the 47.043% Garden Rate contribution up to July 2020. This included the first instalment towards the railings.

(iv) Whilst Sir [NAME] had raised the issue of apportionment in his email of 19 April 2016, this was only a subsidiary point raised in respect of the railings. His primary argument was that the railings were an improvement to which [NAME] should make no contribution. There was no suggestion that [NAME] was challenging its 47.043% contribution towards the maintenance of [NAME].

(v) [NAME] members served on the Executive of [NAME]. There is no evidence that they advocated that the apportionment should be reviewed. It may be that they felt conflicted.

(vi) On 2 March 2020, the Commissioners provided a copy of the spread sheet of the current percentages. At this stage, [NAME] and the Commissioners should have been put on notice of the urgent need to review the manner in which [NAME] was apportioned. It should have been apparent that [NAME] was paying an unduly high contribution towards [NAME].

(vii) On 13 July 2020, [NAME] served [NAME] [NAME] report on the Commissioners. On 23 December 2020, [NAME] withheld part payment of [NAME].

(viii) The Tribunal accepts that it would take time for a new system of apportionment to be devised. [NAME] [NAME] method could have provided an acceptable means of apportionment as at the local [ADDRESS], it has not proved practical for this Garden.

(ix) The Tribunal accepts that it would take some six months to devise a new scheme. If more time was required, an interim scheme could have been put in place to protect [NAME] from the disproportionate burden that it was being required to bear. The Tribunal is satisfied that a new scheme could, and should, have been put in place by 1 January 2021.

26

79. The Tribunal does not consider that there are any undue difficulties in backdating it for one year. The Tribunal notes from the [NAME] at p.716 that the apportionment would be the same in 2021 as in 2022. The accounts of the individual [NAME] will need to be adjusted. [NAME] and the Commissioners must accept some responsibility for not acting more promptly.

80. The Tribunal is satisfied that the Points Based method is one that it is easy for [NAME] and its managing agent to administer. If any new flats are added, keys to [NAME] will be required and the percentages can be adjusted for the following year. Every year, when [NAME] is fixed, [NAME] will need to consider whether any additional units should be added. [NAME] should periodically review, perhaps every five years or when there is any significant change to [NAME], whether this Points Based method remains the appropriate means for apportioning [NAME]. [NAME] should consider whether it should establish itself as a separate legal entity with limited liability.

81. The Tribunal has not considered what charge would be appropriate were any property to be used for business or embassy purposes. This is a matter for [NAME]. It is also for [NAME] to determine how [NAME] should be managed, how [NAME] should be able to use [NAME] and who should have access to [NAME]. The only matters which are within the jurisdiction of this Tribunal are the manner in which the relevant estate/service charge is apportioned and the date from which the Points Based method of apportionment should take effect.

Service of this Decision

82. The Tribunal will serve a copy of this decision on the three sets of lawyers who have appeared before us. They are responsible for notifying their clients of this determination. The Tribunal has appointed the Commissioners as Lead Applicant and they are directed to serve this decision on the Passive Respondents.

Judge Robert Latham 21 February 2022

Rights of appeal By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the tribunal is required to notify the parties about any right of appeal they may have. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber), then a written [NAME] for permission must be made by e-mail

27

to the First-tier Tribunal at the regional office which has been dealing with the case. The [NAME] for permission to appeal must arrive at the regional office within 28 days after the tribunal sends written reasons for the decision to the [NAME]. If the [NAME] is not made within the 28 day time limit, such [NAME] must include a request for an extension of time and the reason for not complying with the 28 day time limit; the tribunal will then look at such reason(s) and decide whether to allow the [NAME] for permission to appeal to proceed, despite not being within the time limit. The [NAME] for permission to appeal must identify the decision of the tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal and state the result the party [NAME] the [NAME] is seeking. If the tribunal refuses to grant permission to appeal, a further [NAME] for permission may be made to the Upper Tribunal (Lands Chamber).