First-tier Tribunal Allows Tenants' Challenge to Service Charges

OUTCOME: Allowed

© CROWN COPYRIGHT

Case Reference(s)

:

BIR/00FY/LIS/2020/0046

Property : [NAME_1] [NAME_1] [POSTCODE]/2HU/2HZ/2HR/2HT/2HX/2HY

Applicants : [redacted] [NAME_4] (4 & 5 Babbington) [NAME_6] (8 Gregory) [NAME_8] (1 Bayley)

Joining Applicants : [redacted] [NAME_12] (7 Bayley) [NAME_14] (3 Trinity) [NAME_16] (5 Trinity) [NAME_18] (1 Victor) [NAME_20] (5 & 6 Victor) [NAME_22] (7 Victor) [NAME_24] (8 Victor) [NAME_25] (6 Galeb) [NAME_27] (10 Galeb) [NAME_29] (7 Gregory)

Representative

:

[NAME_20]/[NAME_4]

Respondent

:

[redacted]

Joining Respondent

:

[redacted]

Representative

:

[NAME_36] - Counsel H [NAME_39] of Applications

:

An application in respect of the liability to pay and reasonableness of service charges under section 27A of the Landlord and Tenant Act 1985 FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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and applications for Orders under section 20C of the Landlord and Tenant Act 1985 and under paragraph 5A of Schedule 11 of the Commonhold and Leasehold Reform Act 2002.

Tribunal Members

:

[NAME_41] Judge M K Gandham G Freckelton FRICS

Date of Decision

:

14 September 2022

Date of Supplementary Decision

:

24 November 2023

__________________________________________________________

DECISION INCLUDING SUPPLEMENTARY DECISION ON RESERVED ITEMS _____________________________________________________

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applications reserved judgement in respect of several items where invoices had not been provided by the Respondent. Following that decision, the Tribunal ordered the production of these invoices, some of which were produced. This document now incorporates decision in respect of those items. Index

Page Original decision of 14 September 2022

4 Supplementary decision of 24 November 2023

24 Appendix One Relevant legislation

50 Appendix Two Order for missing invoices

54 Appendix Three [NAME_43] Schedule relating to original decision 59 Appendix Four [NAME_43] Schedule relating to supplementary decision 93

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Background

1. Th of applications in respect of the liability to pay and reasonableness of service charges under section 27A of the Landlord and Tenant Act 1985 in respect of [NAME_1], [NAME_44] and also applications for Orders for the Limitation of the Respondent proceedings under section 20C of the Landlord and Tenant Act 1985 and under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002.

2. The application was deemed withdrawn on 17 September 2021 under rule 11 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 due to the non-payment of a hearing fee.

3. On 22 September 2021, the Tribunal received an application to reinstate the application. On 29 October 2021, the Tribunal reinstated the application.

4. On 28 January 2022, the Tribunal held a case management conference to discuss the future progress of the reinstated application. The Applicants were represented by [NAME_45], with [NAME_47] in attendance, whilst [NAME_49] appeared for the Respondent.

5. The issues raised in the original application were as follows:

2016

Legal Fees & Accountancy Staffing Costs Repair Costs Sundry & Depreciation

2017

2018

Legal Fees & Accountancy Staffing Costs Repair Costs

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2019

Staffing Costs Repair Costs Sundry & Depreciation

2021

Staffing Costs

6. During the case management conference, the Applicants advised that they wished to raise additional issues, over additional periods, from those originally proposed. On behalf of the Respondent, [NAME_49], confirmed that they were happy to deal with all matters and provide any necessary documents.

7. The Applicants, as agreed, subsequently provided a list of the issues to be determined and the documents required in addition to those already provided. These included the following:

a) Accounts summary sheets for years ending 31/3/17, 31/3/18 and 31/3/19. b) Invoices for service charge year ending 31/3/16 for Legal Fees & Accountancy, Staffing Costs, Repair Costs, Sundry and Depreciation. Plus, year end service charge statement. c) Invoices for service charge year ending 31/3/20 for the same 4 categories. Plus, year end service charge statement. d) Invoices for service charge year ending 31/3/21 for the same 4 categories. Plus, year end service charge statement.

8. The Directions of 18 February 2022 encompassing these items were agreed with the parties before issue.

9. The oral hearing relating to the application was held on 13 July 2022, the Tribunal and the parties considered (where evidence was available) the items set out above, and, accordingly, the decision to be issued by the Tribunal includes a determination of those items.

The Inspection

10. The Tribunal carried out an inspection of [NAME_1] on 5 July 2022. Present at the inspection was [NAME_52], one of the Applicants whilst the Respondent did not attend. [NAME_53] of the current managing agents, [NAME_55], facilitated the inspection.

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11. From the inspection, the Tribunal would make the following comments in respect of the development itself.

12. [NAME_1] is a development of 71 flats formed out of a former tannery building situated approximately 2 miles to the west of Nottingham City Centre, in close proximity to Queens Medical Centre and elements of the campus of the University of Nottingham.

13. The building is of brick and tiled construction with flats on three floors and arranged in an L shape with a car park. There are elements of render and timber cladding to the main structure and additionally some flats benefit from timber balconies.

The Oral Hearing

14. An oral hearing was held on 13 July 2022. Members of the Tribunal were present in the hearing rooms at the [ADDRESS] [POSTCODE] whilst the parties participated by video link.

Appearances

For the Applicants, [NAME_56] (one of the Applicants) represented the Applicants during the oral hearing.

Other Applicants who participated included:

[NAME_52] [NAME_57] [NAME_58] [NAME_59]

For the Respondent, [NAME_60] (a Director of the Respondent Company)

[NAME_62] Counsel of [NAME_63] [NAME_64] of [NAME_40]

15. The Tribunal explained at the outset of the hearing that it could not deal with the following items that had been raised by the Applicants in their submissions:

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Transfer of the [ADDRESS] relating to the development. Governance of the company and changes to the Articles of Association. (The above two items are potentially civil and/or criminal matters not falling within the jurisdiction of the Tribunal. The Applicants may wish to take legal advice in respect of those items) Retrospective costs relating to lease extensions.

The Tribunal explained that it simply had no jurisdiction to deal with these matters except where they impacted on the service charge and the payability and reasonableness of the same.

Lease Provisions relating to Service Charges.

16. There are two leases in place at [NAME_1]. s which, from the copy provided to the Tribunal, appear to date from approximately 1987and the s. The Tribunal finds it convenient at this point to summarise the service charge provisions cited by [NAME_65] during the consideration of the [NAME_43] Schedule in respect of each lease.

The

6: THE Lessee hereby covenants with the [NAME_66] and with the owners and lessees of the other flats comprised in the building and leased by the [NAME_66] that the Lessee will at all times hereafter:

(b) (i) To contribute and pay one-seventy first of the costs expenses outgoings and matters mentioned in the Fifth Schedule hereto

THE FIFTH SCHEDULE before referred to

Costs expenses outgoings and matters in respect of which the Lessee is to -seventy first part .

1: The expenses of and incidental to the running and administration of the Management Company whether or not the Management Company be also the [NAME_66] 2: The expenses incurred by the [NAME_66] in carrying out its obligations under clause 7 (b) (d) (e) (f) (g) and (h) of this Lease 3:

4:

5:

6:

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7: All other expenses (if any) incurred by the [NAME_66] in and about the maintenance and proper and convenient management and running of the building and the land in particular but without prejudice to the generality of the foregoing any expenses incurred in rectifying or making good any inherent structural defect in the building any interest paid or any money borrowed by the Lesser to defray any expenses incurred by it and specified in this Schedule any legal or other costs bona fide incurred by the [NAME_66] in taking or defending proceedings (including any arbitration) arising out of any Lease of any part of the building or any claim by or against any Lessee or tenant thereof (other than a claim for rent alone) or by any third party against the Lesser as owner or occupier of any part of the building 8: The fees and. disbursements paid to any managing agent appointed by the [NAME_66] in respect of the building and to any auditor for the purpose of this Lease 9: The [NAME_66] or the [NAME_66]'s managing agent shall keep proper books of account (which shall be available for reasonable inspection during normal business hours by the Lessee on notice) showing the expenditure incurred in this Schedule and the contributions thereto received from the Lessees of the flats 10: Any reserve funds shall be kept in separate accounts any interest on or income of the said funds shall (after deduction of any tax) be added to the funds which shall be held by the [NAME_66] in trust for the Lessees of the flats and shall only be applied in accordance with the terms of the Schedule 11: The [NAME_66] shall be entitled to employ contractors to carry out any of its obligations under this Lease and if any repairs redecorations renewals maintenance or cleaning are carried out by the [NAME_66] itself not being the Management Company it shall be entitled to charge as the expenses thereof its normal charge (including profit) in respect thereof

Within the Renewal lease, the Fifth Schedule was deleted and replaced with the following:

The Fifth Schedule Services and Service Costs Part 1. The Services 1. Services The Services are: (a) providing heating to the internal areas of the common parts during such periods of the year as the Landlord reasonably considers appropriate, and cleaning, maintaining, repairing and replacing the heating machinery and equipment; (b) lighting the common parts and the [ADDRESS] and cleaning, maintaining, repairing and replacing lighting, machinery and equipment on the common parts;

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(c) cleaning, maintaining, repairing and replacing the furniture, fittings and equipment in the common parts; (d) cleaning, maintaining, repairing, operating and replacing security machinery and equipment (including closed circuit television) on the common parts; (e) cleaning, maintaining, repairing, operating and replacing fire prevention, detection and fighting machinery and equipment and fire alarms on the common parts; (f) cleaning, maintaining, repairing and replacing refuse bins on the common parts; (g) cleaning the outside windows of the building; (h) cleaning, maintaining, repairing and replacing signage for the common parts; (i) maintaining any landscaped and grassed areas of the common parts; (j) cleaning, maintaining, repairing and replacing the floor coverings on the internal areas of the common parts; (k) providing security reception cleaning and maintenance staff for the building; and (l) any other service or amenity that the Landlord may in its reasonable discretion (acting in accordance with the principles of good estate building.

Part 2. Service Costs

1. Service Costs

The Service Costs are the total of:

(a) all of the costs reasonably and properly estimated by the Landlord to be incurred of:

(i) providing the Services; (ii) putting aside such sums as shall reasonably be considered necessary by the Landlord (whose decision shall be final as to questions of fact) to provide reserves or sinking funds for items of future expenditure to be or expected to be incurred at any time in connection with providing the Services; and (iii) taking any steps (including proceedings) that the Landlord considers necessary to prevent or remove any encroachment over the building or to prevent the acquisition of any right over the building as a whole or to remove any obstruction to the flow of light or air to the building as a whole;

(b) the costs, fees and disbursements reasonably and properly incurred of:

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(i) managing agents employed by the Landlord for the carrying out and provision of the Services or, where managing agents are not employed, a management fee for the same; (ii) accountants employed by the Landlord to prepare and audit the service charge accounts; and (iii) any other person reasonably and properly retained by the Landlord to act on behalf of the Landlord in connection with the building or the provision of Services. (iv) the costs of the salaries and employer costs (including pension, welfare and insurance contributions) and uniforms of security reception cleaning and maintenance staff for the building and of all equipment and supplies needed for the proper performance of their duties; (v) All rates, taxes, impositions and outgoings payable in respect of the building, their use and any works carried out on them (other than any taxes payable by the Landlord in connection with any dealing with or disposition of its reversionary interest in the building); and (vi) Any VAT payable by the Landlord in respect of any of the items mentioned above except to the extent that the Landlord is able to recover such VAT.

Items marked on the [NAME_43] Schedule as paid out of [NAME_67]

17. out of [NAME_67] accountancy practice below, however, the accounts provided for the service charge years ending 2016, 2017, 2018 and 2019 were laid out with the following costs:

Service Charge Costs Income from car park rental Net costs to be met by service charge [NAME_67] & service charges receivable

There is no separation of [NAME_67] and service charge income and when challenged regarding accounting for [NAME_67] income, [NAME_68] said that it was noted on the bank statements. If the Respondent had produced [NAME_67] accounts detailing specifically [NAME_67] income and costs paid out of that income (as directed), the Tribunal would have disallowed the challenge. However, as no evidence has been provided that these costs were paid out of [NAME_67] income, the Tribunal will treat them as service charge cost items and consider the challenge accordingly.

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Reasonableness and Payability of Service Charges

18. Before the commencement of the oral hearing, [NAME_65] was keen to emphasise that it is for the Applicants to prove that the stated charges were not reasonable, not for the Respondent to justify them and to this end he cited the case of ASP Independent Living Limited v Godfrey [2021] UKUT 0313 (LC) which concerned the reasonableness and payability of service charges , in particular, paragraph 7 of the same which states as follows:

It is well-established that where a lessee seeks to challenge the reasonableness of a service charge they must put forward some evidence that the charges are unreasonable; they cannot simply put the landlord to proof of reasonableness. See for example Schilling v Canary Riverside Development Ltd [2005] EWLands LRX26 2005)

And paragraph 26 regarding family connections:

suspicion about family connections between the landlord and [NAME_69]. That was not a matter to which the FTT could give any consideration; the only issue before it was the reasonableness and payability of the service charges.

19. The Tribunal accepts these points but, as Tribunal, has also employed its own knowledge and experience of the subject matter.

Matters to be considered by the Tribunal.

20. At the hearing, counsel for the Respondent management company stated that the Tribunal was limited to a consideration of charges as specified in the original application as set out in paragraph 5 above. The Tribunal disagrees. As set out in paragraphs 6, 7 and 8, the additional items were agreed with the parties, who were also given the opportunity to comment on the directions of 18 February 2022 before they were issued.

Accordingly, at the hearing, the Tribunal considered the additional items raised by the Applicants, where evidence was available.

Order

21. In their written evidence and also during the oral hearing held on 13 July 2022, the Respondent - [NAME_1] Management Ltd stated that invoices for the periods stated below were all retained by a former managing agent of the development [NAME_70], a Director of [COMPANY_71], 14 16 [ADDRESS] [POSTCODE]. These invoices were thus not made available to the Applicant leaseholders to consider.

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1/4/2018 to 31/3/2019 1/4/2019 to 31/3/2020 1/4/2020 to 31/3/2021

22. The Tribunal has issued an Order to [NAME_70] of [COMPANY_71] under Rule 20 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013. Rule 20, in so far as is relevant to this matter, states as follows:

Summoning of witnesses and orders to answer questions or produce documents

20. (1) On the application of a party or on its own initiative, the Tribunal may

(a)

(b)order any person to answer any questions or produce any documents in that person's possession or control which relate to any issue in the proceedings

23. The Order requires the information to be delivered up in 21 days. The Tribunal will issue further directions at the expiry of this period. The Tribunal therefore reserves judgement in respect of the challenges to these invoices and will issue a supplementary decision in due course in relation to the same. A copy of the order is attached to this decision as Appendix Two.

The Law

24. The relevant legislation is set out in Appendix One to this decision.

[NAME_43] Schedule Items

25. Prior to the hearing, the Tribunal had directed the parties to complete a [NAME_43] Schedule to identify the issues. A copy of the same is incorporated into this decision at Appendix Two. Within the same, the Applicants had to indicate the charges they took issue with and why, and what they would consider to be a reasonable cost (if any) for the item in question and the Respondent, the justification for the charge, both in terms of the service charge provision in the lease and the reasonableness of the same. The Tribunal used the [NAME_43] Schedule as a running order for the oral hearing. The information included within the Schedule is not repeated in the paragraphs below, only a summary of the additional comments made by the parties either during the hearing or in their written

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submissions. The Tribunal finds it convenient to set out its finding beneath the

26. Item 1 Invoice from [NAME_74]. Survey of car park for new parking arrangements.

Applicant

The Applicants contend that there was no issue with the original lease plan and car parking layout and that since the adjustment there are fewer spaces available.

Respondent

The justification for this charge was that the car parking plan attached to the original leases was inaccurate and a revised plan was required for attachment to the new leases.

Tribunal

unconvincing, and it appeared to the Tribunal that these costs were incurred as a result of an element of the car park being transferred to a third party.

Costs disallowed.

27. Item 2 Invoice from [NAME_75] for preparation of Sellers Pack

Applicant

This information should have been readily available to a Property Manager.

Respondent

The justification for this charge was that it was necessary to provide documents including insurance certificates, accounts, and asbestos reports etc and discuss the same, presumably with potential buyers.

Tribunal

These documents should be available to any Property Manager and in the experience of the Tribunal are universally charged to either the vendor or buyer of

Costs disallowed.

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28. Item 3 Invoice from [NAME_77] - review and amendment of Articles of Association.

Applicant

The Applicants consider that there was no contractual liability for this charge and, further, it strengthened the Directors position in terms of governance of the management company and there was no consultation in respect of the same.

Respondent

The justification for this charge was that the existing articles were not fit for purpose.

Tribunal

The issue of whether the amendments to the articles was lawful is not something this Tribunal has the jurisdiction to deal with. The Tribunal cannot therefore look assertion at face value, there being no evidence that the changes were not agreed to at the time by the leaseholders.

Cost allowed.

29. Item 4 Invoice from [NAME_77] re legal works.

Applicant

The Applicants are of the opinion that there is no contractual liability for advice regarding lease extensions and not all leaseholders have extended their lease.

Respondent

The Respondent state that this invoice related to legal advice regarding lease extensions and reserve fund matters.

Tribunal

Any costs relating to lease extensions should have been borne by the parties to the same and not the general service charge account. The invoice makes no mention of reserve funds.

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Costs disallowed.

30. Item 5 Invoice from [NAME_78] relating to missing restrictions on property registers.

Applicant

The Applicants are of the opinion that there is no contractual liability for this invoice.

Respondent

The justification for this charge was that it related to legal advice regarding missing restrictions on property registers and correction of the same at the Land Registry.

Tribunal

not convincing, and the wording of the invoice was vague. Although the Tribunal considered that the costs may have been a justifiable expense for the freeholder, as previously mentioned, there was no evidence that it had been paid from the income from the [NAME_67].

Costs disallowed.

31. Items 6, 7 & 13 Invoices from [NAME_77] and [NAME_75]

Applicant

The Applicants are of the opinion that the sending out of service charge demands should be the function of a property manager.

Respondent

The justification for these charges was that it was a reasonable fee and permitted under the terms of the lease.

Tribunal

The issue of service charge demands is a basic function that would be expected of any property manager

Costs disallowed.

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32. Items 8, 9 & 10 Invoices from [NAME_80] for accountancy services

Applicant

The Applicants contend that the accounts produced do not meet with property industry standards i.e. as per RICS Guidance. The Applicants consider 50% of the invoices would be reasonable in acknowledgement of other accountancy functions undertaken.

Respondent

Charges of this nature are permitted under the terms of the lease.

Tribunal

The Tribunal agrees with the Applicants. The accounts produced are not of the standard that would be expected in respect of a development of this size and there is a complete lack of detail. Again, agreeing with the Applicants, the Tribunal notes that some functions such as statutory filing obligations were presumably carried out.

Costs 50% allowed.

33. Item 11 Invoice from [NAME_77] regarding Landlord fire safety obligation letters

Applicant

The Applicants are of the opinion that the production and distribution of letters of this type should be the function of a property manager.

Respondent

The justification for these charges was that it was a reasonable fee and permitted under the terms of the lease and followed increased regulation as a result of the Grenfell Tower fire.

Tribunal

The sending out of such standard letters is again a basic function that would be expected of any property manager.

Costs disallowed.

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34. Item 12 Invoice from [NAME_77] regarding single alternative inspection location

Applicants

The Applicants contend that there was no need to use a solicitor for this function

Respondent

The

Tribunal

A SAIL (Single Alternative Inspection Location) is an alternative location to the registered office, where company records can be kept and made available for public inspection. If it were decided that one was required, the offices of the managing this purpose.

Costs disallowed.

35. Items 14, 15 & 16 Invoices for Legal and Accountancy Services

See paragraphs 21, 22 and 23.

The Tribunal reserves judgement in respect of these items.

36. Items 17, 18 & 19 Invoices from [NAME_81] relating to her employment as a Property Manager.

Applicants

The should be limited to what could be achieved in the market for a professional property manager two of whom have been employed for £14,200 and on the basis ns or experience, the Applicants believe the employment cost should be capped at £10,000 and adjusted to represent the standard of service received. This is endorsed by the fact that [NAME_68] seems to have outsourced basic functions, for example sending service charge demands and letters which has been passed to Solicitors and estate management functions which have been passed to third party companies. A 50% reduction is deemed appropriate at £7,100.

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Respondent

stated that her experience for the role came from her training at [NAME_127], solicitors, who the Tribunal understands at one point offered property management services, employment within a Halifax Estate agency branch and the fact that her father was involved in construction.

Tribunal

The salient question that the Tribunal must initially ask itself was whether it was reasonable to employ an individual to manage a development such as [NAME_1], as both leases suggested that such an expense could be payable if reasonably required. The Tribunal cannot see that it is. [NAME_1] at 71 units is not a small development but neither is it of sufficient size to justify the employment of an individual even at minimum wage levels. The Tribunal agrees with the Applicants that a reasonable fee for the management of [NAME_1] by a professional firm experienced in this form of management would be in the order of £200 plus VAT per unit ie £14,200 plus VAT.

Even if the management company decided to employ an individual then that individual should have been experienced in block management which it does not appear to the Tribunal that [NAME_82] is; she had no managerial qualifications and limited experience to have been considered for the position and even the basic administrative functions were outsourced by her. The age of the original structure of [NAME_1] means that proactive management is required from an experienced manager or agent. In addition, the fact that it is a multi-floored building with wooden balconies could have led to serious consequences.

From the submissions of the Applicants, the management service provided appears to have been haphazard; there was no evidence presented of forward planning, regular inspections, leaseholder liaison or meetings and maintenance appeared to be of a reactive rather than proactive nature. The development was not managed in a professional manner.

The Tribunal agrees that a 50% reduction is appropriate to reflect the inappropriateness of employing [NAME_82] and the general of level of service provided.

Costs 50% allowed.

37. Item 20 Invoice from [NAME_83] to attend a meeting in Sheffield regarding lease extensions

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Applicants

The Applicants consider this charge unreasonable as [NAME_82] could have attended.

Respondent

No justification provided.

Tribunal

Costs regarding lease extensions should not be borne by the service charge account.

Costs disallowed.

38. Item

Applicants

The Applicants consider this cost unreasonable.

Respondent

The justification for this charge was that it was based on a day rate plus site visits

Tribunal

The award made by the Tribunal in paragraph 30 above is the total amount allowed by the Tribunal in any one year for management. This item is therefore not allowed.

Costs disallowed.

39. Items 22, 23 & 24. Invoices from [NAME_81] relating to her employment as a Property Manager.

paragraph 36 above are relevant here.

In respect of the redundancy payment, it was not reasonable for the Respondent to employ an individual to manage the development hence this cost is disallowed.

Redundancy costs disallowed.

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40. Items 25 40 & 43, 48 50, 52 & 53. Invoices from [NAME_84], [COMPANY_128], [NAME_85] and [COMPANY_86]

Applicant

The Applicants note that there were no alternative quotations provided for the works that generated these invoices, the companies concerned were connected to the Management Company Directors and it appears that the payments were very often paid on the basis of the quotation rather than an invoice. There was no perceivable effort to achieve best value for the leaseholders. The Applicants do, however, concede that some works were done.

Respondent

These charges relate to general management items such as cleaning, site maintenance etc and also a variety of repairs to the development and as such they were fully permitted under the terms of the lease.

Tribunal

If a management company wishes to use a connected party contractor, then the lessees should, in an ideal transparent world, be made aware of this fact and justification for the Tribunal to disallow these costs without other evidence, particularly since the Applicants accepted that the items were payable as service charge and that some works were done. Taking into account the decision in ASP Independent Living Limited v [NAME_87] , there is no basis or rationale for the Tribunal to disallow these costs even partially as the Applicants had not shown that the costs were unreasonable.

Costs allowed.

41. Item 41. Invoice from [COMPANY_86] relating to works required by [NAME_88]

Applicant

The Applicants made similar comments in respect of this invoice as in paragraph 34 above but also considered the works of poor quality.

Respondent

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The Respondent stated that these works were carried out as a result of them being identified as being necessary by [NAME_88] of the development (which were exhibited). In addition, they are justified under the terms of the lease.

Tribunal

The Tribunal had the benefit of inspecting the fire doors which formed the principal element of these works. [NAME_88] had been carried out, the doors themselves were badly fitted with many seals missing and the installation, generally, appearing of poor quality.

Accordingly, as the Tribunal considers that some of the works were not completed to a reasonable standard, it considers a reduction in the costs is appropriate.

Costs 50% allowed.

42. Items 42 & 44. Invoices from [NAME_89] for website design and maintenance

Applicant

The Applicant consider that that these costs were not value for money and stated that the website itself was not in operation for very long.

Respondent

The Respondent stated that these works were chargeable under the terms of the lease and that the site itself was interactive.

Tribunal

A website can be justified under the terms of the lease and, used proactively, can help the management of the development and be of assistance to lessees. The costs appear reasonable and payable to the Tribunal.

Costs allowed.

43. Items 45, 46 & 47

See paragraphs 21, 22 and 23.

The Tribunal reserves judgement in respect of these items.

44. Item [ADDRESS]

Applicant

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The Applicant consider that that this cost should not form part of the service charge account.

Respondent

The Respondent stated that this amount related to a refund of a car parking fine.

Tribunal

The Tribunal cannot see that this cost is justified or payable under the terms of the lease.

Costs disallowed.

45. Items 54, 55, 56 & 57

See paragraphs 21, 22 and 23.

The Tribunal reserves judgement in respect of these items.

Applications for Orders under section 20C of the Act and under paragraph 5A of Schedule 11 of the Commonhold and Leasehold Reform Act 2002.

39. The Applicants requested the Tribunal make orders to the effect that they should not have to pay any of the costs incurred during these proceedings via the service charge, and that any costs they may be liable for under any clause in the lease allowing the Respondent to charge an administration charge for their costs should not be payable.

40. The Tribunal invited submissions in respect of these applications during the hearing. The Applicants made comments to the effect that they were forced to bring the proceedings before the Tribunal to obtain service charge information, after exhaustive efforts to obtain the same via requests of the Respondent, and that it would be grossly unfair if they were forced to be responsible for the costs of the same. On behalf of the Respondent, [NAME_65] made the comment that the

41. The purpose of section 20C is to give the Tribunal the power to prevent a landlord actually recovering its costs via the service charge when it was not able to recover them by a direct order from the Tribunal.

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42. In Tenants of [ADDRESS] (Sherbani) v [COMPANY_90]/37/2000, which concerned an application for the appointment of a manager under section 24 of the Landlord and Tenant Act 1987 in which the applicant tenants had been successful, the Lands Tribunal (Judge Rich QC) made the following remark:

exercised is to have regard to what is just and equitable in all the circumstances. The circumstances include the conduct and circumstances of all parties as well as

43. However, there is also guidance in previous cases to the effect that an order under section 20C is to deprive the landlord of a property right and it should be exercised sparingly (see for example, Veena-v-Chong: Lands Tribunal [2003] 1EGLR175).

44. The management of [NAME_1] could, at best, be described as opaque, the Tribunal finds that the Applicants had no option but to commence Tribunal proceedings in order to obtain information and, as has been shown above, they have enjoyed considerable success in their challenges.

45.

Accordingly, the Tribunal makes make an order under section 20C of the Act that t costs of these proceedings are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the Respondents. It also makes an order under paragraph 5A of Schedule 11 of the 2002 Act that the liability to pay any litigation costs incurred or to be incurred by the Respondent in connection with these proceedings is extinguished.

Appeal

46. Any appeal against this decision must be made to the Upper Tribunal (Lands Chamber). Prior to making such an appeal the party appealing must apply, in writing, to this Tribunal for permission to appeal within 28 days of the date of issue of the supplementary decision (or, if applicable, within 28 days of any decision on a review or application to set aside) identifying the decision to which the appeal relates, stating the grounds on which that party intends to rely in the appeal, and stating the result sought by the party making the application.

[NAME_41]

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Supplementary Decision in respect of Reserved Items.

1. During the original hearing, the Respondent stated that many invoices were not in their possession as they had been retained by [COMPANY_71], who were briefly employed as manging agents for the development. Judgement was reserved in respect of those items and an Order issued to [COMPANY_71] for the release of these invoices.

2. A response to the Order was received by the Tribunal on 29 September 2022 from [NAME_70] a Director of [NAME_72]. It was as follows:

Further to your order of the 14th September 2022 we do not hold any of the information relating to your order for the reasons set out below.

I understand that your order requests copies of invoices for the stated service charge periods as a result of submissions made by the Respondent, [NAME_1] Management. These submissions are false and misleading. My reasons for this opinion are set out below. Unfortunately this is indicative of my experience with the Respondent who routinely mislead myself and the Applicants regarding the management of [NAME_1].

We did not become involved in [NAME_1] until around October 2019 and formally engaged on the 1st December 2019. Accordingly we had no involvement during the financial year running the 1st April 2018 to the 31st March 2019. We never had sight nor possession of any documents relating to that period.

We were only partially involved in the financial period running between the 1st April 2019 to the 31st March 2020. We never had sight or possession of any documents prior to our appointment, Moreover, all documents relating to the period from our appointment to the 31st March 2020 were provided to the th June 2020. A copy of that email is attached.

The Respondent made a complaint to the Police who duly investigated and obtained a court order to seize all information in our possession relating to [NAME_1]. Despite the passage of over 18 months neither me or my Solicitor have been made aware of any further action and nor have we received back into our possession any of the items seized.

I trust this clarifies.

3. From the response to the Order, the Tribunal considered that substantially all of the financial information relating to the periods in question was available to the Respondent and directed that it be delivered up to the Applicants for them to consider.

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4. As a result of the Direction above, some of the outstanding information was provided however there were significant gaps in the same including whole tranches of invoices missing.

5. The Tribunal held a case management conference on 21 February 2023 to agree a timetable for the determination of the remaining items. The Applicants were represented by [NAME_91], with [NAME_92], [NAME_93], [NAME_95] and [NAME_98] in attendance, whilst [NAME_49] appeared for the Respondent.

6. The outstanding information was discussed. The Tribunal considered that it was implausible to the Respondent. Apart from the books and records that the Management Company should keep the appointed accountant who prepared the filed accounts must, for their own purposes have retained records for the same.

7. Further Directions (Directions Order No:6) were issued which instructed the Respondent to release the outstanding information to the Applicants. The Applicants were then instructed to set out their substantiated reasons why any of the costs were not reasonable, due and payable, by way of a written statement and also a [NAME_43] Schedule. The Respondent was then to respond to the same, explaining the justification for the charges identified by the Applicants and setting out why they were reasonable and payable, again by way of a written statement and [NAME_43] Schedule.

8. An oral hearing was held by video platform on 31 August 2023. The Applicants were represented by [NAME_91], with [NAME_92], [NAME_93], [NAME_95], and [NAME_100] in attendance. No one attended on behalf of the Respondent.

9. The Tribunal finds it convenient to initially set out general comments made by the parties in their respective statements.

The Applicant

10.

a) Missing Invoices.

There are many invoices itemised by the Applicants in Direction 6, where invoices have not been provided by the Respondent. For the years ending 2019/2020/2021 discrepancies were itemised by the Applicant which formed part of the Directions 6 and previous directions. Most of the invoices have still not been provided. For the year ending 2022, no

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invoices have been provided at all, nor a Service Charge Statement, both of which should be available from the Respondents. Without supporting documentation, there is no evidence whatsoever that the services provided were reasonable. The Service Charge Statement was received from [NAME_55] (the current managing agents) on 14 April 2023, not from the Respondent, despite being first requested 6 months ago by various Leaseholders.

According to [NAME_55], the Directors were very slow to sign off the 2023 accounts.

If the invoices are indeed unavailable, the Respondents are acting in breach of s.21(6) Landlord and Tenant Act 1985 s.1212 Companies Act 2006. We also note that the statutory financial statements for the years ended 31 March 2019, 2020, 2021 2022 for [NAME_1] Management Ltd were filed with Companies House. We therefore conclude that the Respondents should have this information available, but it is not forthcoming. There are no Bank Statements provided, despite requested as per Directions 6. This was deemed the only clear way for the Applicants and Tribunal to consider the underlying transactions and especially where there seems to be a complete lack of invoices for 2020/2021 year.

b) Poor Accounting.

Although meeting the minimum legal requirements for service charge accounts, the accounts do not conform to good practice as prescribed under the RICS/ICAEW Guidance Note for preparation and presentation of service charge accounts, which were provided to the Respondents and Tribunal on the 4 February, 2022 specifically:

i) The Service Charge Accounts and Company House filing have been prepared without a full set of invoices. Apart from the books and records that [NAME_101] should keep, the appointed accountants, who prepared the filed accounts must for their own purposes have retained the records for the same.

ii) There are no comparatives or variances year on year (with any explanations), which would enable the reader to question potentially high or unusual levels of expenditure.

iii) There is no specific balance sheet for the service charge expenditure and [NAME_67], which would highlight the true financial position.

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iv) There are no explanatory notes.

v) There are no disclosures in relation to transactions with Directors and their associated companies.

vi) The service charge accounts are not signed.

vii) There have been no yearly budgets presented in advance of Service Charge Demands.

We would therefore conclude that work performed by [NAME_102] on a standing order payment of £70.90 per month has been performed to an insufficient professional standard and question the value for money of this service. Accounts have been signed off and filed by them, without supporting paperwork. These Invoices have been added to the appropriate [NAME_43] Schedule. There is no paperwork as to their terms of service to support this level of renumeration. For this reason, only 25% of their costs should be allowed, acknowledging some level of service.

c) Inexplicable 2020/2021 Accounts

The service charge collected, as per the annual demand per flat equated to £90,747.94. Total outgoings as per the service charge statement was £23,742. The amount of £67,005.94, is unaccounted for and no invoices provided for these transactions. It is inconceivable that these are not available to the Directors who are responsible for providing fair and proper accounts as per the Companies Act. Any argument as to these not being available should rest with the Directors and their Agent at the time. This level of transparency should be available to all Leaseholders and should confirm reasonable spend of their money.

No Bank Statements have been provided, despite requested as per Directions 6. This was deemed the only clear way for the Applicant and Tribunal to consider the underlying transactions and especially where there seems to be a complete lack of invoices for 2020/21 year.

d) Accounts 2021/22 and Service Charge Statement not received, until 14 April 2023 from the Respondent.

These were requested along with accompanying invoices for all 4 categories as per Directions 6. [NAME_103] has also been asked repeatedly for this information. Following th inexplicable accounts, a full set of invoices was requested. These accounts were filed with Companies House in Feb 2023. Again, it is

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inconceivable that these accounts and associated invoices are not available and hence for the purposes of the [NAME_43] Schedule, totals have been estimated. The service charge statement has now been received from [NAME_55] and so totals are now updated with actuals. Without a full set of invoices there is no evidence to suggest these services have been provided. According to [NAME_103], the Directors have not approached them for disclosure of these invoices, confirming they have made no attempt to provide information to the Tribunal.

e) Contractual Liability

The Lease sets out the extent of the Applica costs included within the service charge at paragraph 7 of Schedule 5. The material parts of that paragraph are replicated below for convenience:

or defending proceedings (including any arbitration) arising out of any Lease of any part of the building or any claim by or against any Lessee or tenant thereof (other than a claim for rent alone) or by any third party against the [NAME_66] as owner or occupier of any part of the

The costs included within the [NAME_43] Schedule that are being challenged under this head, are for company administrative matters, sending service charge demands and other communications, and many of considerable size for general legal advice. The Applicants claim that these costs have not been incurred pursuant to any proceedings either as claimant or defendant and therefore no contractual liability exists for the Applicants to contribute to the same by way of service charge.

f) Unreasonably Incurred

liability towards the legal fees incurred, the Applicants further claim that the legal costs specified in the [NAME_43] Schedule are unreasonably incurred on the following basis:

a. The costs incurred in respect of sending service charge demands and other communications are unreasonable because the Respondent employed a full-time employee to manage the Property, or an Agent ([NAME_72] or [NAME_103]). It is therefore reasonable to conclude that this activity was part of the responsibilities attached to that role.

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b. The Applicants claim that the standard of service delivered by [NAME_82], up to December 2019, has been extremely poor over the years. In particular, outsourcing basic functions to solicitors and other activities which do not benefit all Leaseholders. They are not chargeable e.g.:

Sending service charge demands and letters which has been passed to Solicitors. Single alternative Inspection location address

These are not reasonable amounts to spend on basic administration or Estate Management when there is a Property Manager or Agent is in situ.

c. Overuse of a Solicitor for unspecified legal services. There is no detail on the legal invoices, despite requests via the Directions so it is unclear to what extent a solicito queries should have been resolved by the Directors without calling in the services of a solicitor which escalated the issue and at vast cost to the Leaseholder. In many cases it was used to intimidate a frustrated Leaseholder asking probing questions. On many occasions Leaseholders were sent solicitor letters to silence and discourage further questions.

d. Contract Dispute with [NAME_72]. The Leaseholders were burdened with large legal invoices relating to the contract dispute with [NAME_72]. This was a personal dispute that should not have been financed by the Leaseholders.

g) Staffing payments

The poor service by [NAME_82] as Property manager has already been well documented. In the original decision 50% of all salary costs were disallowed and the £9,000 redundancy payment also disallowed.

In 2019/2020 payments were made to [NAME_72] of £4707.40 for their management service for the period 1 December to 31st March 2020 (invoice available in supporting documents) plus salary payments were paid to [NAME_68] for the same 4 months of £9553.85 (no invoices available) hence double a payment for the same service. In addition, in this year [NAME_68] received a £9000 redundancy payment (disallowed in the earlier decision).

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In 2020/2021, it is inconceivable to pay a further £5,000 redundancy, when an Agent was in situ. There is no supporting paperwork and no evidence that any service was provided. It also contradicts the this financial year see supporting documents. £4,710.60 was paid for staff costs (assume [NAME_72]), but no paperwork or invoices available.

h) Unreasonable Spend of Service Charge on Repairs & Maintenance

Invoices received from the Respondents 2019/20 for repairs and maintenance contain many for fire related matters (weekly fire alarm testing required by law) and monthly security light testing (ELT or Flick test required by law). The Applicants challenge these as being related to [NAME_104], a Director of the Respondent. [COMPANY_106] has the same telephone number as [NAME_85] and [NAME_108] is a Director of both [NAME_101] and [NAME_85]. Weekly fire alarm testing is offered by [NAME_109] at £108.00 per weekly test whilst [NAME_107] invoices indicate £155.00 per weekly test. Monthly security light testing (ELT or Flick test), also offered by [NAME_109] at £120.00 with [NAME_107] invoices at £222.00. According to [NAME_103] who are now arranging this service and as detailed in their budgets, this can be provided at a lower cost or £330 per month. The Respondents therefore challenge that all Fire alarm and ELT invoices from [NAME_107] are unreasonably high and therefore request that the difference is disallowed in favour of the Applicants.

i) Summary

In summary, the Applicants believe the Respondent, over these additional 3 years (year ends, 2020, 2021 and 2022) has acted unprofessionally and unreasonably with respect to our Service Charge money and when asked to prove otherwise have repeatedly failed to do so.

This is a conclusion reached because of the considerable number of missing invoices over multiple years, poor accounting whereby accounts have been filed, seemingly without supporting paperwork, a set of inexplicable accounts for year 2020/2021, whereby no attempt has been offered to explain the large variances. There is further evidence of overuse of a solicitor for simple administrative tasks plus considerable invoices for legal costs, unreasonably incurred (annually

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£10,000 to £15,000), without explanation, but notably to engage legal counsel against Leaseholders or their Agent, all of which could have been resolved without the use of service charge monies.

Again, there is evidence of overinflated salary payments to the Property manager whilst the Agent was in situ plus an additional redundancy payment, paid by a Director to herself.

Finally, there is evidence of overcharging for Fire and Security testing services, whilst using a company related to a Director. A pattern noted from previous years. Services are haphazard and overpriced.

All the above has taken place whilst the Directors have failed to provide transparency, accountability and appropriate governance. There is still deep concern and frustrations amongst the Leaseholders who continue to believe that the Directors have been working against their best interests, culminating in an extensive list of unreasonable invoices or no invoices at all and hence misuse of SC funds.

We have been presented with no evidence to counter this conclusion.

The Respondent

11. General comments by the Respondent in their statement are as follows.

a) Accountancy

The fees were paid monthly by direct debit to accountant for services including PAYE, annual accounts, and providing service charge statements. Some invoices are not available, but payment is self-evident from the bank account statements provided. The service provided by the accountant met legal requirements and the work was permitted in accordance with the lease.

b) Invoices held by [NAME_110]

The online link provided by [NAME_110] to obtain previous invoices is no longer in operation. The Respondent therefore cannot provide what we no longer have access to. However, we know that the invoices were available at the time the accounts were produced and relate to a service permitted under Lease.

c) Invoices paid from [NAME_67]

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Invoices paid from [NAME_67] and other income, not from service charge, are not the subject of this determination. From April 2020 onwards, the Respondent did not directly collect or receive service charge monies. The sole income was from [NAME_67] and permitted land rental. Any monies received in error were forwarded to the external management company.

d) Fees for [NAME_72] and payments to [NAME_111].

Payments to [NAME_72] were permitted under the terms of the lease. [NAME_82] was on a full contract of employment and employed for a number of years. A 3 month notice period had to be worked. The Directors wished [NAME_82] to remain in post alongside [NAME_72] to allow for a smooth transition and so that the works requiring section 20 and balconies could begin without delay. [NAME_68] received payslips via accountant and PAYE completed by the accountant, not via an invoice from [NAME_82]. She was an employee under full employment contract and paid directly by the Respondent. The redundancy payment was £4,000.00, not £5,000.00 as erroneously recorded in the accounts and subsequently corrected. This money came from [NAME_67] monies collected by and sent to the Respondent by [NAME_72]. This amount is therefore not subject to this determination.

e) [COMPANY_106] were obtained at the time from [NAME_84] and [NAME_107], and the latter were the cheaper of the two for the same service. [NAME_107] were employed on a temporary contract to comply with fire regulations regarding the fire alarm and smoke detector system in place. At the end of the short-term contract quotes were obtained and [NAME_109] were found to be the most competitive and appointed on a long-term contract. Contracts were continually reviewed to ensure best value.

General comments by the Tribunal

12. The Tribu recorded below however its general comments in respect of some of the over-riding issues is as follows.

Missing invoices.

13. Invoices were missing for the original determination and the primary excuse given by the Respondent was that they had been retained by [NAME_72].

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However, the response given by [NAME_70] of [NAME_72] to the elease of this information can be read above and includes the comment:

Moreover, all documents relating to the period from our appointment to the 31st th June 2020

14. In the opinion of the Tribunal, these invoices were available to the Respondent and this point was emphasised to [NAME_49] at the case management conference on 21 February 2023 and he was told by the Tribunal that these documents must be produced. This was largely ignored but still relied upon in submissions. No evidence was provided that [NAME_108] contacted the accountants concerned to see if they had received the invoices back from [NAME_72] however this was the same firm that had prepared accounts for the disputed years and by any reasonable standard of professionalism would have kept copies of them anyway. Any reasonable enquiry by [NAME_108] would have produced these invoices.

15. The Tribunal has to take a robust view on the missing invoices. They have been repeatedly requested and their production ordered but still not supplied. Accordingly, the Tribunal decided that it would disallow any costs that cannot be supported by an invoice as there is simply no way to verify the same.

Poor accounting

16. The accounts produced for the Respondent were, as recorded in the original decision, not of the standard that would be expected. Items were inaccurately recorded and, in some cases, simply do not add up. On enquiry, it appears that [NAME_102] is not a company that offers a traditional accountancy service but is an online direct debit provider. There appears to have been no reasonable financial oversight of the company by the Directors of the Respondent company for the disputed period, [NAME_108] and [NAME_82].

Payments from [NAME_67]

17. A standard reply from the Respondent to a challenge on a specific cost was that the reliable supporting evidence produced which, apart from the odd screen shot of a bank account, was not provided. There was never any indication that separate accounts of any standard were kept and produced for ground receipts and expenditure. Without this supporting evidence, the Tribunal is not prepared to allow a charge for a specific item purely on the basis of a convenient comment from the

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Respondent that it was funded by [NAME_67]. Accordingly, the Tribunal has detailed below costs which are disallowed as part of the service charge, despite the Respondent's submissions to the contrary, as the Respondent had failed to prove that such costs were, indeed, paid from the [NAME_67].

Invoices from [NAME_113]

18. The Tribunal has several issues with invoices from [NAME_77]. Firstly, on many occasions they are for matters that could have been dealt with by a property manager, secondly that they are not for matters that fall within the ambit of the service charge and thirdly, that they appear excessive. They have been reduced or disallowed accordingly.

[NAME_43] Schedule Items

19. The Tribunal used the [NAME_43] Schedule as a running order for the oral hearing and a copy is attached to this decision as Appendix Four. The information included within the Schedule is not repeated in the paragraphs below, only a summary of the additional comments made by the parties either during the hearing or in their written submissions. The Tribunal finds it convenient to list its determination in respect of each item beneath the pa

20. Item 1 Legal and Accountancy invoices

Applicant

Charges relating to the creation of Single Alternative Inspection location (SAIL), were disallowed as unreasonable in the original Tribunal decision. The [NAME_77] invoices of £300 advice on general meetings, £196.80 advice for drafting a response to a leaseholder and £300 for drafting a further letter are unreasonable and represent the overuse of a solicitor for basic queries which could have been resolved by the property manager. The cost of the new lease extension valuation report of £954.00 was apparently refunded but is not recoverable anyway. A bank statement showing £8,704.00 is not evidence. It just shows a paid in entry. Respondent

No direct response other than the general comments above.

Tribunal

Bracewell are unreasonable; they are for matters that could have been dealt with by a competent manager and they appear excessive.

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Costs disallowed.

21. Item 2 [NAME_114]

Applicant

Since the last Tribunal there has been no change in the level of accountancy service with the usual minimum information provided as mentioned. However, as the years progressed the accounting has been even poorer with incorrect entries and poor evaluation and nonsensical presentation of the figures, not conforming to good practice.

Respondent

See general comments by the Respondent. The service met legal requirements.

Tribunal

The Respondent is correct, accounts were filed. However, the accounting was desultory. Nominal award made.

Costs 25% allowed.

22. Item 3 [NAME_115]

Applicant

Directors are responsible for all invoices and preparing fair accounts. No invoices available.

Respondent

See general comments by the Respondent.

Tribunal

No invoices provided; costs disallowed.

23. Item 4 [NAME_77] for service charge and [NAME_67].

Applicant

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As per previous decision, the Respondent has not separated [NAME_67] for service charges within the accounts. No evidence was provided that this item was paid from a [NAME_67] account so must be considered as part of this application.

Again, overuse of a solicitor for an admin function should have been done by the property manager.

Respondent

This is an invoice that the [NAME_116] was paid out of [NAME_67].

Tribunal

There is no reliable evidence that this was paid out of [NAME_67]. A competent manager would not require legal advice to prepare templates of this type which can be obtained online in any event.

Costs disallowed.

24. Item 5 Low Cost Accounts Room Rental

Applicant

No evidence this invoice was paid out of [NAME_67]. Again, the use of a solicitor for an administrative function that should have been done by the property manager. The room was for a meeting with two leaseholders which did not need to be chargeable, could have been carried out in their offices.

Respondent

Tribunal

There is no reliable evidence that this was paid out of [NAME_67]. In any event, this appears an excessive charge for a meeting with two leaseholders.

Costs disallowed.

25. Item 6 [NAME_77] telephone advice for legal services

Applicant

37

No detail of legal services provided, therefore unreasonable. No evidence that this was paid from [NAME_67].

Respondent

Tribunal

There is no reliable evidence that this was paid out of [NAME_67] and no specific information as to what the nature of the service provided.

Costs disallowed.

26. Item 7 [NAME_77] advice re two leaseholders

Applicant

According to [NAME_117] one of the two leaseholders, this concerned a small outstanding service charge amount, which the Directors chose to refer to their solicitors. This could have been resolved without the use of a professional. No evidence it was paid out of [NAME_67].

Respondent

Tribunal

There is no reliable evidence that this was paid out of [NAME_67]. However, there is specific information as to what the nature of the service provided actually was. Conceivably, the advice could fall within the ambit of the service charge however we have no detail, so in the absence of the issue being a complex matter a reasonable sum would be £150.00 plus VAT i.e., £180.00.

£180.00 allowed.

27. Item 8 [NAME_77] .

Applicant

Again, the overuse of a solicitor for the outsourcing basic functions which could have been done by the property manager. No evidence it was paid out of [NAME_67].

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Respondent

Tribunal

This information should have been freely available to a shareholder.

Costs disallowed.

28. Item 9 [NAME_77] Location Address

Applicant

See comments above relating to the same issue.

Respondent

There is no evidence that this was paid out of [NAME_67].

Tribunal

Costs disallowed.

29. Item 10 ICO

Applicant

No invoice, no evidence the work took place or payable.

Respondent

Tribunal

No invoice available.

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Costs disallowed.

30. Item 11 [NAME_77] with [NAME_110]

Applicant

This invoice is shown as £153 (not £1053) in the supporting schedules. Therefore, the legal total as per the service charge statement is incorrect.

This is a large invoice for a contract issue between [NAME_72] and the Directors of the Respondent which could have resolved without a solicitor.

Not a reasonable invoice to be paid by the leaseholders.

Respondent

Tribunal

The dispute between [NAME_72] and the Respondent from the information provided, related to the way in which [NAME_108] and [NAME_82] were running the company. This is not a cost that should be borne by the leaseholders.

Costs disallowed.

31. Item 12 [NAME_77]

Applicant

No invoice, no evidence the work took place or payable. No detail of legal services provided, therefore unreasonable.

Respondent

Tribunal

No invoice available.

Costs disallowed.

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32. Item 13 [NAME_77] Location Address

See comments above.

Costs disallowed.

33. Item 14 [NAME_77]

Applicant

No detail of legal services provided, therefore unreasonable.

Respondent

Tribunal

No detail provided as to what the service entailed.

Costs disallowed.

34. Item 15 [NAME_40]

Applicant

Respondent

Tribunal

No detail provided.

Costs disallowed.

35. Item 16 [NAME_40]

Applicant

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Respondent

Tribunal

No invoice or detail provided.

Costs disallowed.

36. Item 17 - Accountancy

Applicant

Very poor accounting no detail, no variances, no disclosures relating to associated companies and no budgets. The accounts collected and the expenditure expected.

Respondent

Tribunal

Accounts were filed; however, the accounting was desultory. Nominal award made.

Costs 25% allowed.

37. Item 18 [NAME_40]

Applicant

Respondent

Tribunal

No detail provided.

Costs disallowed.

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38. Item 19 [NAME_40] Counsel Fees

Applicant

Another legal invoice for unspecified services.

Respondent

Tribunal

No detail provided.

Costs disallowed.

39. Item 20 Legal & Accountancy Invoices

Applicant

These accounts are for large amounts of expenditure and are nonsensical without explanation. No invoices forthcoming despite being requested.

It is the responsibility of the Directors to obtain this information.

Respondent

Tribunal

unless supporting invoices can be provided, service charges are not payable.

Costs disallowed.

40. Item 21 Staffing and Management Costs.

Applicant

The Respondents were paying [NAME_72] and [NAME_81] as Property Manager. The 2020 breakdown of the invoice list shows £9,553.85 paid to [NAME_81] for 1 December to 31 March. This overlaps with the payment to

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[NAME_72]. No invoices or contract of employment for either party and no evidence of a handover. Additionally, no evidence of hours worked by logbooks etc.

Unreasonable level of renumeration without evidence.

Respondent

No detail of note provided although this appear between [NAME_72] and [NAME_81].

Tribunal

Ordinarily the Tribunal would find a handover period between agents for a short period say one month, reasonable. However, there is no evidence that it was reasonable to employ [NAME_82] once [NAME_72] were instructed.

Costs to [NAME_81] disallowed. Costs relating to [NAME_72] allowed.

41. Item 22 [NAME_81]

Applicant

No documentation to confirm why another payment was made to [NAME_81], considering her poor level of service. As per last the Tribunal decision

reasonable to pay an individual to manage the development hence this redundancy cost is

Respondent

Tribunal

See comments above regarding the service provided by [NAME_82].

Costs disallowed.

42. Item 23 Staff Costs

Applicant

44

No invoices or detail

Respondent

Tribunal

If this is a charge made by [NAME_72], then it would be allowed although the comment made by Respondent makes no sense.

Costs allowed subject to proof being provided to the Tribunal that this charge related to [NAME_72].

43. Item 24 Staffing to agent [NAME_103]

Applicant

No invoices provided by Respondent, hence there is no evidence to confirm if the service was provided.

Respondent

A copy of this invoice should be available from [NAME_103].

Tribunal

As with the item above, if this is a charge made by [NAME_103], then it would be allowed.

Costs allowed subject to proof being provided to the Tribunal that this charge related to [NAME_103].

44. Item 25 Discrepancy in Service Charge statement

Applicant

There are still missing invoices for this amount.

The Respondents are not prepared to consider this discrepancy which suggests poor accounting yet again.

Respondent

45

No specific comment.

Tribunal

No invoice provided.

Costs disallowed.

45. Item 26 [NAME_119]

Applicant

[NAME_110] were appointed by the Respondent to prepare fair and proper accounts with or without an Agent. No invoices, therefore, cannot assume work was carried out reasonably.

Respondent

No specific comment.

Tribunal

No invoice provided.

Costs disallowed.

46. Item 27 [NAME_120]

Applicant

No Invoices provided by Respondents, hence there is no evidence to confirm if the service was provided.

Respondent

No specific comment.

Tribunal

No invoice provided.

Costs disallowed.

47. Item 28 [NAME_84]

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Applicant

Respondent

No specific comment.

Tribunal

No invoice provided.

Costs disallowed.

48. Item 29 [COMPANY_106]

Applicant

Unreasonable invoices as the service can be provided cheaper by £47 per week. Therefore 21 tests at £47 is £987 over charged.

This is the use of a related party for an overpriced service. The Respondents claim [NAME_107] were cheaper, but no evidence provided. As per the original Tribunal decision was known and still no copies of competitive quotations.

Respondent

No specific comment.

Tribunal

[COMPANY_106] is a company of which [NAME_108] was a Director of, for at least the period in question. The invoices themselves, and online enquiry, offer no comfort that they had the knowledge and experience to carry out this work which is of vital importance. The company that were subsequently employed appear to have credibility for this work and offer a cheaper service. Costs are reduced to the level of those charged by [NAME_109].

£987.00 disallowed.

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49. Item 30 [COMPANY_106] above.

Tribunal

£612.00 disallowed.

50. Item 31 Repairs and Maintenances services - Invoices not accounted for

Applicant

There are no invoices for this outstanding amount. The service charge collected far exceeds the figures presented without explanation. The Applicants consider that repair and maintenance work took place in 2020/21 over and above what has been accounted for.

Very poor accounting and Directorial management to sign off and post inexplicable accounts. It is the Directors responsibility to produce fair and proper accounts with or without an Agent.

It is questionable what level of financial controls the Respondent had in place whilst working with an Agent.

Respondent

The service charge monies after April 2020 were collected by an external and separate company and therefore this matter needs to be addressed to and by [NAME_121] and the Respondent.

Tribunal

Service charges are paid to the agent on behalf of the Respondent and subsequent expenditure is the responsibility of the latter, not the agent. It is for the Respondent to obtain copies of the relevant invoices and provide an explanation for the same.

Th supporting invoices can be provided, these costs are not payable as part of the service charge.

51. Item 32 Repairs & Maintenance

See above.

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Tribunal

Determination as for the item above.

52. Item 33 Sundries & Depreciation

Applicant

There is a discrepancy between the invoices available and the figure shown in the accounts. There is no effort to reconcile actuals with invoices, before publishing the service charge statements.

Respondent

No specific comment.

Tribunal

charges are not payable. these costs are not payable as part of the service charge.

53. Item [ADDRESS] fees

Applicant

No invoice to consider if charges were reasonable.

Respondent

Tribunal

No invoice

Costs disallowed.

54. Item 35 Sundries & Depreciation

Applicant

Missing invoice to reconcile accounts.

Respondent

49

Accepted as £0.00

Tribunal

Costs disallowed.

Summary

55. The Tribunal has now completed its determination in respect of the applications made, save for any appeal. It is clear to the Tribunal that during the periods covered by this application, the management of the development was not carried out in the best interests of the leaseholders. However, the Tribunal is heartened by the statement of the Applicants during the last hearing, to the effect that under new directorship, management of the develop

Appeal

56. The appeal provisions are given in paragraph 46 of the original decision.

50

Appendix One Relevant Legislation

51

Application under Section 27A of the Landlord and Tenant Act 1985

Sections 18 and 19 provide:

payable by a tenant of a dwelling as part of or in addition to rent

(a) which is payable, directly or indirectly, for services, repairs, maintenance,

(b) the whole or part of which varies or may vary according to the relevant costs.

(2) The relevant costs are the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a superior landlord, in connection with the matters for which the service charge is payable.

(3) For this purpose

(b) costs are relevant costs in relation to a service charge whether they are incurred, or to be incurred, in the period for which the service charge is payable or in an earlier or later period.

19(1) Relevant costs shall be taken into account in determining the amount of a service charge payable for a period

(a) only to the extent that they are reasonably incurred, and

(b) where they are incurred on the provision of services for the carrying out of works, only if the services are of a reasonable standard;

and the amount shall be limited accordingly.

(2) Where a service charge is payable before the relevant costs are incurred, no greater amount than is reasonable is so payable, and after the relevant costs have been incurred any necessary adjustment shall be made by repayment, reduction, or subsequent charges or otherwise.

Section 27A, so far as relevant, provides:

(1) An application may be made to the appropriate tribunal for a determination whether a service charge is payable and, if it is, as to

(a) the person by whom it is payable,

(b) the person to whom it is payable,

(c) the amount which is payable,

52

(d) the date at or by which it is payable, and

(e) the manner in which it is payable.

(2) Sub-section (1) applies whether or not any payment has been made.

(3) An application may also be made to the appropriate tribunal for a determination whether, if costs were included for services, repairs, maintenance, improvements, insurance or management of any description, a service charge would be payable for the costs, if it would, as to

(a) the person by whom it would be payable,

(b) the person to whom it would be payable,

(c) the amount which would be payable,

(d) the date at or by which it would be payable, and

(e) the manner in which it would payable.

s Tribunal.

Application for an Order under Section 20C of the Landlord and Tenant Act 1985

20C. Limitation of service charges: costs of proceedings.

(1) A tenant may make an application for an order that all or any of the costs incurred, or to be incurred, by the landlord in connection with proceedings before - account in determining the amount of any service charge payable by the tenant or any other person or persons specified in the application.

(2) The application shall be made

(aa) in the case of proceedings before the First-tier Tribunal, to the tribunal;

(3) The court or tribunal to which the application is made may make such order on the application as it considers just and equitable in the circumstances.

The purpose of section 20C is to give the Tribunal the power to prevent a landlord actually recovering its costs via the service charge when it was not able to recover them by a direct order from the Tribunal. The discretion given to the Tribunal is to make such order as it considers just and equitable.

Application for an Order under Paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002

53

Limitation of administration charges: costs of proceedings

5A (1) A tenant of a dwelling in England may apply to the relevant court or tribunal for an order reducing or extinguishing the tenant's liability to pay a particular administration charge in respect of litigation costs. (2) The relevant court or tribunal may make whatever order on the application it considers to be just and equitable.

(3) In this paragraph

connection with proceedings of a kind mentioned in the table, and table in relation to those proceedings.

The table referred to in sub-paragraph 3(b) confirms that if the proceedings to which the costs relate were proceedings in the first-tier tribunal, then the first-tier tribunal is the relevant court or tribunal.

The Tribunal therefore has a discretion limited only by the requirement that it make a just and equitable decision.

54

Appendix Two Copy of Order

55

Case Reference(s)

:

BIR/00FY/LIS/2020/0046

Representative

:

[NAME_20]/[NAME_4]

Respondent

:

[redacted]

Joining Respondent

:

[redacted]

Representative

:

[NAME_36] - Counsel H [NAME_39] of Applications

:

An application in respect of the liability to pay and reasonableness of service charges under section 27A of the Landlord and Tenant Act 1985 and applications for Orders under section 20C FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

56

of the Landlord and Tenant Act 1985 and under paragraph 5A of Schedule 11 of the Commonhold and Leasehold Reform Act 2002.

Tribunal Member

:

[NAME_41] (Regional Surveyor)

Date of Order

:

14 September 2022

__________________________________________________________

ORDER _____________________________________________________

57

Background

1. has received applications in respect of the liability to pay and reasonableness of service charges under section 27A of the Landlord and Tenant Act 1985 in respect of [NAME_1], [NAME_44] and also applications for Orders for the Limitation of the Respondent section 20C of the Landlord and Tenant Act 1985 under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002.

2. The application was deemed withdrawn on 17 September 2021 under rule 11 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 due to the non-payment of hearing fee. On 22 September 2021, the Tribunal received an application to reinstate the application. On 29 October 2021, the Tribunal reinstated the application.

3. In their written evidence and also during the oral hearing held on 13 July 2022, the Respondent - [NAME_1] Management Ltd stated that invoices for the periods stated below were all retained by a former managing agent of the development [NAME_70], a Director, of [COMPANY_71], 14 16 [ADDRESS] [POSTCODE]. These invoices were thus not made available to the Applicant leaseholders to consider.

4. imperative that these invoices are made available.

Rule 20

5. Rule 20 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 in so far as is relevant to this matter states as follows:

(a)

58

Order

6. Under Rule 20 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the Tribunal hereby orders [NAME_70], a Director, of [COMPANY_71], 14 16 [ADDRESS] [POSTCODE] to produce all invoices and financial records for the periods indicated below in respect of and relating to [NAME_1] Management [NAME_1] [NAME_1] NG7 within 21 days of the date of this order.

7. These documents should be sent to the First-tier Tribunal (Property Chamber), 15th [ADDRESS] [POSTCODE].

8. If these documents are no longer in your possession, then you should state where, when, and to whom they were given, again within 21 days of the date of this Order.

[NAME_41]

59

Appendix Three [NAME_43] Schedule relating to original decision.

60

FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

[NAME_43] Schedule

Property:

[NAME_1] [NAME_1] NG7

Case References:

BIR/00FY/LIS/2020/0046

Item Cost Heading: Legal and Accountancy

61

62

63

64

65

66

67

68

[NAME_43] Schedule

Property:

[NAME_1] [NAME_1] NG7

Case References:

BIR/00FY/LIS/2020/0046

Item Cost Heading: Staffing -

69

70

71

72

73

74

*2021 According to [NAME_82], in the Service Charge year 2021 (April 2020-end March 2021) no staffing costs were paid by [COMPANY_122] from the Service Charges collected during that period.

75

[NAME_43] Schedule

Property:

[NAME_1] [NAME_1] NG7

Case References:

BIR/00FY/LIS/2020/0046

Item Cost Heading: Repairs and Maintenance

76

77

78

79

80

81

82

83

84

85

86

87

88

[NAME_43] Schedule

Property:

[NAME_1] [NAME_1] NG7

Case References:

BIR/00FY/LIS/2020/0046

Item Cost Heading: Sundry & Depreciation

89

90

91

92

93

Appendix Four [NAME_43] Schedule relating to supplementary decision.

94

[NAME_43] Schedule

Property:

[NAME_1] [NAME_1] NG7

Case References:

BIR/00FY/LIS/2020/0046

Item Cost Heading: [NAME_123]

95

96

97

98

99

100

101

102

103

104

105

[NAME_43] Schedule

Property:

[NAME_1] [NAME_1] NG7

Case References:

BIR/00FY/LIS/2020/0046

Item Cost Heading: [NAME_43] 2 Staffing

106

107

108

109

[NAME_43] Schedule

Property:

[NAME_1] [NAME_1] NG7

Case References:

BIR/00FY/LIS/2020/0046

Item Cost Heading: [NAME_124]

110

111

112

113

114

115

[NAME_43] Schedule

Property:

[NAME_1] [NAME_1] NG7

Case References:

BIR/00FY/LIS/2020/0046

Item Cost Heading: [NAME_43] 2 Sundries & Depreciation

116