First-tier Tribunal Decides on Reasonable Share of Insurance Premium for Tenants

OUTCOME: Dismissed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00AG/LSC2024/0281 Property : 41A Parkway, London [POSTCODE] Applicants : [redacted] (2) [COUNSEL] (3) [COUNSEL] : [COUNSEL] Respondents : [redacted] :

[COUNSEL] of [NAME] : For the determination of the liability to pay service charges under section 27A of the Landlord and Tenant Act 1985 Tribunal members : Judge [NAME] FIRPM Venue : 10 [ADDRESS] [POSTCODE] Date of hearing Date of decision : 2 December 2024 7 January 2025

DECISION

2 Decisions of the tribunal (1) The tribunal determines that the 50% of the insurance premium for 2024/2025 is reasonable and payable by the Applicant. (2) The tribunal makes an order under section 20C of the Landlord and Tenant Act 1985 so that 50% of the landlord’s costs of the tribunal proceedings may be passed to the lessees through any service charge. (3) The tribunal makes an order under para. 5 of Schedule 11 of the Commonhold and Leasehold Reform Act 2002 limiting the Applicants’ liability to pay the Respondents’ costs of this [NAME] to 50%. _____________________________________________________ The [NAME]

1. The Applicant seeks a determination pursuant to s.27A of the Landlord and Tenant Act 1985 (“the 1985 Act”) as to the amount of service charges payable by the Applicant in respect of the service charge year 2024/2025.

2. The subject property comprises a 2 bedroom flat on the 1st and 2nd floor of a 4-story building with commercial premises ([NAME]) on the ground floor and basement floors.

3. The Applicant seeks the tribunal’s determination as to the reasonableness of the respondents’ demand for 50% of the total insurance premium due. The hearing 4. The Applicants were represented by [NAME] [NAME] [NAME] at the hearing and the Respondents were represented by Ms [COUNSEL] of counsel. The background 5. The property which is the subject of this [NAME] is a 2 bedroom flat on the 1st and 2nd floor of a 4-story building with commercial premises ([NAME]) on the ground floor and basement floors as referred to in the lease.

6. Neither party requested an inspection and the tribunal did not consider that one was necessary, nor would it have been proportionate to the issues in dispute.]

3 7. The Applicant holds a long lease of the property dated 11 April 2008 which includes the terms of the original lease 27 October 1989, which requires the Respondent landlord to provide services and the tenant to contribute towards their costs by way of a variable service charge. The specific provisions of the lease and will be referred to below, where appropriate. The issues 8. At the start of the hearing the parties identified the relevant issues for determination as follows: (i) The reasonableness of the percentage charged to the applicant which is divided equally (50%) between the Applicant and the commercial premises.

9. Having heard evidence and submissions from the parties and considered all of the documents provided, the tribunal has made determinations on the various issues as follows. The insurance premium for 2024/2025 10. In the [NAME] form the Applicant asserted that: (i) The subject property is substantially smaller at 36.20% than the

extended commercial premises at 63.80% of the total floor area

of the building. (ii) The commercial premises which operates as a [NAME] carries

a higher risk of loss or damage. (iii) The market value of the commercial premises is 4.6 times higher

than the value of the subject residential property. (iv) The tribunal should determine that a fairer and more reasonable

apportionment of the insurance premium due from the

Applicant is no more than 25%.

11. The Applicant told the tribunal that works of extension to the basement area in 2017 had substantially increased the size of the commercial premises and the upgrade to fittings had caused the insurance premium to increase from £2,610.60 in 2023 to £5,789.40 over the last five years. However, the percentage payable by the Applicant at 50% of the insurance premium had remained the same although the lease provides in The Fifth Schedule Part I at clause (2) of the Lessee’s Covenants:

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(2) To pay by way of additional rent om demand a sum or

sums equal to the sum or sums of money which the

[NAME] may reasonably expend ion effecting or

maintaining the insurance of the Demised Premises in

accordance with Clause 1 of the Sixth Schedule. 12. The Sixth Schedule requires the [NAME]:

(1) Subject to the payment by the Lessee of the rents and

share of the insurance premium herein mentioned the

[NAME] will keep the Property including The Demised

Premises insured to its full reinstatement value against

loss or damage by fire aircraft explosion and subsidence

and such of the usual comprehensive risks including

Architects and Surveyors fees to insure against… 13. During the course of the hearing the Applicants asserted they would

accept as reasonable a 43%/57% split for the residential and commercial

premises, respectively. The Applicants also accepted that if they

converted the roof space into habitable accommodation a 50/50 spilt of

the insurance premium between the commercial and residential

premises would be reasonable. 14. In the Respondents’ Statement of Case dated 14 October 224 it was

accepted that a lease dated 1 November 2016 of the commercial premises

comprising the ground and basement floors had been granted for a term

of 20 years with effect from that date. The Respondents asserted that the

Applicants’ Demised Premises included the first and second floor flat as

well as the entrance hallway and staircase to the first floor as well as

floors, ceilings, joists and beams, the roof, roof void and beams and

timbers supporting the roof. 15. The Respondents asserted that an invoice of £6,726.21 for the insurance

premium covering the period 3 September 2024 to 2 September 2025

had been received made up of:

Property owners-renewal £5,744.29

Commercial loss recovery insurance – new business £261.26

Insurance premium tax - £720.66

16. The Respondents stated the sum of £261.26 was removed from the

demand made to the Applicants and the remainder divided equally

between the commercial and residential premises amounting t0

£3,232.48. 17. The Respondents stated they had commissioned a report from [COMPANY] who inspected the commercial and residential premises

on 8 October 2024. This report attributed a floor area of 122.5 sqm to

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the ground and basement floors and 93.1 sqm to the Applicant’s demised

premises ie. a percentage of 57% commercial premises to 43% residential

premises. 18. The Respondents asserted that a 50/50 split of the insurance premium

was reasonable as the Applicants’ Demised Premises includes all

conduits exclusively serving 41A Parkway, all external walls and the

whole of the roof structure. Further, the Respondents are required to

insure for the full reinstatement value not the respective market values

of the commercial and residential premises. 19. A witness statement dated 14 October 2024 from [NAME] set

out the steps taken to obtain the most competitive insurance quote

through the services of the Respondents’ insurance brokers [COMPANY]. The demand for 50% of the insurance premium from

the lessees of the residential premises had been made since Respondents

acquired the freehold in 1988 and this percentage had not varied. 20. Ms [NAME] submitted that as the only challenge made is to the

Respondents’ decision to demand a 50% contribution to the insurance

premium, it is for the applicants to show the Respondents’ decision was

irrational and unreasonable; [NAME] v [COMPANY] [2024] UKUT

120 (LC). The tribunal’s decision 21. The tribunal determines that the proportion payable by the Applicants

towards the insurance premium of 2024/2025 is 50%. Reasons for the tribunal’s decision 22. The tribunal accepts the Respondents’ evidence as to how it has gone

about acquiring the insurance premium and why it was determined the

reasonable proportion payable by the Applicants is 50%. The tribunal

found the evidence relied upon by the Applicants in respect of

habitable floor areas or market values was not sufficient

persuasive to support the Applicants’ case.

23. The tribunal finds the Applicants failed to demonstrate that there was a

substantial difference in the floor areas of the commercial or residential

premises or that the difference in market value was relevant to the

apportionment of the insurance premium. [NAME] under s.20C and para 5 of Schedule 11 24. The Applicant made an [NAME] in the [NAME] form for an order

under section 20C of the 1985 Act and para 5 of Sch. 11 of the 2002 Act.

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Having heard the submissions from the parties and taking into account

the determinations above, the tribunal determines that it is just and

equitable in all the circumstances for an order to be made under section

20C of the 1985 Act or para 5 of Schedule 11 of the 2002 Act limiting

the Respondents recovery of costs through the service charge and the

Applicants’ liability to pay to 50%.

Name: Judge Tagliavini Date: 7 January 2025

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 to the First- tier Tribunal at the Regional Office which has been dealing with the case. The [NAME] should be made on Form RP PTA available at https://www.gov.uk/government/publications/form-rp-pta-[NAME]-for- permission-to-appeal-a-decision-to-the-upper-tribunal-lands-chamber 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).

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