First-tier Tribunal Decides on Reasonableness of Service Charges

OUTCOME: Allowed in Part

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00BG/LSC/2023/0460/0461 and 0462 Property : Flats 123, 142, 177, 178 and 179 [NAME_13], London E14 Applicants : [redacted] (2) [COMPANY_3] (Flat 142) (3) [COMPANY_4] (Flats 177,178 & 179) Representative : [NAME_1] (1st and 2nd applicants) [NAME_5] (3rd applicant) Respondent : [redacted] : [NAME_7], counsel Type of application : For the determination of the liability to pay service charges under section 27A of the Landlord and Tenant Act 1985 Tribunal members : Judge [NAME_8] Venue : 10 [ADDRESS] [POSTCODE] Date of hearing Date of decision :

13 & 14 January 2025 21 February 2025

DECISION (corrected 28 March 2025)

2 Decisions of the tribunal (1) The tribunal determines that: A. The credits transferred by the respondent from the applicants’ service

charge accounts to the reserve fund and represent excess payments for

Building and Estate charge in respect of all service charge years in

dispute, are to be re-credited to the respective service charge accounts

as soon as is reasonably possible. B. The tribunal is unable to determine whether the amount of £739,833.43

said by the respondent to be in the reserve fund as the date of the

hearing, is a true or inaccurate reflection of the amount that should be

in the reserve fund account for all leaseholders of Limehouse Basin, as

this is framed as an ‘accounting exercise’ rather than a service charge

dispute and therefore it falls outside of the jurisdiction of the tribunal. C. The cleaning charges are reasonable, rational and proportionate and are

payable. D. The electricity charge are reasonable, rational and proportionate and are

payable. E. The 92% recovery of costs of the maternity cover (cleaner) from HMRC

is reasonable, as there is no small employee recovery available to it by

which the respondent can increase this percentage. F. The front entrance doors to the flats are demised to the applicants who

are not liable to pay a service charge for an annual safety check. G. It is reasonable for the respondent to carry out annual inspections and

safety checks of the communal front doors with the help of a specialist

and to have three monthly checks carried out by trained staff members. H. The accountancy, audit are reasonable and payable. I. The audit preparation fees are reasonable and payable. J. The fees charged by [NAME_9] have been reasonably incurred and

are reasonable in amount in view of the handover of this large complex

Estate. K. [ADDRESS] Fee of £251 per block is reasonable. However,

the £500 per block to complete a ‘plan of action is unreasonable

and is limited to £100 per block.

3 L. The staff costs have been reasonably incurred by the respondent and are

payable. M. The (revised) estimated Safety Case Works in the sum of £20,000 was

agreed by the parties as reasonable. N. No external decorations carried out and no cost was incurred. O. No internal decorations carried out and no cost was incurred. P. Landscaping costs were not incurred. Q. Landscape maintenance estimated and actual costs reasonable and

payable. (2) The terms of the updated leases in respect of Building F require the third

applicant to contribute to the costs of maintaining the whole Building,

including all areas on, above and below ground level except where

expressly excluded i.e. lifts. (3) The tribunal limits the recovery of the respondent’s costs of this

application through the service charges to 75% pursuant to s.20C of the

landlord and Tenant Act 1985 and/or para 5A of Sch. 11 of the

commonhold and Leasehold Reform Act 2002. (4) The tribunal makes no order in respect of the reimbursement of fees. _____________________________________________________ The application 1. The applicants seek a determination pursuant to s.27A of the Landlord and Tenant Act 1985 (“the 1985 Act”) as to the amount of service charges payable to the respondent by each applicant in respect of:

[NAME_12] – reasonableness and payability of

service charges for the service charge years 1 October 2021 to 30

September 2022; 2022/2023 and 2023/2024 (estimated).

[COMPANY_4] – reasonableness and payability of service charges

for the service charge years 2020/21; 2021/22; 2022/23 and the

2023/2024 estimated charges.

[COMPANY_4] also seeks a determination of the relevant percentage

payable for service charges under the leases of its three flats in

Block F.

4 2. As there were three applications concerning different flats at the same property, the tribunal consolidated the applications and directed that the application be heard together. Background 3. [NAME_13] is a development of 180 units spread across 6 apartment

blocks and 9 townhouses in Limehouse, London E14. It was constructed

by [COMPANY_36] in 1999/2000 and is one of a number of developments

that are situated on the Limehouse Basin next to the river. The

apartment blocks are labelled as C Blocks (C1-4, Flats 1-126), D Block

is Flats 127 to 157, including 127A, a commercial unit; the townhouses

are Houses 158 to 166 (sometimes known as E Block) and F Block is

Flats 167 to 179 which includes the third applicant’s ground floor

commercial units. 4. In his skeleton argument, [NAME_7] set out the history of this

development which was not disputed by the applicants. [NAME_7]

informed the tribunal that the respondent was incorporated in 2000,

when [NAME_13] was constructed. Every leaseholder at [NAME_13] is a shareholder of the Respondent. Every leaseholder is

entitled to apply to be a director of the respondent. Directors of the

respondent are unpaid volunteers who fulfil their roles in their spare

time. They outsource the day-to-day management of [NAME_13] to

a professional estate management company but maintain an oversight

role and take active roles in certain matters, for example, cladding

remediation, approving certain expenditure by the management

company. [NAME_11] is the current management estate company, engaged

since July 2022. 5. The service charges for the estate are divided into five specific areas:

(i) Blocks C - 126 flats

(ii) Block D - 31 flats and 1 commercial unit

(iii) Blocks E - 9 houses

(iv) Block F - 10 flats and 3 commercial units converted to residential

use

(v) Estate Charges

6. Flat 123 is situated in Block C, Flat 142 is situated in Block D, and 177,

178 and 179 are situated in Block F. The hearing 7. The first and second applicants were represented by [NAME_1] (a

former director of the respondent) and the third applicant was

represented by [NAME_5] who adopted the arguments and

submissions made by [NAME_1], where they concerned common issues

5

and advanced his own submissions where they concerned Block F.. The

respondent was represented by [NAME_7] of counsel. 8. The parties relied on the following electronic bundles of documents: Part A - 751 pages Part B - 50 pages Part C -375 pages Part D – 20 pages Part E – 169 pages

9. Included in the bundles were witness statements from [NAME_1]

(18/10/24); [NAME_14] (18/10/24 director of the second applicant

company; [NAME_5] (18/10/24), director of the third applicant;

[NAME_15] (21/10/24) Chartered Accountant for the applicants

and [NAME_16] (23/10/24) director of the respondent company and

[NAME_17] (23/10/24) for the respondents. In addition, the parties

relied on bundles of authorities and provided a Skeleton Argument to

assist the tribunal. Bundle E was a late additional bundle relied on by the

applicants respondent but no objection was made by the respondent.

applicants.

10. None of the parties requested an inspection and the tribunal did not

consider that one was necessary, nor would it have been necessary or

proportionate to the issues in dispute. 11. The applicants holds a respective long lease for each flat which requires

the landlord to provide services and the tenant to contribute towards

their costs by way of a variable service charge. The specific provisions of

the leases will be referred to below, where appropriate. The issues 12. At the hearing, the applicants identified the heads of service charge that

remained in dispute concerned the reasonableness and payability of:

The first applicant and second applicants:

[redacted] • Insurance • [NAME_19] • Accounts/audit fees/preparation costs • Reserve Funds • EV Chargers • Entrance doors • Electricity charges • Cleaning costs

6 • Safety Case work • Water surface charge costs

And for second applicant: [redacted]

AND the estimated costs for 2023/2024 in respect of: • Insurance • [NAME_19] • Accounts/audit fees/preparation costs • Reserve Funds • EV Chargers • Entrance doors • Electricity charges • Cleaning costs • Safety Case work • Water surface charge costs • Arbitrary Block D costs (commercial unit) – 2nd applicant only • Reserve funds • Communal doors • [NAME_20] fees • Staff costs • Fire evacuation plan • High Risk Building Fees • Flat roof survey • 24hr emergency line • Jet washing • Landscape maintenance • Landscaping • Internal decorations • External decorations

The third applicant: [redacted] 2022/2023 and 2023/2024 (estimated)

• Items disputed as above; AND • Percentage of service charges for Block F

13. The parties were however able to agree on a number of these issues

leaving only the following to be determined by the tribunal:

(*) items in dispute by third applicant

• Reserve funds & re-credits of excess sums collected

7 • Entrance doors • Communal doors • Communal electricity • Cleaning costs • Safety Case works • Accountancy fees/audit fees • Accountancy preparation • [NAME_20] fees • Staff costs • Fire evacuation plan • 24hr emergency line • High Risk Building fees • Flat roof survey • High Risk Building fees • Landscape maintenance • Landscaping • Internal decorations • External decorations • [NAME_21]/Building F charges (*)

14. The applicants also sought a reimbursement of the application and

hearing costs and an order under s.20C of the Landlord and Tenant Act

1985.

The tribunal’s determination

15. In reaching its determinations, the tribunal found the second and third

applicants simply adopted the first applicant’s submissions, without

seeking to distinguish the items they disputed for a particular year that

fell outside of the first applicant’s application or seek to make separate

submissions in respect of item, with the exception of part of the third

applicant’s case and the definition of ‘[NAME_21].’ In

reaching its determinations, the tribunal had regard to s.19 of the

Landlord and Tenant Act 1985 which states:

16. The tribunal accepts [NAME_7]’s analysis of this legislation he set out

in his Skeleton Argument;

Relevant costs may be taken into account in determining

the amount of a service charge payable only to the extent to

which they are “reasonably incurred”: s.19(1)(a). This

applies once costs have been incurred. There is a two-stage

test. First, was the decision- making process reasonable?

Secondly, is the sum to be charged reasonable in light of

market evidence? The test is whether charges that were

made were reasonable, not whether there are other

8

possible ways of charging that might have been thought

more reasonable. A tribunal should not simply impose its

own decision if the course chosen by the landlord leads to a

reasonable outcome; Havering LBC v MacDonald [2012]

UKUT 154 (LC), Waaler v Hounslow LBC [2017] EWCA

Civ 45).

Where relevant costs have been incurred on the provision

of services or the carrying out of works, those services or

works must be of a “reasonable standard”: s.19(1)(b).

Where a service charge is payable before relevant costs are

incurred, “no greater amount than is reasonable” is

payable, s.19(2). This applies to interim service charge

demands and sinking funds/reserve funds. A landlord

needs to be able to point to some rational basis for an

amount demanded as a contribution towards such funds…

Where a lease does not state a percentage but provides that

the tenant shall pay a “fair” or “reasonable” proportion of

the service charge and that that proportion shall be

determined by the landlord, the tribunal can determine

what the reasonable apportionment would be. In this case,

the Applicants’ issues include(d) apportionment, in that

they challenge the way in which the Respondent has

apportioned services based on block allocation or

contribution.

17. 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. Reserve Funds 18. Initially the applicants were primarily concerned with the alleged

manner in which the respondent had dealt with the sums collected in

respect of the reserve fund alleged to be in breach of its duties. The

applicant submitted that the reserve fund accounts were initially opened

with HSBC to hold the reserve funds on trust, and to ensure that the

reserve funds were held in a separate bank account to the service charge

monies. 19. In 2023 the Respondent decided to close the accounts and to transfer the

funds held on trust for the leaseholders to [NAME_22]’s general

account. The funds were then mixed with hundreds of other

developments being managed by [NAME_11], including service charge monies.

Following requests made by the applicants for the Respondent to

disclose bank statements to establish the level of reserve funds, and to

ensure that the funds were being held in a separate and ring-fenced

account.

9 20. The applicants became aware this year that the Respondent has

been using the reserve funds as expenditure for the estate rather than re-

crediting excess sums paid by the leaseholders for estimated service

charges where the actual sums were less. Although not clearly stated in

the application that the applicants disputed the respondent’s The

applicants asserted the respondent was not entitled to do this under the

terms of the leases. [NAME_1] referred the tribunal to his lease dated

5/11/01 which granted a term of 200 years less three days commencing

on 24 June 1998. The Sixth Schedule set out the parties obligations

under Part “A” (Building Costs); Part “B” (Estate Costs) and Part C

(Costs applicable to Parts A and/or B). The same provisions were also

included in the leases for Blocks D. 21. [NAME_1] accepted the lease made express provision for the collection

of a reserve fund and submitted the estimated costs of this were included

in the estimated service charge demands. He submitted that para 1(ii)

and (vi) of the Fourth Schedule – Part I (Estate Service Charge)

defined the service charge as:

“Service Charge” means the Relevant Percentage of the

Expenditure on Estate Services

AND

”Service Charge Excess” means the amount by which any credits

shown on a Service Charge Statement exceed the Service Charge

shown thereon 22. Para 7 of the Fourth Scheule -Part I states;

Within seven days of receipt of the final Service Charge

Statement for Term (howsoever determined) the Estate

shall pay to the Tenant any Service Charge Excess shown

thereon 23. The respondent rejected any allegations of misappropriation of the

reserve funds and disputed whether the tribunal had the jurisdiction to

carry out an ‘accountancy’ exercise or deal with allegations of misuse or

misappropriation of reserve funds. 24. [NAME_7] referred the tribunal to para 14 of Part C of the Sixth Schedule

which states;

Such sums as shall be considered necessary by the Landlord or

the Estate Company (whose decision shall be final as to

questions of fact) to provide a reserve fund or funds for items

of future expenditure to be or expected to be incurred at any

time in connection with the Estate

10

provided the respondent an absolute discretion to decide what sums

were considered necessary for the reserve fund and to put any sums paid

in excess of the service charges to be put in the reserve fund rather than

being re-credited to a leaseholders’ account. [NAME_7] submitted that

it did not matter whether these had been budgeted or otherwise pre-

allocated. In support of this argument [NAME_7] also relied on paras 8

and of Part A and Part B of the Sixth Schedule which state;

The Landlord or the Estate Company may alter or modify the

services referred to in this Schedule and/or provide additional

service if such alteration modification or additional service is or

are in the opinion for the Landlord or the Estate Company

reasonably necessary or desirable in the interest of good estate

management or for the benefit of the tenants or occupiers of the

Building and/or the Estate The tribunal’s decision 25. The tribunal determines that the express terms of the leases for

Buildings C and D require that:

(i) Sums paid in excess of the percentage specified in the lease as of

the Part A Building Charges are to be re-credited to the respective

leaseholders.

(i) Sums paid in excess sums of the percentage specified in the lease

as Part B Estate Charges are to be re-credited to the leaseholders

by the Estate Company.

(ii) Excess sums paid to the [COMPANY_23] are to be repaid to the

leaseholders. Reasons for the tribunal’s decision 26. The tribunal finds that the percentage of the Building and Estate charges

are specified in the lease. The lease expressly provides that excess Estate

Charges are to be re-credited to the leaseholder and excess Basin Costs

are to be repaid to the leaseholder. The tribunal disagrees with [NAME_7]’s interpretation of the Sixth Schedule of the lease and finds it

does not provide a discretion to the respondent to divert excess

Building or Estate costs to the reserve fund.

27. The tribunal finds that the lease does provide a mechanism for the

Landlord or Estate Company to increase the services and/or amounts

required in the reserve fund, but this fund does not and is not

intended to operate as a mechanism for defraying the charges of

defaulting leaseholders.

11 Entrance door works – issue conceded by respondent 28. The applicants submitted that the leases describes as being included in

the demise in the first Schedule – Part I at para. B as;

The entrance door of the Demised Premises and any door

leading to a balcony (but excluding the paintwork and

decoration of the external surfaces of such windows and window

frames) Communal door works 29. The applicants asserted that it is unreasonable and wrong for the

respondent to incur significant additional costs for simple and basic

visual checks to the doors. The doors have been risk assessed and have

no history of damage or defects for the last 21 years. 30. The applicants also submitted that the tenants were required by clause 4

of the lease, to report any defects seen to the Landlord, the Estate

Company and the [COMPANY_23]. Further, inspections of the communal

doors could easily be allocated to the staff currently employed at the

development at no or little extra cost. Specifically, the porters were

trained to patrol and inspect the buildings when the claddings issues

arose. The porters are required to perform routine checks of the

buildings, including the doors, for any damage or defects. This is

undertaken weekly by the porters who are a highly trained, competent

and experienced team. 31. The respondent maintained its position as set out in it the statement of

case and in [NAME_24]’s written and oral evidence to the tribunal that

as the Responsible Person, the respondent has a duty to consider

instruction of specialists where it, (or staff it employs), has no such

specialist knowledge or experience. Based on advice it has taken from

specialists, the respondent does not agree that it would be reasonable to

expect the Estate team to add these inspections to their duties and it

would be disruptive to their duties, particularly if they were not

trained and/or compensated accordingly. 32. The respondent also submitted that here is also the issue of vicarious

liability if such checks are not carried out correctly and the advice given

to [NAME_24] by the insurance brokers that insurers might use the

respondent’s failure to have carried out the checks professionally could

lead to problems claiming on the insurance. The applicants offer no

alternative other than non-trained people taking on additional roles

where they assume no further cost (or potential liability) may be

attached.

12 33. The respondent stated that a total of 6 reports were prepared, one for

each of Buildings C1-4, D and F which involved154 doors being surveyed.

The reports total 355 pages. 6 days were spent surveying the communal

doors plus the time to produce the reports. Therefore, the costs incurred

are reasonable and payable by the applicants. The tribunal’s decision 34. The tribunal finds it reasonable for the respondent to incur an annual

cost from a specialist for checks to the communal doors. The tribunal’s reasons 35. The tribunal accepts the respondent’s explanation for why it employs the

services of specialists to carry out what the applicants perceive to be

simple, basic checks rather than asking the porters to do so or relying on

occupiers to report defects with the communal doors. The tribunal finds

that the potential consequences of these communal doors not being

properly inspected and remaining defective outweighs the reasonable

cost of an annual inspection. 36. However, the tribunal considers it reasonable for porters to be trained

and required to carry out three monthly checks of the communal doors

as part of their duties. Electricity charges 37. The applicants asserted that the Sixth Schedule, Part B ‘Estate Costs’

provides that LEM shall keep lighted the roads and pathways on the

estate. The respondent also provides accommodation for the porters and

the costs associated with the [NAME_25], and the lights on the

roads and pathways is currently being charged to Buildings C, D and

F. There has not been any allocation to the estate or Building E (the

townhouses). This means that other leaseholders on the estate are not

making any contribution towards certain Estate charges. 38. The applicants stated they have reviewed the electricity invoices and

believe that £20,000.00 should be allocated to the estate for the

electricity charges as this would be a reasonable apportionment. 39. The respondent accepted there was a historic anomaly as to how

communal electricity charges are apportioned given there are no

separate meters and never have been since the Development was built

and no means of identifying separate costs without installing meters. 40. The respondent asserted that there is no currently identifiable separate

cost for the [NAME_25] that can be apportioned as an Estate cost. The

13

same applies to lighting across the Estate. Each Building powers and

pays for the nearby lighting or Lodge (for which it receives a direct

benefit by virtue of its vicinity in either case).The only long term way

forward would be to install meters at leaseholders’ cost although the

respondent accepted it would be possible to get an electrical engineer to

do an assessment of the energy used to power the [NAME_25]/Estate

Office and the street lights fed from each Building The respondent stated

it will seek a quotation for the cost of this exercise as well as considering

the cost of installing individual meters. The tribunal’s decision 41. The tribunal finds the respondent’s historic and current allocation of

these charges to be reasonable in the absence of individual meters for

the Buildings and the Estate. The tribunal’s reasons 42. The tribunal accepts the respondent’s explanation as to why it has

historically allocated the electricity charges in the current format. The

tribunal accepts that this was not previously an issue raised by

leaseholders when energy prices were low and that it has become one

since their increase. However, for future years, the tribunal would

reasonably expect the respondent to investigate and have carried out an

assessment of the energy used to power the Estate Office and the

street lights on the Estate and/or alternatively explore the cost of

installing individual meters. Cleaning costs and recovery of maternity cover 43. The applicants asserted that the cleaner, who is employed for 40 hours a

week, spends the majority of their time cleaning the Estate and very

little time in Buildings C1 C2 C3 C4 D and F). The applicants asserted

the respondent has failed to appropriately allocate the costs incurred.

The applicants suggested that the cleaner should be required to complete

a detailed rota, specifying the time spent on cleaning a particular

Building or the Estate. 44. The applicants also asserted the respondent had failed to fully recover

the costs of providing maternity cover for the cleaner from HMRC as they

have been able to recover 99% of the costs of cover, rather than the 92%

the respondent got back. 45. The respondent asserted that the sums for the suggested amendment to

the cleaning costs are in reality very modest and do not justify the

detailed approach suggested by the applicants, nor is the respondent

required to do so by the terms of the leases. The respondent stated that

there are no timesheets as such, but only a cleaning schedule, although

14

no schedule or hours are specifically allocated to separate elements,

although the bulk of the time is spent on cleaning of the residential parts,

but this may vary depending on the needs of the Buildings and the

Estate. However, the respondent proposed it would consider making a

change to the way it allocated these costs for future years, by 46. The Respondent submits that maternity cover pay has been recovered

through HMRC and not incurred. This issue was not formally raised by

the Applicants until witness evidence. The tribunal’s decisions 47. The tribunal finds the allocation of the costs of cleaning are reasonable

and payable by the applicants. 48. The tribunal finds the respondent has recovered the maximum amount

for statutory maternity cover from HMRC. The tribunal’s reasons 49. The tribunal finds the apportionment used by the respondent for these

costs is reasonable, appropriate and proportionate in view of the

uncertainty of the level and extent of cleaning any one Building may

require at any particular time. The tribunal finds these relatively small

sums are reasonably allocated to the leaseholders and that to carry out

the exercise suggested by the applicants of keeping timesheets for each

Building unreasonable and would only increase costs and not reduce

them. 50. The tribunal was unclear how the applicants had reached their

conclusion on how long the cleaner spent in any one Building or over

what period the average of 4-6 hours covered. 51. The tribunal accepts the respondent’s evidence that it has recovered as

much of the statutory maternity cover costs of the cleaner from HMRC

as is permitted. Safety Case works 52. The applicants asserted the respondent has charged £38,000.00 for

safety case works but has failed to produce invoices, safety case reports

etc. and the applicants remain unclear as to how this sum was incurred.

The government has expressed concern of “unacceptably high” fees for

building safety reports although under the new system anyone

responsible for a block of 18 metres or taller must submit a safety case

report to the [NAME_26].

15 53. The respondent’s asserted that its approach, to outsource to

professionals and obtain competitive quotes based on advice from

experts/consultants, is a reasonable one and it relied on the witness

statement of [NAME_17]. The respondent asserted the Safety Case

works were not limited to the installation of wall mounted secured boxes

and alternative quotes were obtained from [NAME_27], [NAME_28] and

[NAME_29]. The tribunal’s decision 54. The parties subsequently agreed that an estimate figure of £20,00o for

this item was reasonable.54. Accountancy and audit fees 55. The applicants asserted the respondent has unreasonably incurred two

professional fees for the same work, as it had terminated [NAME_15]’s appointment as the accountant without good reason and was

due to the allegations raised by [NAME_15] raising serious concerns of

financial mis-management. The applicants asserted there should have

been no duplication of accountancy fees but this was made unreasonably

necessary the respondent’s actions. 56. The applicants asserted that as a result of [NAME_15]’s termination of

employment, the respondent incurred additional fees by instructing

[NAME_30] to carry out the same services and is not entitled

to charge leaseholders for [NAME_31]’s fee of £1,800 which they incurred

as an additional payment, due to terminating his services without any

good reasons. 57. The tribunal was provided with a witness statement from [NAME_15]

who also attended the hearing but was not cross-examined by the

respondent. 58. The respondent asserted that its approach is to outsource xx

experts and that it is reasonable to do so. As it had lost confidence in [NAME_15] to provide the accountancy service it required, it was within its

rights to find an alternate and it was not unreasonable to do so. The tribunal’s decision 60. The tribunal finds these costs have been reasonably incurred by the

respondent. The tribunal’s reasons

16 61. The tribunal accepted the respondent’s evidence and reasons on why it

had decided to terminate [NAME_15]’s contract and seek alternative

accountancy provision. The tribunal finds that a residual contractual

obligation to pay [NAME_15] does not render costs payable for the new

accountants as unreasonable in the circumstances. 62. The tribunal finds the terms of the leases provide the respondent with a

wide discretion as to who it may employ and in respect of what services. Accountancy preparation 63. The applicants stated that as the respondent has entered into a contract

with [NAME_22] to provide accountancy services and receives

payment in excess of £15,000.00 as a fixed contract price, it is

unreasonable for [NAME_11] to charge an additional fee of £900.00 for

accountancy preparation. 64. This respondent asserted that this item is for the provision of the

information necessary to produce the company accounts, which is in

addition to the day-to-day accountancy function provided by [NAME_11] for

those fees and therefore, the sum claimed is reasonable in the

circumstances. The tribunal’s decision 65. The tribunal finds this sum has been reasonably incurred. The tribunal’s reasons 66. The tribunal accepts that it is reasonable to require the management

company to collect and provide information to the accountant for the

production of the annual accounts. As this is not a part of the day to day

management obligations of [NAME_11] the tribunal does not consider it

unreasonable for an additional fee to be incurred by the respondent.

[NAME_10] – [NAME_22] fees 67. The applicants asserted that the respondent had unreasonably incurred

costs in the sum of £6,238.28 for [NAME_20] fees for the period

August 2023 to January 2024, when management of the Buildings and

Estate was transferred to [NAME_22]. In addition, [NAME_22] charged the same fees from May 2023 and therefore it was

unreasonable and disproportionate for the respondent to incur two sets

of fees for financial administration over much of the same period as the

respondent had provided two months’ notice to [NAME_10] on 26 May 2023

17

(as required). Therefore there should have been no overlap of

management services or duplicate payments. 68. The applicants also asserted that [NAME_10] were also not entitled to charge

a fee of £995.00 for the [NAME_32] 69. The Respondent relied on the witness statement of [NAME_16]’s

statement and asserted that in May 2023 the respondent’s directors

began discussing transferring the bookkeeping function to [NAME_11], which

was and is currently the estate manager for the Development, in order to

bring multiple functions together to be carried out by one company. As

the Directors were in favour of telling [NAME_10] to start handing over to

[NAME_11], a letter was sent to [NAME_10] on 26 May 2023. Formal notice was not

served at that time but served in November 2023, because the

respondent did not know how smooth the handover would be, how long

might be needed and [NAME_10] still had useful background knowledge of all

the fire safety/cladding invoices and processes, plus their account was

the one that was on file with the [NAME_32] for all future

payments. 70. To allow for as smooth a transition as possible of such a vital

management function the Respondent decided that it needed an overlap

between [NAME_11] and [NAME_10] and would also need [NAME_10]’s assistance for

the preparation of the end of year accounts. The administration charge

for the [NAME_32] was paid by the Fund and is not

therefore a cost to the respondent or the service charge. The tribunal’s decision

71. The tribunal finds the costs incurred during the transition from [NAME_20] to [NAME_34] to have been reasonably incurred.

The tribunal’s reasons

72. The tribunal accepts the respondent’s evidence in respect of the need to

have an orderly transition from one management company to another

due to the complex requirements of this large Development. The tribunal

accepts there was some duplication of fees but finds this was inevitable

in the circumstances in order to ensure a smooth transition of the

management of the Development.

Staff Costs 73. The applicant told the tribunal the respondent has three employees

working as porters at a total cost of £191,346.99 .However the actual

total staff cost (including holiday cover) had totalled £156,601.11

thereby leaving a difference of £34,744.89 which need to be returned to

the leaseholders.

18 74. The Respondent asserted that as employees the staff have Employees

National Insurance and Income Tax deducted from their salaries and the

compensation they receive individually does not match the gross sums

quoted by the applicants. The respondent also relied on the witness

statement of [NAME_17]. The respondent also asserted that the

statements of costs where the actuals were shown, were lower than the

estimated costs and queried how the applicants had derived their own

figures. The tribunal’s decision 75. The tribunal finds the staff costs have been reasonably incurred. The tribunal’s reasons 76. The tribunal finds the staff costs are supported by documentation and

are fully recorded. The tribunal is unclear how the applicants reach their

conclusions on the excess sum that has been collected in respect of these

costs. Fire Evacuation Plan 77. The applicants told the tribunal that all blocks have in place fire

evacuation plans. However, the respondent has incurred thousands of

pounds developing these plans. The plans have not changed and

therefore it is unreasonable for Respondent to incur additional costs of

£2,779.25. 164 particularly when it has failed to disclose documents

concerning this issue. 78. The respondent relied on its Statement of Case and the witness

statement of [NAME_17]. The respondent stated these are not fire

evacuations as such, but plans required to show the layout of each floor,

fire system related assets and compartmentalisation detail. They are

needed by the Fire Brigade and were refreshed in accordance with

updated legislation. The plans are not generally circulated as this is not

required. However, they are available in the Premises Information Boxes

on site and will be submitted to the [NAME_26] as part of

the Building Safety Case requirement. The cost is of £13,500 is

reasonably incurred. The tribunal’s decision 79. The tribunal finds these costs have been reasonably incurred by the

respondents and are payable by the applicants. The tribunal’s reasons

19 80. The tribunal acknowledges the importance of this head of service charge

for the safety of all leaseholders and that it was reasonable for the

respondent to ‘refresh’ these plans in accordance with the updated

legislation. High Risk Building Fees 81. The applicants asserted that the respondent has unreasonably incurred

costs of £13,500.00 concerning High Risk Building fees although this

had not been notified to them as an Estate Charge. The fee per building

is £251.00. and submission is by way of a straight forward form which

requires the building’s name, address and postcode, a building

summary, including height in metres, number of floors and year of

completion, the names and contact details of the principal accountable

person and accountable person. 82. As there are only 5 high risk buildings on the estate the total cost for

submitting the standard forms would be £1,004.00 and therefore, the

respondent has therefore not reasonably incurred the sum of £13,500.00

and the excess £12,496.00 should not be charged to the leaseholders. 83. The respondent asserted that this item represents the cost of registering

the buildings with the relevant authorities, following recent legislation

relating to high rise building with inflammable cladding in situ. The

Respondent’s obligation is a statutory obligation and recoverable under

the Sixth Schedule to the Lease. Therefore, the fees are reasonably

incurred The tribunal’s decision 84. The tribunal finds it is reasonable for the respondent to incur costs in

respect of this head of service charge. However, the reasonable costs are

limited to £251 per Building and £100 per Building in respect of steps to

‘complete the plan of action.’ The tribunal’s reasons 85. The tribunal accepts the respondent is required to register the Buildings

in the Development with the appropriate authorities. However, it finds

the costs of £13,500 to do so is completely exaggerate and unreasonable

having regard to the limited amount of work that is required. Flat Roof survey 86. The applicants asserted the respondent has not incurred any costs

instructing professionals to undertake a flat roof survey for [NAME_35] as

the survey was specific to a property with water ingress problems for

20

which the insurance company has discharged the costs. Therefore, the

payment of £474.00 has not therefore been reasonably incurred. 87. The respondent told the tribunal that [NAME_35] survey was carried out

for a modest sum which it was reasonable to incur and reasonable in

amount The issue appears to be whether but not recovered through the

insurance. The tribunal’s decision

88. The tribunal finds the cost of these works have been reasonably incurred

and are payable by the leaseholders.

The tribunal’s reasons

89. The tribunal accepts the respondents submissions that this work was

necessary and is payable by the leaseholders under the terms of the lease.

The tribunal finds the applicants objection to this item of work to be

unclear and unsubstantiated.

Landscaping

90. The respondent accepted there had been no landscaping and therefore

no costs had been incurred. Therefore, the tribunal was not required to

determine this issue.

Landscape maintenance

91. The applicants asserted that the invoices did not add up to the £12,000

estimated sum charged by the respondent for the service charge year

2023/2024.

92. The respondent submitted that works had been carried out by the

contracted gardener and that in any event the estimated costs had not

been demanded or would be subject to revision once the actual costs

had been ascertained.

The tribunal’s decision

93. The tribunal finds the estimate costs of this work to be reasonable and

payable.

The tribunal’s reasons

94. The tribunal accepts the respondent’s submissions that the landscape

maintenance was the subject of a contract (now ended as of October

2024). As these were estimated costs the tribunal accepts the respondent

will make any necessary adjustments to reflect the actual charges

incurred.

21

Building F – Costs to the former Commercial Units

95. The third applicant relied on the witness statement of [NAME_5].

Units 177, 178, and 179 [NAME_13], referred to in their leases as

Work Units 1, 2, and 3, are ground-floor units located in what is known

as Block F, [NAME_13], LONDON, [POSTCODE], a low-rise building (four

floors) now containing 13 flats. These three units are now converted to

residential use are held on 200-year leases (less 3 days) starting from 24

June 1998, with identical rent of £150, subject to review.

96. [NAME_5] asserted that the original leases dated 31st July 2003

were subject to a Deed of Variation, dated 7th March 2016 which

replaced the definition of ‘[NAME_21].’ The updated definition

limits the '[NAME_21]' to the areas demised under the

third applicant’s three leases, and explicitly state they include only the

‘ground floor work units.’ Therefore, the defined '[NAME_21]' is

limited to these former commercial units and does not include any

shared or common areas of Block F nor any spaces used in common with

other leaseholders. Therefore, the third applicant is therefore required

to pay service charges in respect of the ground floor only and not to any

other charges.

97. [NAME_5] told the tribunal that Part A of the leases (Proportions'

Service Charge Structure), that was applied pre-2019, established that

the percentage service charge for Units 177, 178, and 179 were

20.78614%; 31.4457% and 47.76815%, respectively and represented

100% of the Building F Service Charge the third applicant was

required to pay and which were predominantly confined to entry phone

maintenance. Therefore, the Estate Company's Obligations Subject to

Reimbursement PART "A" ([NAME_21]) relates to that

entity as defined as the [NAME_21], and not to the ‘Building’

defined in the lease and shown on Plan 2, and otherwise known as Block

F.

98. [NAME_5] also asserted that the definition of the ‘[NAME_21]’ cannot now include anything above the ground-floor level

(such as roofs, balconies, terraces, or external features) or any

parts below ground-floor level (such as foundations); any ground-floor

spaces outside those demised in the three title plans or any common

areas, garages, parking spaces, structural elements, service ducts, risers,

utilities, external walls, or building envelope elements not demised and

ground floor of Building F only and not for the rest of the Building.

99. [NAME_5] told the tribunal that in 2019-2020, the Respondent

incorrectly departed from these contractual percentages by merging the

commercial units' budget with the Block F budget. This resulted in the

units being wrongly charged at: - Unit 177: 2.69337% - Unit 178:

4.07459% - Unit 179: 6.18957% These incorrect figures collectively

account for 12.95753% of this combined budget, with slight annual

22

variations - a clear breach of the percentages specified in the lease

schedules. [NAME_5] submitted that the third applicant was not

required to contribute to window cleaning costs (conceded by the

respondent); cleaning and maintain balconies (conceded by the

respondent); cleaning costs; flat roof survey and insurance.

100. The Respondent rejected this interpretation and stated the updated

(varied) lease makes it clear that the [NAME_21] is part of the

Building and is not a separate standalone entity. As varied in the lease,

the definition of the [NAME_21] is specifically to mean ‘any part

of the Building comprising commercial units….’ The respondent

asserted that the disputed charges under THE SIXTH SCHEDULE,

PART "A" ([NAME_21]) came into effect in 2019 and

continues through to the current 2023-24 budget. [NAME_7] also

submitted that the updated definition is more expansive than as

originally drafted, as it removes the reference to “that part of the

Building comprising commercial units only” and by stating it means

“any part of the Building comprising commercial units and

including units…now converted into and used as residential units only”

(emphasis added by respondent).

101. [NAME_7] also submitted that the converted residential premises share

the same roof, exterior walls, foundations etc as the remainder of the

Building. Further, the updated leases also state that the [NAME_21] has a right of support, shelter etc from the remainder of the

Building. The right cannot come without the obligation.

102. Further, The Sixth Schedule specifically refers to the Roof, Walls,

Foundations etc of the [NAME_21], which would make no sense if

the third applicant’s position is correct, as it would not be liable for any

costs arising from those elements. Further, as the lift is expressly

excluded from the third applicant’s obligations, it shows the intention

was to include other expressly stated items.

103. Further, or alternatively, clause 16 of Part C applies, or there has been

a clear mistake and it is clear what correction ought to be made (compare

for instance the Eight Schedule, which uses Building rather than

[NAME_21]) There is a clear insurance obligation, whether

premises are demised or not, so the third applicant cannot be

right that there is no obligation to contribute towards insurance at

all and this would have an adverse on the other leaseholders if the third

applicant is not to contribute to service charges as the Respondent

submits

The tribunal’s decision 104. The tribunal finds the third applicant is required to contribute to the

service charges in respect of all parts of Building F and not just the

ground floor units.

23 The tribunal’s reasons 105. The lease variation dated 7 March 2016 relating to Unit 1, Block F, [NAME_13], London [POSTCODE] and made between Canal & [COMPANY_6] and [COMPANY_37] and [COMPANY_36] and [COMPANY_4]

states:

2. Replacement of Definitions

The definitions of ‘Apartments’ and [NAME_21]’ contained

in clause 1 of the Lease shall be deleted and replaced with the

following:

‘“Apartments” means the residential properties in the Building

on the first floor and above of the Building and an Apartment

means any one of them.’

‘”[NAME_21]” means any part of the Building comprising

commercial units and including units on the ground floor

formerly used as commercial units (including those units

registered under HMLR title numbers EGL462597, EGL451228

and EGL451230) but now converted into and used as residential

units only and excluding the Apartments.’ 106. The tribunal accepts the respondent’s interpretation and effect of

the varied leases, to that put forward by the third applicant. The

tribunal finds that the variations both intended to and do include

the third applicants three units as part of Building F and do

not amount to a separate standalone entity as submitted by [NAME_5]. The tribunal finds therefore, the third applicant

is required to contribute to the costs incurred in respect of

Building F and the estate save where expressly excluded. Application under s.20C and refund of fees 107. At the end of the hearing, the Applicant made an application for a refund

of the fees that he had paid in respect of the application/ hearing. In the

application form the applicants applied for an order under section 20C

of the 1985 Landlord and Tenant Act and/or para 5A of Sch 11 of the

Commonhold and Leasehold Reform act 2002 in addition to the

reimbursement of the application fee and hearing costs. 108. The applicants submitted that where an applicant has been partially

successful, it is usual for the Tribunal to make an order that no part of

the landlords’ costs in connection with the proceedings are to be

regarded as relevant costs in determining the amount of any service

24

charge, and the applicant’s liability to pay administration charges in

respect of litigation costs are extinguished 109. The respondent objected to these applications and asserted that the

leases provide for the recovery of legal costs; in any event the application

was premature as much of it was based on estimated service charges

rather than the actual sums incurred, the applicants had failed to

attempt any negotiations with the respondent before issuing the

applications to the tribunal. 110. Having heard the submissions from the parties and taking into account

the determinations above and the limited success of the applicants, the

tribunal determines that it is just and equitable in the circumstances an

order to be made under section 20C of the 1985 Act and/or para 5A of

the 2002 Act so that the respondent may not pass more than 75% of

any of its costs incurred in connection with the proceedings before the

tribunal through the service charge. 111. The tribunal makes no order in respect of the reimbursement of fees.

Name: Judge Tagliavini Date: 21 February 2025 (corrected on 28 March 2025 pursuant to rule 50 of The First-tier Tribunal) (Property Chamber) Rules 2013

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 application for permission must be made to the First- tier Tribunal at the Regional Office which has been dealing with the case. The application should be made on Form RP PTA available at https://www.gov.uk/government/publications/form-rp-pta-application-for- permission-to-appeal-a-decision-to-the-upper-tribunal-lands-chamber The application for permission to appeal must arrive at the Regional Office within 28 days after the Tribunal sends written reasons for the decision to the person making the application.

25 If the application is not made within the 28-day time limit, such application 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 application for permission to appeal to proceed, despite not being within the time limit. The application 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 making the application is seeking. If the Tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).