First-tier Tribunal Decides on Service Charge Reasonableness

OUTCOME: Allowed in Part

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00BG/LSC/2024/0228 LON/00BG/LSC/2023/0435 Property : Flats 4 & 5,94 [ADDRESS] [POSTCODE] Applicants : [redacted] : None Respondent : [redacted] : [NAME] of Application : Liability to pay services charges Tribunal : Judge Shepherd John Stead BSc MSc CEng Date of Decision : 6th November 2025

DETERMINATION

1. In this case there was a challenge to the reasonableness and payability of service charges. The challenge was brought pursuant to Landlord and Tenant Act 1985, s.27A. The Applicants are [APPELLANT] and [APPELLANT]. They are both [NAME] at 94 Bromley High Street, London E3 3 EG (“The premises”). Both Applicants have let their properties out. The freeholder at the premises is [RESPONDENT] limited (“The Respondent”). Their agent is [NAME].

2. The Applicants challenged whether service charges were payable for the period 2019 to date. Their challenges were contained in a Scott Schedule which in general terms identified the following issues: 2019-2020 – internal repairs and decorations - £4568.14 2019 -2020 -general service charges - £1169 2020-2021 – general service charges -£1521.29 2021-2022 - major works-£8810.10 2021-2022 -general service charges -£1688.62

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2022-2023 – General service charges - £1604.85 2023-2024 – External emergency works- £7201.64 2023-2024 – General service charges - £1416.73 2024-2025 – General service charges - £959.17

3. In their [NAME] schedule the parties made general comments which were largely unhelpful in determining what the dispute was about. The documents provided little assistance to us either. The dispute only became clear at the hearing which took place on 2nd June 2025.

Inspection

4. The Tribunal inspected the premises on the morning of 2nd June 2025. We went into the Applicants’ flats (flat 4 and 5) and inspected the common areas. The building is a converted pub which runs adjacent to a school. The school is so close at points that access for works has been made difficult. The management of the building was provided by [NAME] from 2003 to 2011 and by [NAME] thereafter. There are six flats in the block.

5. We were shown where urgent safety works were carried out to the façade. There had been a risk of falling masonry. The Respondents had needed to get dispensation from the Tribunal to carry out the works because of their urgency. The Applicants said they had not been informed of the outcome of the dispensation. In fact the Tribunal sent notification of the decision allowing dispensation and we are satisfied that it was received.

6. An issue arose in relation to the timing of the demands relied upon by the Applicants. This is dealt with in more detail below. The Applicants were sent threatening correspondence despite the fact that no determination had been obtained. The [NAME] Applicant is still facing the consequences of a [NAME] which should not have been obtained. The Respondents would be well advised to review their recovery procedures which are oppressive and in parts illegal. Their solicitors PDC added legal charges to the demands which should be removed as the legal proceedings were altogether peremptory and unfair. The [NAME] Applicant had requested payment by instalments but this request was not responded to. The Applicants were very dissatisfied with the management of the building.

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7. The roof of the building was leaking for some time. Eventually the necessary works were carried out to repair the leak and redecoration internally was completed. Unfortunately, a leaking or blocked gutter has caused further water ingress. The first Applicant said that he had lost a sale of his flat due to the state of the premises.

8. The stone remedial works were part covered by insurance with a payment recorded of £3,657. A more complex and estimated costly programme to check the remaining stone details was complete and this confirmed the condition of stone details elsewhere were in fact acceptable so the final cost was less than expected.

9. Previous redecoration internally had been consulted upon and we were shown evidence of this. The law

10. The law applicable in the present case was limited. It was an assessment of the reasonableness and payability of the costs.

11. The Landlord and Tenant Act 1985,s.19 states the following: 19.— Limitation of service charges: reasonableness. (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 or the carrying out of works, only if the services or works are of a reasonable standard; and the amount payable 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.

12. The Tribunal’s jurisdiction to address the issues in s.19 is contained in s.27A Landlord and Tenant 1985 which states the following:

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27A Liability to pay service charges: jurisdiction 1. An application may be made to [the appropriate tribunal]2 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, d. the date at or by which it is payable, and e. the manner in which it is payable.

2. Subsection (1) applies whether or not any payment has been made.

3. An application may also be made to [the appropriate tribunal]2 for a determination whether, if costs were incurred for services, repairs, maintenance, improvements, insurance or management of any specified description, a service charge would be payable for the costs and, 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 be payable.

4. No application under subsection (1) or (3) may be made in respect of a matter which— a. has been agreed or admitted by the tenant, b. has been, or is to be, referred to arbitration pursuant to a post-dispute arbitration agreement to which the tenant is a party, c. has been the subject of determination by a court, or d. has been the subject of determination by an arbitral tribunal pursuant to a post-dispute arbitration agreement.

5. But the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment.

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13. In Waaler v Hounslow [2017] EWCA Civ 45 the Court of Appeal held the following:

Whether costs were “reasonably incurred” within the meaning of section 19(1)(a) of the Landlord and Tenant Act 1985 , as inserted, was to be determined by reference to an objective standard of reasonableness, not by the lower standard of rationality, and the cost of the relevant works to be borne by the lessees was part of the context for deciding whether they had been so reasonably incurred; that the focus of the inquiry was not simply a question of the landlord's decision-making process but was also one of outcome; that, where a landlord had chosen a course of action which led to a reasonable outcome, the costs of pursuing that course of action would have been reasonably incurred even if there were a cheaper outcome which was also reasonable; that, further, before carrying out works of any size the landlord was obliged to comply with consultation requirements and, inter alia, conscientiously to consider the lessees' observations and to give them due weight, following which it was for the landlord to make the final decision; that the court, in deciding whether that final decision was reasonable, would accord a landlord a margin of appreciation; that, further, while the same legal test applied to all categories of work falling within the scope of the definition of “service charge” in section 18 of the 1985 Act, as inserted, there was a real difference between work which the landlord was obliged to carry out and work which was an optional improvement, and different considerations came into the assessment of reasonableness in different factual situations

Determination

14. We consider that there are two main issues for us to resolve. First whether the sums demanded were reasonable and secondly whether those sums were payable in accordance with the lease.

Reasonableness

15. We broadly consider that the sums demanded by the Claimant were reasonable. Taking each item in turn:

2019-2020 – internal repairs and decorations - £4568.14

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16. There was nothing to suggest these sums were not reasonably incurred. The Respondent carried out a consultation and the works were carried out. The fact that the common areas may have been damaged by later water ingress did not negate the fact that sums were properly incurred.

2021-2022 – major works - £8810.10

17. These works were also carried out and sums are recoverable.

External emergency works - £7201.64

18. These works resulted from an emergency situation when parts of the roof were loose and there was a danger of injury. Dispensation was properly obtained. The works did not result from neglect as alleged by the Applicants because the remainder of the roof was found to be sound.

General service charges - £1169, 1521.29, £1688.62, £1604.85, £1416.73 and £959.17

19. The Applicants were frustrated with the service provided by [NAME] but the per unit management charges were reasonable and this was an outlier property which was difficult to manage. On balance we consider that the sums claimed for the regular service charges were reasonable.

Payability

20. Clause 4(b) of the lease states the following as an obligation on the leaseholder: (b) Contribute and pay a proportionate part of the costs expenses outgoings and matters mentioned in the Fourth Schedule hereto such contribution being paid by half yearly instalments on the twenty-fifth December and Twenty- fourth June.

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20. In this case the Applicants made regular service charge constributions in accordance with the lease. They were also asked to pay additional sums for the major works when there does not appear to be a provision allowing collection outside the mechanism stated above.If this is right the additional major works sums are not payable under the lease if they were charged outside of the two dates mentioned above.

21. This was raised briefly at the hearing. We invited further submissions on the point. The Respondents said that clause 4(b) related solely to the payment and demands could be made at any time as long as they were paid on the dates in 4(b). The Applicants who instructed solicitors to make submissions for this purpose said that the major works sums were not payablke as they were not demanded in accordance with Clause 4(b).

22. It is common ground that the demands were not made on either date in clause 4(b). It is also clear that the major works sums were not demanded by reference to the two payment dates. They were in effect immediate demands for payment. [NAME] are entitled to some clarity in the interpretation of the lease by their landlord. Here it is suggested that the lease was being operated but in a flexible manner where the payment dates remained the same. This is post event rationalisation. The Respondents behaved as if they were entitled to the sums immediately without any reference to the operative dates. We consider therefore that the sums demanded from the two applicants for the major works as follows are not payable:

£4568.14 – 10/11/20 £8810.10 -3/3/22 £7201.64 -26/11/24

23. The parties are invited to make any final submissions in relation to costs within 14 days of receipt of this decision. Judge Shepherd 6th November 2025

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ANNEX - RIGHTS OF APPEAL Appealing against the tribunal’s decisions

1. A written application for permission must be made to the First-tier Tribunal at the Regional tribunal office which has been dealing with the case.

2. The application for permission to appeal must arrive at the Regional tribunal office within 28 days after the date this decision is sent to the parties.

3. 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.

4. The application for permission to appeal must state the grounds of appeal, and state the result the party making the application is seeking. All applications for permission to appeal will be considered on the papers 5. Any application to stay the effect of the decision must be made at the same time as the application for permission to appeal.

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