First-tier Tribunal Decides on Service Charge Reasonableness

OUTCOME: Allowed

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Case Reference

: CAM/2UE/LSC/2022/0007

HMCTS

: Paper

Property

: 116 [ADDRESS], [POSTCODE]

Applicants (Tenant) : [COUNSEL] : [COUNSEL]

Respondent (Landlord): [RESPONDENT] [NAME] : [RESPONDENT] of Application : 1) to determine the reasonableness and

payability of Service Charges (section 27A Landlord and Tenant Act 1985) 2) for an order that the landlord’s costs arising from the of proceedings should be limited in relation to the service charge (Section 20C of the Landlord and Tenant Act 1985) 3) for an order to reduce or extinguish the Tenant’s liability to pay an administration charge in respect of litigation costs (Paragraph 5A of Schedule 11 of the Commonhold and Leasehold Reform Act 2002)

Tribunal

: Judge J R Morris

Date of Application : 16th February 2022 Date of Directions : 24th March 2022 Date of Decision : 24th June 2022

____________________________________

DECISION ____________________________________

© CROWN COPYRIGHT 2022

FIRST - TIER TRIBUNAL [NAME] (RESIDENTIAL PROPERTY)

2 Decision

1. The Tribunal finds that the inspection of a Service Installation to assess whether a water leak is from a part of the Maintained Area or part of a Demise and hence determine whether the cost of its repair is a Service Charge or Tenant liability is part of the [NAME] within the Fifth Schedule of the Lease and so a Service Charge cost. Therefore, the Tribunal determines that the Cost in Issue comes under the head of Management and is a Service Charge Cost.

2. The Tribunal determines a reasonable charge for the Cost in Issue as a Service Charge cost of Management is £120.00 including VAT comprising £100.00 plus £20.00 VAT.

3. The Tribunal does not consider it just and equitable to make an Order under section 20C of the Landlord and Tenant Act 1985 that the Respondent’s costs in connection with these proceedings should not be regarded as a relevant cost to be taken into account in determining the amount of any Service Charge payable by the Applicant.

4. The Tribunal makes an Order extinguishing the Applicant’s liability to pay an administration charge in respect of litigation costs under paragraph 5A of Schedule 11 of the Commonhold and Leasehold Reform Act 2002.

Reasons

Background

5. On 16th February 2022 the Applicant applied for:

a) A determination under section 27A of the Landlord and Tenant Act 1985 as to whether a charge of £609.72 for a contractor to assess whether a leak from a Service Installation was from a part of the Maintained Area or part of a Demise (“the Cost in Issue”) is: 1. A cost chargeable to the Service Charge; and, if so, 2. Whether the cost is reasonable.

b) An order that the landlord’s costs arising from the proceedings should be limited in relation to the service charge payable under section 20C of the Landlord and Tenant Act 1985.

c) An order to reduce or extinguish the tenant’s liability to pay an administration charge in respect of the litigation costs under paragraph 5A of Schedule 11 of the Commonhold and Leasehold Reform Act 2002.

6. Directions were issued on 24th March 2022 with which the parties complied. The parties agreed that the matter should be dealt with on consideration of the papers alone.

The Law

7. The Law relating to these proceedings is set out in Annex 2 and should be read in conjunction with this Decision and Reasons.

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The Leases

8. A copy of the Lease relating to the Property was provided together with a copy of HM Land Registry Entry Title Number HD565700116 under which the Property is registered. The Lease is dated 15th June 2017 between [APPELLANT] (1) Tenant [APPELLANT] (2) and Manager [APPELLANT] (3) for a term of 125 years from 1st January 2016. At some time thereafter it appears that the reversion was assigned to [COMPANY].

9. It is not clear whether the role of Manager under the Lease has been assigned to the [COMPANY] or whether the [NAME] is the [NAME] [NAME] and/or the Manager. For the sake of convenience [NAME] is referred to hereafter as “the [NAME]”.

10. The relevant parts of the Lease are:

11. [NAME] states:

In the case of a conflict between this clause and the remainder of this lease then, for the purposes of registration, this clause shall prevail Fourth floor Apartment/to be known as: - 116 [ADDRESS] [POSTCODE]

12. Clause 1 - Definitions

1.8 “[NAME]” defined as the Property Specified at [NAME] and the First Schedule

1.26 “Maintained Areas” defined as those parts of the Estate which are more particularly described in the Fourth Schedule

1.14 “First Maintained Areas” defined as those areas and facilities described or referred to in part 1 of the Fourth Schedule

1.36 “Second Maintained Areas” defined as those areas and facilities described or referred to in part 2 of the Fourth Schedule

1.44 “Third Maintained Areas” defined as those areas and facilities described or referred to in part 3 of the Fourth Schedule

1.38 “Service Charge” defined as the monies actually expended or reserved for periodical expenditure by or on behalf of the Manager or the landlord at all time during the Term in carrying out the obligations specified in the Fifth Schedule…

1.40 “Service Installations” all drains channels sewers pipes wires cables conduits …now constructed excluding such Installations exclusively serving the [NAME]

4 13. Clause 2 - Demise

…The Landlord with full title guarantee hereby demises unto the Tenant all and singular the [NAME] together with the rights set out in the Second Schedule…

14. The First Schedule - The [NAME] 1 (Apartment) states:

The property referred to at [NAME] (together with the floor surface only of any balcony or patio co-extensive therewith (if any) and the air space above such balcony or patio to a height one storey above the surface thereof) shown edged green on the Plan including:

6. All Service Installations exclusively serving the [NAME]

15. The Second Schedule – Rights included in the demise

1. To the extent reasonably necessary for the purposes of domestic use and convenience incidental to the occupation of the [NAME] to use those parts of the maintained areas intended to be accessible to the [NAME] including but not limited to

3.1 The right to connect to and use inspect maintain and renew any Service Installations on the estate which serve the [NAME]

16. The Fourth Schedule - The Maintained Areas

Part 1 First all those parts of the Estate which are available or are intended to be available for the use or benefit in common by the Properties on the Estate and which parts are not intended to be adopted but including but not limited to: -

(j) All Service Installations and the Satellite Apparatus but excluding any such Service Installations utilised exclusively by individual Dwellings

Secondly in relation to in addition to those first described above those areas intended to use or benefit in common by the Owners (and/or occupiers of a discrete group of Dwellings again not intended to be adopted including but not limited to: -

(s) All Service Installations and the Satellite Apparatus but excluding any such Service Installations utilised exclusively by individual Dwellings

Part 2 Relating to those parts of the Development intended for use or benefit in common by the Owners of the Apartments and not intended to be adopted including but not limited to: -

e) All Service Installations but excluding any such Service Installations utilised exclusively by individual properties Part 3 Relating to the Building including but not limited to: -

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b) All structural parts of the Building including (but not limited to) the roofs beams timbers joists foundations cellars floors gutters rainwater pipes…of the Building… and all Service installations not used solely for the purposes of one Apartment

17. The Fifth Schedule - Maintenance obligations expenses and administration of the Maintained Areas

Part 1 Maintained Areas (applying as necessary to those parts as set out in the fourth Schedule)

3. Keeping in good order and repair any Service installations within the Maintained Areas

9.2 All such Service Installations in under and upon the Building as is enjoyed or used by the tenant in common with the Owners or occupiers of the other Apartments and other premises comprised in the building and insofar as the same are not maintained at the public expense or by the relevant Authorities

Part 2 Section 1 The Manager’s expenses, outgoings other heads of expenditure and administration

1. The expenses incurred by the Manager in carrying out its obligations under this Schedule including the costs of carrying out inspections and tests…

2. The costs of employing contractors or [NAME] agent to carry out any of the Manager’s obligations under this lease

18. The Sixth Schedule - The Tenant’s Proportion of Service Charge

1. The Tenant shall pay the tenant’s Proportion to the Manager in the manner hereafter described Provided that the Manager may vary the scope of the maintenance obligations set out in the Fifth Schedule from time to time as may be deemed appropriate of the purposes of good estate management

4. The amount of the Service Charge shall be adjusted to take into account any sums received by the manager as contribution towards the cost of the matters mentioned d in the Fifth Schedule from the owners tenants or occupiers of nay adjoining or neighbouring properties to the estate.

The Seventh Schedule - Covenants by the Tenant

4 Service Indemnity

4.1 To keep the Manager and the Landlord indemnified in respect of any charges for water electricity and gas or other services payable in respect of the [NAME] such sums to be repaid to the Landlord or the Manager on demand.

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Description

19. The Tribunal did not consider it necessary for the determination of the issues to inspect the Building in which the Property is situated.

Evidence

Applicant’s Case

20. The Applicant provided a written Statement of Case and supporting documents which included a statement made by the Applicant to [NAME] relating to a complaint that the [NAME] had incurred the Cost in Issue on behalf of the Applicant. The relevant parts of the statement are repeated here as an account of how the Cost in Issue was incurred.

21. The Applicant stated:

“During a routine boiler service, I was advised by the [NAME] that there was a leak and the pipe leading down into my flat should be checked. I phoned my point of contact at [NAME], [NAME] [“the Property Manager”] to discuss this. I advised the I had a leak with water dripping into the electrics. She advised that the problem sounded as if it was contained within my own flat and if she sent a [NAME] out and that was the case, I would be issued a recharge for the call out. I explicitly said I could not agree to this without a quote and that [NAME] would do the work, I asked her for the communal access point to the pipes coming into my flat as the [NAME] wanted to check for any more pipe damage, and she said she did not know where it was and would have to send someone to locate it. I was not advised of any possibility of a charge for this query. She advised they would be arriving at around 3 p.m. At 4 p.m. I tried to phone her and text asking for an ETA – she never responded to this.

At around 5 p.m. two workmen arrived and I showed them the pipe [NAME] wanted to check and asked for the communal hatch entrance. They advised that there is no communal hatch entrance and instead showed me that the hatch leading out on to the top of the building. They said that [NAME] had advised them of a leak in the roof. This was not suggested by myself at any point.

Date the above took place: 5th February 2021”

22. A photograph of the leaking pipe was provided.

23. An email in response to the Property Manager’s account of the event was provided in which the Applicant stated that: “I advised you [the Property Manager] that I had a pipe leaking and you explained that as this was in my flat it was my responsibility to fix. When I said that we could not tell at that point if the leak was in my flat or coming from above you offered to send someone out and explained that if the problem was within my flat, I could get charged for this. I explicitly said I could not agree to any call out charges without prior quote and that [NAME] would fix the problem.

7 It was only when I asked you for the information regarding communal hatchet[sic] access from [NAME] to check the pipes coming into my flat that you said you did not know where the access points were and would have to send someone out to advise of their location.”

24. The remainder of the Statement of Case and accompanying documents relate to: • The disputed account of the conversation between the Applicant and Ms [APPELLANT] on 5th February 2021. • The inclusion of the Cost in Issue with the Service Charge demand.

Respondent’s Case

25. The Respondent provided a copy of a letter dated 12th February 2021 from the [NAME] to the Applicant the text of which states:

“Further to our contractor’s attendance last week for a suspected external water leak, found that the issue was in fact coming from your own boiler. This would therefore be a recharge to yourself as it was not a communal issue but one within your own demised area”

26. A Statement of Events was provided from the Property Manager following a complaint by the Applicant as follows:

“Issue: Suspected external water leak coming in to [ADDRESS] – Attendance by [COMPANY] 5th February 2021

Sequence of Events: We have considered your objection to my letter and explanatory notes by way of an email dated 5th March 2021 setting out the sequence of events on the day (copy not provided)

Following your [NAME]’s attendance, he advised you there was a separate leak coming into your property and that water was running down the pipework from above and across your boiler which you were worried about and wanted the matter investigated immediately.

There was no talk of a quote and you stated quite categorically that you wanted me to get [NAME]’s contractors out as soon as possible as neither yourself nor your [NAME] knew where the water was coming from.

Any contractor that [NAME] instruct will be chargeable. If it was an external issue, the service charge would have supported it or in this case, it was found to be a flat specific call out thus chargeable to the owner. I advised at the time it would be flat specific but you said the water was streaming down from the ceiling, so the decision was made.

27. Due to the fact it was fairly late in the day the contractors arrived out of hours, hence you texting me to ask where they were, but on arrival found that the leak was coming from your own boiler and that an error of judgement had been made.”

8 28. The Respondent provided an opinion from its solicitors, [NAME] [RESPONDENT], which referred to the following parts of the Lease:

[NAME] of the Particulars and the First Schedule which in turn are referred to in Clause 1.8 and 2 as defining the Demise.

Paragraph 6 of the First Schedule which states that the demise includes Service Installation exclusively serving the [NAME].

Clause 1.4 which defines Service Installation includes pipes tank conduits and any structures incidental to the use thereof

Clause 3 which states that the Tenant covenants to observe and perform the obligations set out in the Seventh Schedule

Paragraph 4.1 of the Seventh Schedule which requires the Tenant to keep the Manager and the Landlord indemnified in respect of any charges for water electricity and gas or other services payable in respect of the [NAME] 5 of the Seventh Schedule which requires the Tenant to keep the [NAME] in repair.

29. Reference was made to the Property Manager’s Statement of Events. It was submitted that the Lease envisaged that either costs for services were charged to the relevant Leaseholder personally or by all the Leaseholders in a shared capacity by way of Service Charges under the Lease. It was said, what is not envisaged is that the Manager or Landlord subsidise a Leaseholder for the cost of services provided.

30. It was further submitted that as the Applicant requested the contractor attend then the fee charged by the contractor cannot be considered unreasonable.

Decision

Is the Cost in Issue chargeable to the Service Charge?

31. The Tribunal noted all the evidence adduced and submissions made by the parties in respect of whether the Cost in Issue is chargeable to the Service Charge. The Tribunal was of the opinion that the Cost in Issue might come under two heads of the Service Charge: 1) Repair and/or 2) Management

32. Firstly, the Tribunal considered whether the Cost in Issue could be chargeable to the Service Charge under the head of a Repair.

33. The Tribunal found as follows: 1. The parties agreed that there was water leaking into the Applicant’s flat which was subsequently found to be coming from the Applicant’s boiler. 2. The Applicant’s boiler is what is referred to in the Lease as a Service Installation.

9 3. The Applicant’s boiler is a Service Installation exclusively serving the [NAME] which in the Lease are identified in [NAME] of the Particulars, defined in Clause 1.8 and the First Schedule and demised in Clause 2.

4. Under the Fifth Schedule only the costs incurred in relation to maintaining the Maintained Areas are chargeable to the Service Charge payable in accordance with Sixth Schedule.

5. The Fourth Schedule of the Lease expressly excludes a Service Installation exclusively serving the [NAME] from the Maintained Areas.

34. Therefore, as far as the Cost in Issue being a repair to a Service Installation within the Demise, it is not chargeable to the Service Charge. The Tribunal derives its jurisdiction from section 27A of the Landlord and Tenant Act 1985 which enables applications to be made by a landlord or a tenant for a determination as to whether a service charge is payable. If the Cost in Issue is not part of the Service Charge, then the Tribunal has no jurisdiction to determine whether it is reasonable.

35. The Tribunal found the contractor’s invoice dated 11th February 2021 for the Cost in Issue states: Description of Works Leak into Flat 116 Labour@ £475.00 + Vat £95 Materials and mileage £33.10 + VAT £6.62 Total £609.72

36. The Applicant, who was present at the time, said in her Statement of Case that “no action was taken at the time by the contractors” to remedy the leak. The [NAME]’s invoice dated 12th February 2021 states “Boiler Leak Investigation”.

37. From its knowledge and experience the Tribunal would expect an invoice for a [NAME] who had carried out work in respect of a leak to state that the leak had been remedied. No evidence was adduced to show that a repair was carried out. If a repair had been carried out and there had been an issue regarding the reasonableness or payability as to its cost, it would be outside the Service Charge and the Tribunal’s jurisdiction.

38. The Tribunal finds from the evidence adduced that on the balance of probabilities the Cost in Issue does not relate to a repair.

39. Secondly the Tribunal considered whether the Cost in Issue could be chargeable to the Service Charge under the head of Management as an inspection under Paragraph 8 of the Fifth Schedule of the Lease. Although the leak was from a Service Installation which was included in the Demise, the pipes from which the leak was emanating were situated in the void which was part of the Maintained Area and so an area subject to inspection by the [NAME].

40. The parties agreed that the Applicant telephoned the [NAME] regarding a leak of water into the flat, coming from the void above the flat, which had been identified by the Applicant’s [NAME]. The purpose of the telephone call was to find out from where the leak was coming for which there were two possibilities. Firstly, the leak could be caused from a Service Installation as part of the Maintained Area or secondly, a Service Installation that is part of the Demise. If it was from part of

10 the Maintained Area the cost of any repair would be a matter for the Service Charge, if it was part of the Demise the cost would need to be met by the Applicant.

41. The Applicant states that the [NAME] was not able to investigate because it was not known where the access points to the void are. It then fell to the [NAME] pursuant to its management obligations under the Lease to make the investigation and determine from where the leak was coming.

42. There are three actions the Property Manager could have taken on behalf of the [NAME]. First, since the Property Manager should have known the access points for services, she could have given instructions to the Applicant or her [NAME] to access the void to make an assessment without incurring a call out charge to the Service Charge. Secondly, the Property Manager could have attended herself to determine from where the leak was coming. Thirdly she could delegate the task to a contractor, which, in the event is what the Property Manager did.

43. The Tribunal finds that it was incumbent upon the [NAME] as part of its responsibilities of [NAME] to investigate the leak. If the leak had been from a Service Installation which was part of the Maintained Area, then the [NAME] would need to instigate a repair. Even if it came from a Demise, it would need to be inspected to ensure that it did not affect other flats in the Building or the Maintained Areas. Therefore, the Tribunal determines that the Cost in Issue incurred is chargeable to the Service Charge under the head of Management.

Is the Cost in Issue Reasonable?

44. The Tribunal then considered whether the charge incurred was reasonable. Irrespective of when the telephone calls were made by the Applicant to the [NAME] or by the Property Manager to the contractor, the attendance by workmen was at 17.00 hours which is within the normal working day. There was no evidence of any exceptional circumstance or difficulties encountered by the contractors, in fact there is very little evidence as to what they did at all. However, it appears that they carried out the management duty of showing the Applicant where the access points to the void are and identifying the source of the leak.

45. The Tribunal considered the invoice submitted by the contractor and found from its knowledge and experience that the charge was high for the work said to be done. The charges referred to on the Internet site appear more in line with what might be expected where a [NAME] engages a contractor to make an inspection of a specific item on its behalf provided it is not covered by the Management Fee, which has not been put in issue.

46. The Tribunal determines a reasonable charge for the Cost in Issue is £120.00 including VAT comprising £100.00 plus £20.00 VAT.

Other Matters

47. With regard to the Service Charge demands addressed to the Applicant by [NAME] it appears that the full amount of the Cost in Issue is

11 being charge to the Applicant as a Tenant alone. This is not correct. Under the Lease the Service Charge is a collective charge apportioned amongst all the Tenants of the Building. Under the Lease an individual Tenant cannot be charged more than their designated apportionment for a cost incurred in respect of the Service Charge. As the Cost in Issue is part of the Service Charge, then it must be apportioned to all the Tenants in accordance with Lease.

48. The Solicitor for the Respondent submitted that the Cost in Issue would come within Paragraph 4 of the Seventh Schedule as an indemnity payment for services. The Tribunal finds that this paragraph relates to the payments of utility charges for water, electricity and gas and other services. The Tribunal is of the opinion that the general words “other services” are limited to matters of the same kind by the specific words i.e., charges for water, electricity and gas.

49. Similarly, the Tribunal is of the opinion that Paragraph 5 of the Seventh Schedule requiring the Applicant Tenant to keep the [NAME] in repair is not an issue. The Cost in Issue is not part of a charge against the Applicant for failing to keep the Demise in repair. These proceedings have arisen because the Applicant was seeking to keep the Demise in repair.

Decision re Section 20C and Paragraph 5A of Schedule 11

50. The Applicant applied for an order under section 20C of the Landlord and Tenant Act 1985 that the landlord’s costs arising from the proceedings should be limited in relation to the service charge and for an order under paragraph 5A of Schedule 11 of the Commonhold and Leasehold Reform Act 2002 to reduce or extinguish the Tenant’s liability to pay an administration charge in respect of litigation costs.

51. The provision enabling a landlord to claim its costs directly from a tenant is an individual liability, whereby a tenant alone bears the landlord’s costs of the proceedings. Under paragraph 5A of Schedule 11 of the Commonhold and Leasehold Reform Act 2002 a tribunal may, if it is satisfied it is just and equitable, make an order that a landlord’s costs, either in part or whole, cannot be re-claimed directly from the tenant.

52. The first issue is whether the Lease contains either or both of these provisions enabling the Respondent to claim its costs in respect of these proceedings through the Service Charge or directly from the Applicant.

53. The Tribunal found that the only provision in the Lease which places personal liability on the Applicant Tenant for legal costs is under Paragraph 10 of the Seventh Schedule. Under that Clause the Applicant covenants to pay the Respondent Landlord’s costs charges and expenses incurred in respect of any proceedings under sections 146 or 147 of the Law of Property Act 1925. As these proceedings are not under sections 146 or 147 of the Law of Property Act 1925 the Tribunal finds that there is no provision in the Lease enabling the Landlord to reclaim its costs against the Tenant as an individual.

54. Notwithstanding there being no provision in a lease, for the avoidance of doubt, a tribunal is able to make an order under paragraph 5A of Schedule 11 of the 2002 Act if it is satisfied that it is just and equitable to do so. Having found that the Cost in Issue

12 was a chargeable to the Service Charge the Tribunal determined that it was just and equitable that the costs of these proceedings should not be reclaimed against an individual tenant and so makes an Order under paragraph 5A of Schedule 11 of the 2002 Act.

55. The Tribunal found that there was a provision for the Respondent to recover the costs of these proceedings under the Seventh Schedule Part 2, Section 1 Paragraph 4 of the Lease. The effect of making an Order under section 20C would be to exempt the Applicant from being charged for the Respondent’s costs of these proceedings under the Service Charge leaving the other Tenants who were not directly involved on this occasion to pay the costs as the Order can only apply to the Applicant.

56. The Tribunal does not consider it just and equitable to make an Order under section 20C of the Landlord and Tenant Act 1985 that the Respondent’s costs in connection with these proceedings should not be regarded as relevant costs to be taken into account in determining the amount of any Service Charge payable by the Applicants.

Judge JR Morris

APPENDIX 1 - RIGHTS OF APPEAL

1. If a party wishes to appeal the 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.

2. 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.

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 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.

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APPENDIX 2 – THE LAW

The Law

1. The relevant law is contained in the Landlord and Tenant Act 1985 as amended by the Housing Act 1996 and Commonhold and Leasehold Reform Act 2002.

2. Section 18 Landlord and Tenant Act 1985 (1) In the following provisions of this Act “service charge” means an amount payable by a tenant of a dwelling as part of or in addition to the rent- (a) which is payable directly or indirectly for services, repairs, maintenance, improvement or insurance or the landlord’s costs of management, and (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 of which the service charge is payable. (3) for this purpose (a) costs include overheads and (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 period

3. Section 19 Landlord and Tenant Act 1985 (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.

4. Section 27A Landlord and Tenant Act 1985 (1) An application may be made to a leasehold valuation 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, (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 a leasehold valuation tribunal 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-

14 (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 arbitration agreement to which the tenant was a party (c) has been the subject of a determination by a court (5) But the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment.

5. 20C Landlord and Tenant Act 1985 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 a court, residential property tribunal or leasehold valuation tribunal or the First-tier Tribunal, or the Upper Tribunal, or in connection with arbitration 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 tenant or any other person or persons specified in the application. (2) The application shall be made— (a) in the case of court proceedings, to the court before which the proceedings are taking place or, if the application is made after the proceedings are concluded, to the county court; (aa) in the case of proceedings before a residential property tribunal, to a leasehold valuation tribunal; (b) in the case of proceedings before a leasehold valuation tribunal, to the tribunal before which the proceedings are taking place or, if the application is made after the proceedings are concluded, to any leasehold valuation tribunal; (ba) in the case of proceedings before the First-tier Tribunal, to the tribunal; (c) in the case of proceedings before the Upper Tribunal, to the tribunal; (d) in the case of arbitration proceedings, to the arbitral tribunal or, if the application is made after the proceedings are concluded, to the county court. (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.

6. Schedule 11 Commonhold and Leasehold Reform Act 2002 relating to reasonableness of Administration Charges

Paragraph 1 Meaning of “administration charge”

(1) In this Part of this Schedule “administration charge” means an amount payable by a tenant of a dwelling as part of or in addition to the rent which is payable, directly or indirectly—

15 (a) for or in connection with the grant of approvals under his lease, or applications for such approvals, (b) for or in connection with the provision of information or documents by or on behalf of the landlord or a person who is party to his lease otherwise than as landlord or tenant, (c) in respect of a failure by the tenant to make a payment by the due date to the landlord or a person who is party to his lease otherwise than as landlord or tenant, or (d) in connection with a breach (or alleged breach) of a covenant or condition in his lease. (2) But an amount payable by the tenant of a dwelling the rent of which is registered under Part 4 of the Rent Act 1977 (c. 42) is not an administration charge, unless the amount registered is entered as a variable amount in pursuance of section 71(4) of that Act. (3) In this Part of this Schedule “variable administration charge” means an administration charge payable by a tenant which is neither— (a) specified in his lease, nor (b) calculated in accordance with a formula specified in his lease. (4) An order amending sub-paragraph (1) may be made by the appropriate national authority.

Paragraph 2 Reasonableness of administration charges

A variable administration charge is payable only to the extent that the amount of the charge is reasonable.

Paragraph 5 Liability to pay administration charges

(1) An application may be made to a tribunal for a determination whether an administration 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) Sub-paragraph (1) applies whether or not any payment has been made. (3) The jurisdiction conferred on a leasehold valuation tribunal in respect of any matter by virtue of sub-paragraph (1) is in addition to any jurisdiction of a court in respect of the matter. (4) No application under sub-paragraph (1) 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.

16 (6) An agreement by the tenant of a dwelling (other than a post-dispute arbitration agreement) is void in so far as it purports to provide for a determination— (a) in a particular manner, or (b) on particular evidence, of any question which may be the subject matter of an application under sub- paragraph (1).

5 A Limitation of administration charges: costs of proceedings (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—

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Case Reference

: CAM/2UE/LSC/2022/0007

HMCTS

: Paper

Property

: 116 [ADDRESS], [POSTCODE]

Applicants (Tenant) : [COUNSEL] : [COUNSEL]

Respondent (Landlord): [RESPONDENT] [NAME] : [RESPONDENT] of Application : To make an order under Rule 13 of the Tribunal Procedure (First-tier Tribunal) ([NAME]) Rules 2013

Tribunal

: Judge J R Morris

Date of Original Decision: 24th June 2022 Date of Application : 8th July 2022 & 23rd July 2022 Date of Decision : 12th August 2022

____________________________________

DECISION ____________________________________

© CROWN COPYRIGHT 2022

Decision

1. The Tribunal makes an Order under Rule 13(2) of the Tribunal Procedure (First-tier Tribunal) ([NAME]) Rules 2013 for the Respondent to reimburse the Applicant £50.00 towards the Tribunal Application Fee of £100.00 within 28 days of receipt of this Decision.

2. The Tribunal makes no Order for costs under Rule 13(1) of the Tribunal Procedure (First-tier Tribunal) ([NAME]) Rules 2013.

FIRST - TIER TRIBUNAL [NAME] (RESIDENTIAL PROPERTY)

2 Reasons

Background

3. On 16th February 2022 the Applicant applied for a determination under section 27A of the Landlord and Tenant Act 1985 as to whether a charge of £609.72 for a contractor to assess whether a leak from a Service Installation was from a part of the Maintained Area or part of a Demise (“the Cost in Issue”).

4. On 24th June 2022 the Tribunal found that the inspection of a Service Installation to assess whether a water leak is from a part of the Maintained Area or part of a Demise, and hence determine whether the cost of its repair is a Service Charge or Tenant liability, is part of the [NAME] within the Fifth Schedule of the Lease and so a Service Charge cost. Therefore, the Tribunal determined that the Cost in Issue comes under the head of Management and is a Service Charge Cost.

5. The Tribunal determined a reasonable charge for the Cost in Issue as a Service Charge cost of Management is £120.00 including VAT comprising £100.00 plus £20.00 VAT.

6. The Tribunal did not make an order under section 20C of the Landlord and Tenant Act 1985 but did make an order under paragraph 5A of Schedule 11 of the Commonhold and Leasehold Reform Act 2002.

7. On 8th July 2022, the Tribunal received an enquiry from the Applicant’s Representative as to whether the Applicant could recover the cost of the application fee from the Respondent. The Tribunal treated this enquiry as an application from the Applicant for the reimbursement by the Respondent of the Tribunal’s fees pursuant to rule 13(2) and (5)(a) of the Tribunal Procedure (First-tier Tribunal) ([NAME]) Rules 2013. The Respondent was invited to make representations, by 29th July 2022 and the Applicant was given an opportunity to reply by 5th August 2022. Both parties responded as directed.

8. In an email dated 23rd July 2022 the Applicant’s representative also applied for costs under Rule 13(1) of the 2013 Rules.

The Law

9. The Law relating to these proceedings is set out in Tribunals Procedure (First Tier Tribunal) ([NAME]) Rules 2013.

Rule 13 (1) states that: The Tribunal may make an order in respect of costs only- (b) if a person has acted unreasonably in bringing, defending or conducting proceedings in- (ii) a residential property case Rule 13(2) states: The Tribunal may make an order requiring a party to reimburse to any other party the whole or part of the amount of any fee paid by the other party which has not been remitted by the [NAME].

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Applicant’s Case

10. The Applicant’s Representative submitted that the decision had effectively been in favour of the Applicant and so felt an entitlement to reimbursement of the fee. In addition, it was said that the Applicant had been placed under a great deal of needless stress by the Respondent’s unreasonable demands. The Applicant said she had repeatedly attempted to explain the sum demanded was incorrect but [NAME] refused to engage with her which forced her to apply to the Tribunal. The Applicant was of the opinion that it seemed entirely appropriate that having had her reasoning confirmed to be correct by the Tribunal that the Respondent should pay the Applicant’s fee. It was added that the claim had taken approximately 50 hours researching and preparing the case and attempting to communicate with the Respondent to resolve the dispute without going to the Tribunal. It was requested that a sum for costs should also be included.

Respondent’s Case

11. The Respondent’s Representative conceded that it was correct that the Applicant was able to avoid liability for the whole of the cost of the relevant charge (via a reasonableness reduction) the Applicant was still found to liable to contribute towards the cost of the charge i.e., it was found to be a charge chargeable to the leaseholders via their service charges (including the Applicant) albeit at a reduced amount. In addition, there was at all times a legitimate question for the Tribunal to answer (the proceedings thus being necessary). The Respondent has not acted unreasonably, irresponsibly or otherwise and so should not be subjected to further fees/restrictions in furthering the Overriding Objective.

Decision

12. The wording of the email of 8th July 2022 from the Applicant’s Representative was sufficient for the Tribunal to find it to be an application for reimbursement of fees under Rule 13(2) of the 2013 Rules.

13. In an email dated 23rd July 2022 the Applicant’s representative also applied for costs under Rule 13(1) of the 2013 Rules. Such Application must, pursuant to Rule 13(5) be made “within 28 days after the date on which the tribunal sends a decision notice recording the decision which finally disposes of all issues in the proceedings”. Also, under Rule 13(6) “The Tribunal may not make an order for costs against a person (“the paying person”) without first giving that person an opportunity to make representations”.

14. Firstly, the Tribunal considered the application under Rule 13(2) for reimbursement of the Tribunal fees (i.e., £100 application fee) to be paid by the Respondent.

15. The reimbursement of fees does not require the Applicant to prove unreasonable conduct on the part of the Respondent. The Tribunal noted all the submissions by both parties regarding fees.

16. In its Decision dated 24th June 2022 the Tribunal found that there were two issues which were:

4 1) is the Cost in Issue chargeable to the Service Charge and 2) if it is, is it reasonable. The Tribunal finds that both issues were legitimate questions to come before the Tribunal and that either party could have applied to the Tribunal for their determination. In the event the Tribunal found that the Cost in Issue was chargeable to the Service Charge and made a determination as to its reasonableness which in this instance happened to favour the Tenant.

17. The Tribunal finds that in the circumstances it is just and equitable that the fee should be split equally between the parties. The Applicant having paid the fee of £100.00 the Tribunal determines that the Respondent should reimburse the Applicant £50.00.

18. Secondly, the Tribunal considered the application under Rule 13(1) for costs.

19. The Tribunal starts from a position that its jurisdiction is one in which costs are generally not awarded. The only exception being where a party has acted unreasonably. The Civil Procedure Rules do not apply to tribunals including the provision relating to costs and “there is no equivalent general rule that the unsuccessful party will be ordered to pay the costs of the successful party” as per paragraph 28 of Ridehalgh v Horsefield [1994] Ch 2015.

20. In addition, paragraph 43 of Ridehalgh v Horsefield states that a costs application “should not be regarded as routine, should not be abused to discourage access to the tribunal, and should not be allowed to become major disputes in their own right”.

21. The Tribunal applied the three-stage test in [ADDRESS] Company (1985) [COMPANY] v [NAME] [NAME] [NAME]; Ms [NAME] v 231 [COMPANY]; Mr [NAME] v [ADDRESS], [COMPANY] [2016] UKUT 290 (LC), LRX/90/2015, LRX/99/2015, LRX/88/2015 considering: (i) Whether the Respondent had acted unreasonably, applying an objective standard; (ii) If unreasonable conduct is found, whether an order for costs should be made or not; (iii) If so, what should the terms of the order be?

22. The Tribunal also took into account the meaning of “unreasonable” in Ridehalgh v Horsefield [1994] Ch. 205 which dealt with a wasted costs order, the principles of which we consider apply in this case:

“Unreasonable” means what it has been understood to mean in this context for at least half a century. The expression aptly describes conduct which is vexatious, designed to harass the other side rather than advance the resolution of the case, and it makes no difference that the conduct is the product of excessive zeal and not improper motive. But conduct cannot be described as unreasonable simply because it leads in the event to an unsuccessful result or because other more cautious legal representatives would have acted differently. The acid test is whether the conduct permits of a reasonable explanation. If so, the course adopted may be regarded as optimistic and as reflecting on a practitioner’s judgement, but it is not unreasonable.

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23. The Tribunal considered whether the Applicant has acted unreasonably in bringing, defending or conducting proceedings.

24. In making its determination in respect of Rule 13(2) the Tribunal found that the two issues raised legitimate questions and as such it was reasonable for the Respondent to defend the action. In conducting the proceedings, there were two provisions of the Lease to be considered, that of repair and that of management. The Respondent’s approach was that under the repair provision in that as the leak came from a part of the demise its repair was the responsibility of the Tenant Applicant. The Applicant’s approach was, in effect, that the work actually related to management, with which the Tribunal agreed. Both were reasonable.

25. The Tribunal therefore found that the proceedings had been conducted reasonably by the parties.

26. Having found that neither party had acted unreasonably the Tribunal makes no order for costs under Rule 13.

27. This does not affect the Respondent’s contractual right to charge costs through the Service Charge. The Tribunal is aware that the Respondent’s Representative had not been given an opportunity under Rule 13(6) to specifically address the issue of costs under Rule 13(1). However, as the Tribunal determined to make no order, it was of the opinion that, taking into account the wording of Rule 13(6), to seek further representations might incur unnecessary costs.

Judge JR Morris

APPENDIX - RIGHTS OF APPEAL