First-tier Tribunal Determines Reasonableness of Service Charges

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case Reference

Property

Applicant

Respondent

Representative

Type of Application

Tribunal

Date of Hearing

Venue:

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CHI/00HB/LSC/2003/0056

56B [ADDRESS] [POSTCODE]

[NAME] [NAME]

56-58 [COMPANY]

[NAME] [NAME], Director

Determination of service charges under section 27A of the Landlord and Tenant Act 1985 with limitation of costs applications.

Judge David Clarke MA [NAME] [NAME]

3 May 2024

Bristol Magistrates Court and Tribunal Centre

DETERMINATION AND STATEMENT OF REASONS

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DETERMINATION

1. The Tribunal formally records that the service charges payable by the Applicant for all periods before 2020, except where already accepted or admitted by [NAME] [NAME], are £nil.

2. In respect of the service charge year 2020, the amount payable by way of service charge by the Applicant is £1,345, namely £935 in respect of roof repairs that year and £410 in respect of the cost of emergency drainage work. No management charge is payable for the year.

3. In respect of the service charge year 2021, the amount payable by way of service charge by the Applicant is £9,089. This comprises £8,484 in respect of roofing and other repairs (to include relevant sums actually charged in January 2022), £540 in respect of the management charge and £65 for buildings insurance.

4. In respect of the service charge year 2022, the amount payable by way of service charge by the Applicant is £486, being the £450 management fee (£540 less £90 disallowed) plus £36 for insurance.

5. In respect of the service charge year 2023, the amount payable by way of service charge by the Applicant is £941 being £536 for insurance and £405 as management fee (£540 less £135 disallowed) for a management fee.

6. Under section 20(1)(b) and section 20ZA(1) of the Landlord and Tenant Act 1985 as amended, the Tribunal determines that it is reasonable to dispense with the requirement to serve notices under section 20 on two occasions subject to the following conditions: a. The Respondent must bear the cost to the Applicant of both the cost of obtaining the report from [NAME] [APPELLANT] [NAME] and the cost of [NAME] [NAME] attending the hearing of this case on 3 May 2024. The Applicant is to supply [NAME] [APPELLANT] and the Respondent with evidence of the cost within 28 days of receipt of this determination. b. The Respondent must refund to the Applicant the Tribunal fees paid by him in bringing this case. c. In respect of the failure to serve section 20 notices in respect of the 2021 repair works, Tribunal directs that the cost is to be subject to a 20% deduction from the cost of £42,420 to £33,936. The Applicants 25% share of this cost is £8,484. d. In respect of the failure to serve notices in respect of the 2020 repairs, the Tribunal grants dispensation to the Respondent subject to the condition that the sum of £234 is repaid or credited to the Applicant.

7. The Tribunal makes an order under section 20C of the 1985 Act that any costs incurred by the Respondent in connection with these proceedings

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are not to be regarded as relevant costs to be taken into account in determining the amount of the service charge payable by the Applicant.

8. The Tribunal makes an order under Paragraph 5A of Schedule 11 to the 2022 Act extinguishing any liability to pay a particular administration charge in relation to the litigation costs of the Respondent in this case.

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STATEMENT OF REASONS

The Application.

1. This Application, for a determination of liability to pay and reasonableness of service charges, was made by virtue of section 27A of the Landlord and Tenant Act 1985 (“the 1985 Act”) on 24 April 2023 by [APPELLANT] (“the Applicant”). It is made in respect of service charges charged in respect of his long leasehold flat known as 56B [ADDRESS] [POSTCODE] (“[NAME]”). [NAME] is part of a development of three flats and a [NAME] all contained within a building (“the Building”) fronting [ADDRESS], more fully described in paragraph 5 below. The Respondent to this Application is a company, 56-58 [RESPONDENT] (“the Respondent”) who is the freeholder of the Building and landlord of the Applicant. The Respondent is not a [COMPANY] but one controlled by [NAME] [RESPONDENT], the director of the Respondent who appeared on its behalf. The Applicant seeks a determination in respect of service charges levied on [NAME] for the accounting years 2020 to 2023.

2. The Application includes two further applications, namely under section 20C of the 1985 Act and under Paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2022 (“the 2022 Act”).

3. Directions were issued on 1 November 2023 for a case management hearing which included the usual directions for filing papers and combining a bundle. Further Directions were required on 16 January 2024 because of [NAME] [NAME] absence abroad. The hearing took place at Bristol Magistrates Court and Tribunal Centre on 3 May 2024.

4. It should be mentioned that the Respondent issued County Court proceedings for recovery of alleged arrears of service charge and those proceedings were transferred to this Tribunal by an order dated 16 February 2024 and were listed under case number CHI/00HB/LSC/2024/0047. Those proceedings related in part to service charges relating to the four financial years 2020 to 2023 inclusive, which are the subject of this Application. All that needs to be recorded in this determination is that [NAME] [APPELLANT] and the Respondent (the applicant in case 0047) failed to respond to Tribunal Directions requesting details of any disputed amount outside 2020-2023. Consequently, on 15 April 2024, Judge Dobson made a decision to partially strike out case 0047 for any period prior to 2020 and held that service charges for periods before 2020, except where already accepted or admitted by [NAME] [NAME], are £nil. The service charges for the four-year period 2020 to 2023 which arose as part of the proceedings in the County Court now transferred to this Tribunal fall to be determined in this decision.

[NAME]. 5. [NAME] is a one bedroomed long leasehold basement flat known as [ADDRESS], Bedminster Bristol. It sits within two formerly separate properties, 56 and [ADDRESS], which are themselves part of a row of terraced properties fronting directly onto [ADDRESS], all of which have retail shops on the ground floor. Numbers 56 and [ADDRESS] together comprise the Building, built into the side of a hill. The Building is divided into four units with both raised and submerged entranceways.

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6. [NAME] is within the basement (which abuts onto rather than being wholly beneath) the retail unit, currently [COMPANY], which is on the ground floor at the front of the Building. [NAME] are two further flats, numbered 56A and 58A making four units in all within the Building, three being long leasehold flats and one being the commercial shop, which the Tribunal understands is also held on a long [NAME] at a low or peppercorn rent. [NAME] is accessed from the rear of the Building via a narrow alleyway.

The [NAME]. 7. The [NAME] of [NAME] (“the [NAME]”) is dated 13 June 2003 and is a demise for 999 years from 1 July 2002. The rent is a peppercorn. As is usual, the demise excludes the main structure of the Building, namely, the roofs foundations and load bearing walls severed medially. The provisions of the [NAME] relevant to this determination are as follows.

8. There is an insurance rent, being 25% of the cost of insuring the Building. The service charge percentage is also 25% - each of the four units paying the same amount. The tenant’s covenants are in usual form and extensive; those include covenants to pay the rent and pay the service charge; others with relevance to this decision are covenants not to underlet part only of the Premises and not to keep any pet.

9. The landlord’s covenants are primarily to observe the covenants in the first schedule to the [NAME] which requires the landlord to undertake the services. The services are to maintain and keep in repair and renew and replace when required the main structure of the building and to decorate the external parts of the Building. The services include employing a firm of managing agents to manage the Building. There is a requirement to keep proper books of account of all sums received, to set aside sums for future costs and to clean all windows monthly.

10. The second schedule contains the service charge provisions. The landlord is required to prepare an account of annual expenditure for each financial year ending on 31 December and have it independently certified. The tenant is to pay in each financial year a provisional sum being an estimate by the surveyor of what the annual expenditure is likely to be. The tenant then pays his 25% of this sum by equal quarterly instalments on the usual quarter days. The surveyor and the agent are to be a person or firm appointed by the landlord to perform the functions of surveyor and agent respectively under the [NAME]. There is provision for any excess at the end of the year, of the provisional sum paid at the beginning of the year, to be repaid or overpayment credited against the next quarterly payment due.

Relevant facts. 11. [NAME] [NAME] spouse, [NAME], purchased the shop [NAME] sometime prior to 2005. She continues to operate the business [COMPANY] in the shop premises in the Building. [NAME] [NAME], in his statement of case, records that she found that no building management was in place and there was no buildings insurance. As the then landlord and freeholder was, in [NAME] [RESPONDENT] words, ‘remote and uncommunicative’, [NAME] [NAME] decided to purchase the freehold and was eventually able to do so for the sum of £5,000 in 2005. Since that date he has had the responsibility of managing the Building and has done so for 18 years through the medium of the [COMPANY] that is the Respondent.

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12. The Applicant purchased [NAME] in October 2013 and has lived there for most of the relevant time. He has been the sole carer for two sons.

The Applicant’s case summarised.

13. The Applicant summarised his concerns about the amount and reasonableness of the service charges for the four years 2020-2023 in question both in his statement of case and in his opening address to the Tribunal. His principal complaint was that he had been overcharged for various works of repair but it was difficult if not impossible for him to find full details of the work done in each case. This was because the works should have been preceded by a notices under section 20 of the Act but none were ever served. Moreover, he had requested copies of the invoices for works done but these had not been supplied. He had successfully challenged one matter that had been wrongly charged to him alone but only after a solicitor’s letter; and even then, there was no repayment to him but only a credit note.

14. The Applicant also pointed to the failure of the Respondent to observe the terms of the [NAME]. No proper management accounts had been produced for any year. There was no budget prepared and no provisional service charge which would have enabled him to budget for quarterly payments due. Instead, he was asked to pay for repairs as planned or completed. His service charge payments were asked to be paid into the accounts of at least two other companies trading and controlled by [NAME] [RESPONDENT] – the Respondent had no bank accounts and service charges were not held in a trust account.

15. There was an administration charge paid quarterly but as no agents had ever been appointed to manage the Building it was unclear what this payment was for. What was clear was that [NAME] [NAME] had on recent occasions threatened to suspend, and then did actually suspend, property management of the Building. In the case of one repair that was required, [NAME] [NAME] sought, wrongly, to place liability for the repair onto another of the [NAME]. This delayed the work for a significant period of time (discussed more fully below).

16. The Tribunal was also asked to look at the insurance premiums for the Building and in particular whether the cost had increased after a flood in the [NAME].

17. The Tribunal considers the detailed arguments of the Applicant for each of the four financial years further below.

The Respondent’s case summarised. 18. [NAME] [RESPONDENT] began his presentation of the case for the Respondent by claiming that he was a freeholder but was not a landlord and had to be corrected by the Tribunal. His case was that he managed the Building on a non-profit basis and did all the work himself and in his own time. He felt the freehold was a liability and relatively worthless yet the value of the flats had increased. The repairs that had been done to the roofs were needed, and in some cases, were time critical. The management fee was £540 per annum paid quarterly and used for window cleaning and clearing of drains.

19. He stressed that he had always tried to work informally with the three tenants and this had been open and friendly for some years. Indeed, the Applicant had done some painting of the Building. He contended that his informal approach benefitted the tenants.

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20. He admitted that there were no notices served under section 20 of the Act because he had no idea at the time that they were required. The Applicant also indicated that he only became aware of the need for these notices when preparing this application to the Tribunal. The Respondent seeks dispensation in respect of its failure to serve any section 20 notices.

Service charges in 2020.

21. The Applicants concerns for 2020 centre on the leaks into his living room through the small area of roof. The Respondent company through [NAME] [RESPONDENT] wrongly denied responsibility for 13 months suggesting it was the responsibility of the lessee who had a walkway above. After 13 months, the Applicant consulted solicitors and, after a letter by a solicitor, eventually [NAME] [COUNSEL] agreed to cover the costs under the terms of the [NAME]. However, he required the Applicant to arrange for the work and pay these costs upfront. After the repairs were done, the Respondent collected the share of the costs from the other three [NAME] but did not refund the Applicant for the 75% of the costs that the Applicant had had to pay upfront, giving him a credit note instead. The Applicant contends that this issue was a major contributory factor in him being unable to sell his flat that year. The Tribunal notes that the cost of the works was such that section 20 notices should have been served.

22. The Applicant also contends he should not have had to pay for the urgent drains survey costing him £445 to investigate fumes in the [NAME]. He paid this under protest as he was trying to sell his flat at the time.

23. Finally, for this year, and for all four years, the Applicant contended that the annual management fee of £540, payable quarterly, was unreasonable given the poor management regime.

24. [NAME] continued to maintain before the Tribunal that the responsibility for the repairs was not that of the management company but the responsibility of the tenant of flat 58A because the access walkway to that flat was above the roof. He said that he had only eventually agreed to cooperate in doing the works to avoid legal fees. The Tribunal was not provided with a copy of the [NAME] of flat 58A nor did it have the benefit of an inspection of the building but the [NAME] of the Applicant clearly excludes all parts of the main structure of the Building, including the roofs and photographs indicate that the roof is separate from the walkway.

25. As for the drains charge, [NAME] [NAME] accepts that the cost was considerable. Though the Applicant at one point in his paperwork says that the total cost for the work on the drains was £1,776, which would mean that the amount to be charged to the Applicant was 25% of that, namely £445, the amount of the total cost was stated at the hearing to be £1,640. The charge to the Applicant if the cost was £1,640 would be £410, which is 25% of £1,640. Since the Tribunal does not have an invoice from the firm that did the work to determine the exact amount, the cost is taken by the Tribunal to be the lower sum, of £1,640 in total. In any event, [NAME] [NAME] submitted that the charge was necessary and reasonable for emergency work.

26. [NAME] [NAME] justified the annual management fee as reasonable and claimed it was used for window cleaning and clearing drains.

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Service charges in 2021.

27. The Applicants concerns for 2021 relate primarily to roof repairs to the main roof over flat 58A. The then lessee of that flat, keen to sell his property, obtained his own written quote for wok that was necessary amounting to just under £11,000. [NAME] [NAME], unaware of the requirements of section 20, obtained an oral quotation for works from a firm called [COMPANY] at a cost of about £26,000. The lessees were required to pay as work progressed but the Applicant refused to pay the final request as his total was £10,605, which equated to a total cost of £42,420. The Applicant paid £5,730 but has not paid the balance said to be due of £4,875. This is because the Applicant asked for, but has never received, copies of any written quotation or detailed invoices for any of the work done. It was only after the Tribunal requested evidence about the work that [NAME] [NAME] obtained a retrospective (paid for) quotation dated 23 November 2023 for the works undertaken, but this is stated to be at 2023 prices and there so is no indication of what was actually charged in 2021. The Applicant also contended that [COMPANY] was not a specialist roofing contractor and not registered with the [NAME].

28. The Applicant had obtained an expert report on the roof repairs from [NAME] [NAME] [NAME], who gave evidence at the hearing and discussed his report. His evidence is examined below. The Applicant considered in the light of that report that some work was not of a reasonable standard as there was ‘ponding’ in the gullies and distortion in the new roof timbers.

29. [NAME] [NAME] contended that the roofing works were done to a satisfactory standard. He now accepted that there should have been a section 20 notice giving specification for the works required and an opportunity to suggest another contractor. His quote for £26k included more work and the scaffolding cost which were not included in the quotation obtained by [NAME] [NAME], the lessee of flat 56A. The work necessitated an overall steel temporary roof. He admitted that he had no invoices for the work that had been done and no receipts for payments he had made. He paid the main contractor and four other individuals doing work in cash. The extra cost was because the gable end wall had to be reconstructed. The roof timbers were replaced, the tiles were removed, stored, and reused. He was not aware of the distortion confirmed in [NAME] [NAME] report. He trusted [COMPANY] as they had done work in the past and they did all kinds of work. There have been no problems since the work was completed.

Service charges in 2022.

30. The Applicant questions two charges totalling £2,370 made early in the year. The first amounting to £1,700 is said to be for the appointment of a structural engineer for the dismantling and rebuilding of a new structural and supporting wall and for the associated scaffolding costs of £670. These were issued early in 2022 but appear to be related to the 2021 roofing works. It was confirmed at the hearing that they did relate to the gable end wall. They are included in the total overall cost of £10,605 charged to the Applicant.

31. The Applicant also questions the annual management charge for this year on the additional ground that [NAME] [NAME] wrote during that year saying that he was no longer taking any responsibility for management of the Building. He was therefore not fulfilling his responsibilities. (He claimed that [NAME] [NAME] also sent an untrue message in November 2023 saying he had sold the freehold).

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32. [NAME] [NAME] provided photographs of the scaffolding and the new supporting wall confirming it was part of the costs for the 2021 roof repair. He admitted that to sending both of the emails in the bundle stating that he was declining further responsibility and the false email about a sale. He said he did this because he was ‘at the end of his tether’ and he was trying to prompt the [NAME] into action and take over management of the Building. He indicated that his then preference was to move to professional management but that the lessee of 58A ‘refused’ to agree so he could not be sure that a professional management fee would be paid.

Service charges in 2023. 33. There are no significant amounts in dispute for 2023. The parties are clearly not in agreement but that disagreement is mainly about the alleged arrears and the correct level of disputed payments unpaid by the Applicant. They do not agree on the figures.

34. There are however some lesser items in dispute. The first raised by the Applicant is the £536 charge for insurance premiums (and the £36 of increased insurance costs in 2022). It seems that the lessees were advised that additional charges are made because [NAME] [NAME] was issued with a county court judgement and also because of a flood in the [NAME] which increased premiums because of the claim made by the shop proprietor, Mrs [NAME].

35. [NAME] [NAME] denied this claim in the strongest possible terms both in his statement of case and at the hearing. He claimed in return that the flood may have been made worse by the Applicant building ‘a structure’ over the manhole cover in his outside yard. The flood did lead to an insurance claim and he accepted in his statement of case that the premiums ‘may have slightly increased due to that claim’. At the hearing, he said that the shop was prone to flooding and on that occasion the damage was ‘horrific’ causing damage to skirting boards, doors and to the shop stock. The premium did go up but his broker had now moved to a different insurance company. He admitted to a CCJ but said it was related to a different company that he was involved with.

36. Finally, at the hearing but not in his statement of case, the Applicant questioned the reasonableness of the larger sum of £909 charged to him as a management fee.

Failure to observe section 20 of the Act.

37. Section 20 0f the Landlord and Tenant Act 1985 was enacted by Parliament to provide some protection for long [NAME] from unexpected or significant works to the buildings in which their flats are located. They must be consulted whenever the proposed costs exceed the sum of £250 multiplied by the number of properties paying a proportion of the cost. In this case, with four units, any works exceeding £1,000 should be subject to those consultation procedures set out in regulations. In this way, the Applicant in this case would have had advance notice of the works, have a sense of the work involved from the specifications sent to him, been able to suggest a suitable contractor to be approached for a quotation for the work required, made comments about the contractor that the landlord proposed to use and plan well in advance to budget for the costs. Failure to serve such a notice may lead to the landlord only being able to claim a sum of £250 from each [NAME] towards the works where a notice should have been served but was omitted.

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38. [NAME] [NAME] says he just did not know about these requirements and the Applicant acknowledged that he too was not aware of the section until he began to research for this application. However, it is not for the [NAME] to make himself or herself aware of the law. It is the landlord’s responsibility to do so. [NAME] [RESPONDENT] had every opportunity over a period of nearly 20 years to take some legal advice about his duties as a landlord and under the [NAME] but chose not to do so. He could have also searched online where it is very easy to find advice from the [NAME].

39. [NAME] [NAME] has now undertaken sufficient research online or elsewhere to submit in his statement of case that this Tribunal should apply the Supreme Court decision in [COMPANY] v Benson [2013] UKSC 14 and grant him dispensation from the requirements of section 20 to enable him to recover from the Applicant the full amount of 25% of the costs of repairs. He says the works were required and the work was done promptly and well. The Applicant, he submits, has the benefit of a leasehold asset which has been kept secure by the work that was undertaken.

Assessment of the evidence 40. [NAME] [APPELLANT] accused the Applicant of lies in his comments in relation to the insurance issue, the Tribunal assessed the Applicant as providing an honest and fair assessment of the history of what had occurred. His oral evidence was given in a measured way notwithstanding the personal pressures that he had experienced. He provided at his expense an expert report of the state of the roof after major works and produced it to the Tribunal even though it revealed that a lot of the work done appeared to be satisfactory.

41. At the beginning of his evidence, [NAME] [NAME] felt it necessary to stress that he was not an oppressive landlord. The Tribunal at the time gave him some reassurance that there was no indication that was the case and now confirms that it does not believe that he set out deliberately to make life difficult for his [NAME] or to profit from them. However, [NAME] [NAME], who showed himself in his written submissions, to be an erudite person who was able to delve into the basics of the law and find the [NAME] v Benson authority, nevertheless chose over a long period of time not to take any legal advice about managing his property. (He also ignored the advice of the Tribunal in the hearing for directions to obtain legal assistance). As a consequence, not only did he not observe the requirement to consult on major works under section 20 but he also failed to hold funds received in a trust account. He was ready to refer to the terms of the [NAME] when recording that the Applicant had kept a pet when not allowed to do so and once allowed others to occupy [NAME] yet never made any attempt to follow the very clear [NAME] requirements in relation to the service charge.

42. His explanation was that a ‘Gentleman’s agreement’ existed to deal with everything informally. However, there is no evidence whatsoever that any such agreement was made. Rather, [NAME] [NAME] chose to act in the way that he did and the [NAME] had to accept that approach. The context in which the Tribunal has to decide the issues raised in this case is one where there are no proper certified management accounts for any year, no annual budget of estimated expenditure, no building up of reserve funds, and no end of year assessment of actual outturn against budget to show either an excess or underpayment for the year. Finally, invoices and details of the cost of repair works were not kept by [NAME] [NAME] and with cash payments being made by him without receipts, there is no actual proof of the cost of the works undoubtedly undertaken.

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Roof repairs and drain survey in 2020.

43. When there was a leak though the Applicant’s roof, the Respondent denied liability. The Tribunal determines from the terms of the [NAME] and from a photograph supplied that the Respondent was wrong to do so. He could and should have taken legal advice to get a definitive ruling but chose not to do so. The Applicant consulted a solicitor who wrote to the Respondent (the letter was in the bundle) setting out fully and correctly the terms of the [NAME], which made it clear that the Respondent had the duty to undertake repairs. Even then the Respondent did not accept his responsibility but allowed or required the Applicant to arrange for the work to be done. [NAME] [APPELLANT] then obtained payments from the other three unit holders but only gave the Applicant a credit note for that sum (£2,805).

44. The Respondent ultimately spread the cost across the four units but did not arrange for the work to be done. It is unusual to say the least that [NAME] [NAME] now accepts that, if the work should have been done by the Respondent, a section 20 consultation notice should have been served and seeks dispensation under section 20(1)((b) of the Act. Unless dispensation is given, he will be limited to a £250 contribution from the Applicant in respect of costs for which the Applicant’s share was £935. The Tribunal’s decision on dispensation under section 20ZA is set out below.

45. With regard to the charge of £445 for emergency drains work, the Tribunal accepts that in an emergency, such work can be done without a section 20 notice. The Tribunal considers that the costs were reasonable but the Appellant should have been charged 25%, namely £410.

46. In that year, the Respondent charged the sum of £540 for management costs. While this is not an unreasonable sum if management is being undertaken, it cannot be reasonable where the Respondent declines to fulfil its responsibilities in relation to the roof leak for 13 months. For 2020 only, the Tribunal determines that the management charge is unreasonable and no charge is payable.

Roof Repairs in 2021 and ancillary costs in 2022.

47. The Tribunal had the benefit of an expert report dated 6 December 2023 from a [NAME] [NAME] [NAME], C.Eng, MICE, of [COMPANY], who added to his evidence in oral testimony. The report was commissioned and paid for by the Applicant. The Respondent considered the report unnecessary. In fact, the report, which was commissioned in respect of the roof to which repairs were undertaken in 2021, revealed that there were no serious defects requiring urgent repair. To that extent it provided evidence (otherwise unavailable) that the works that the Respondent had undertaken in 2021, were largely done to a reasonable standard. There were two main concerns, and some additional recommendations. First, there was minor distortion in the ridge line that required inspection (which will require construction of a hatch). Secondly, there was a not inconsiderable amount of ponding of water to the valley gutters which require inspection by a roofing contractor to correct any issues found (although it was noted by [NAME] [NAME] that this was not unusual in this type of roof detail). There were also concerns about the cracking to the render of the parapet upstand to the front wall and some isolated repairs are necessary to ensure that the walls remain watertight.

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48. Though, with the benefit of [NAME] [NAME] report, the Tribunal can conclude that the roofing works were largely done to a reasonable standard, the same conclusion cannot be made about the cost of those works. The Respondent does not have any independent evidence of the amounts paid as there are no invoices and no receipts for cash payments. The Applicant produced a spreadsheet of his payments over the four years but the only evidence from the Respondent are the demands for payments of service charge (not in accordance with the [NAME]) under the heading of the Respondent company listing work done and asking for 25% payment. There is little or no proof of evidence of the person to whom these various payments are made.

49. Without proper management accounts, the Tribunal starts on the basis that the total charge for the major works of repair is £42,420, with the 25% share for the Applicant being £10,605. This is covered by demands for payment in 2021 of £8,235 and in January 2022 of £2,370.

50. The helpful report of [NAME] [NAME] reveals mainly work of a reasonable standard but the Tribunal discounts the final total by 5% to take account of the distortion in the ridge line and the need for examination of the pooling of water in the gullies. The total amount is therefore reduced by £2,121 to £40,299.

51. The Tribunal is particularly exercised by the lack of evidence as to cost, which is exacerbated by the lack of any management accounts as required by the Leases, the lack of invoices, the use of bank accounts of three companies controlled by [NAME] [NAME] to receive payments of service charge, and the basic lack of transparency. These factors compound the failure to seek more than one quotation and deprived the [NAME] of the opportunity to suggest another possible contractor. Using its expertise, the Tribunal would expect a manager seeking competitive quotations from three contractors to have obtained a price some 10-15% below the cost now charged. A 15% deduction, namely £6,363 being 15% of £42,420, is appropriate in this case. The charge of £42,420 is therefore reduced by £2121 and by £6363 to £33,936. The Applicants 25% share of this cost is £8,484.

52. This would be subject to a maximum charge of £250 as no valid section 20 notice was served. The Respondents application under section 20ZA of the Act is considered below.

Insurance premiums 53. The Applicant complained about increases in insurance premiums namely the excess of £36 in 2022 and the charge of £536 in 2023. The Applicant has not satisfied the Tribunal that these sums are unreasonable. The Tribunal only comments that it is essential that communal insurance relates to the Building only. Contents cover, and any commercial cover for the [NAME] for stock and fittings must be the responsibility of each unit owner.

Annual administration charge 54. The Tribunal has already given its view on the reasonableness of the annual administration charge. Though the amount charged per annum appears to be reasonable, it is important that management is undertaken and available at all times. The Tribunal notes that from 11 November 2022 to the end of March 2023 [NAME] [NAME] indicated that he was ‘shelving’ all administration work. In such circumstances, it is inappropriate to make an administration charge for that five-month period. The

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Tribunal therefore disallows the sum of £90 from the service charge for 2022 and £135 from the service charge of 2023. The deduction of £1235 should come from the sum of £540 as the Tribunal was not given any justification for an increase to £909 for that year.

Section 20 and dispensation 55. The 2020 flat roof repairs were arranged and funded by the Applicant after the refusal by [NAME] [APPELLANT] on behalf of the landlord to get the work done. [NAME] [RESPONDENT], incorrectly, continued to maintain that it was not the Respondent’s responsibility, he now asks for dispensation under section 20(1)(b) of the Act and section 20ZA(1). The Tribunal takes its guidance on giving such dispensation from the Supreme Court decision in [COMPANY] v Benson [2013] UKSC 14. The [NAME] gives a helpful summary of that decision: a. The correct legal test on an application to the LVT for dispensation is: “Would the flat owners suffer any relevant prejudice, and if so, what relevant prejudice, as a result of the landlord’s failure to comply with the requirements?” b. The purpose of the consultation procedure is to ensure [NAME] are protected from paying for inappropriate works or paying more than would be appropriate. c. In considering applications for dispensation the LVT should focus on whether the [NAME] were prejudiced in either respect by the landlord’s failure to comply. d. The LVT has the power to grant dispensation on appropriate terms and can impose conditions. e. The factual burden of identifying some relevant prejudice is on the [NAME]. Once they have shown a credible case for prejudice, the LVT should look to the landlord to rebut it. f. The onus is on the [NAME] to establish: i. what steps they would have taken had the breach not happened and ii. in what way their rights under (b) above have been prejudiced as a consequence. g. Where relevant prejudice has been established the LVT should, in the absence of some good reason otherwise, require the landlord to reduce the amount of service charges claimed to compensate the [NAME] fully for that prejudice. h. Essentially the LVT is to reconstruct what would have happened had the consultation been followed properly and in deciding what conditions to impose the LVT should adopt a “sympathetic” approach to the [NAME].

56. Applying those principles, the Tribunal notes that eventually the Applicant did get the repair works completed and at a fair price. The Applicant says he was prejudiced by not being able to sell his flat at that time but produced no or at least insufficient evidence that he was unable to sell, or lost a sale, because of the lack of repair for a period of time. But he was prejudiced by having to arrange the repairs himself and then having to carry the costs with a refund not in cash but in the form of a credit note. Since the Tribunal is satisfied that relevant prejudice is established, it grants dispensation to the Respondent subject to the condition that the sum of £234, being 25% of the cost to the Applicant of those repairs, is refunded to him.

57. Section 20 notices were also required for the roof works in 2021 but no such consultation took place. [NAME] [NAME] again seeks dispensation from the Tribunal in respect of that failure. He may not have known at the time that they were required but

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even if he was reluctant to ever take legal advice a quick glance at websites such as that of the [NAME] would have alerted him to the need to consult appropriately.

58. Applying the principles derived from [APPELLANT] v Benson, the Tribunal considers that the Applicant has suffered prejudice. Because of the way [NAME] [APPELLANT] operated, the Applicant cannot be sure that the works were done appropriately and at a fair price. These is no evidence that the works did in fact cost a total of £42,420 because there are no stage invoices from contractors and apparently, as [NAME] [NAME] mentioned, four other persons were paid for work in cash with no receipts. On the other hand, the work was done and substantially to a reasonable standard. The Tribunal has already reduced the amount by 5% for the distortion in the ridge and a further 15% because of the Tribunal’s view that obtaining competitive quotations to a specification of work would be likely to have resulted in a cheaper price. It does not think it appropriate to make any further reduction in the service charges. However, if for any reason it was inappropriate for this Tribunal to make such a 20% reduction, it determines that in the alternative, that 20% deduction from £42,420 could equally be justified as a reduction for prejudice established and suffered by the Applicant.

59. The Tribunal therefore grants dispensation for the failure to serve section 20 notices in respect of the 2021 repair works subject to a 20% deduction for the cost of £42,420 to £33,936. The Applicants 25% share of this cost is £8,484.

60. The Tribunal is also entitled to impose conditions on granting dispensation and is required to take a sympathetic attitude to [NAME]. It imposes the following conditions on the grants of dispensation made. a. The Respondent must bear the cost to the Applicant of both the cost of obtaining the report from [NAME] [APPELLANT] [NAME] and the cost of [NAME] [NAME] attending the hearing of this case on 3 May 2024. The Applicant is to supply [NAME] [APPELLANT] and the Respondent with evidence of the cost within 28 days of receipt of this determination. The Respondent should regard [NAME] [RESPONDENT] report of considerable benefit to him as without it the Tribunal would not have had evidence that a substantial part of the works undertaken were of a reasonable standard. b. The Respondent must refund to the Applicant the Tribunal fees paid by him in bringing this case. These conditions are imposed on the basis that they would not have been costs the Applicant would have had to bear if the provisions of the [NAME] had been followed, notices under section 20 served and appropriate management practices as set out in the third edition of the RICS code of practice (Service Charge Residential Management Code) had been observed.

Summary of determination 61. The Tribunal formally records that the service charges payable by the Applicant for all periods before 2020, except where already accepted or admitted by [NAME] [NAME], are £nil.

62. In respect of the service charge year 2020, the amount payable by way of service charge by the Applicant is £1,345, namely £935 in respect of roof repairs that year and

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£410 in respect of the cost of emergency drainage work (the Tribunal takes the sum of £1.640 as the total cost). No management charge is payable for the year.

63. In respect of the service charge year 2021, the amount payable by way of service charge by the Applicant is £9,089. This comprises £8,484 in respect of roofing and other repairs (to include relevant sums actually charged in January 2022), £540 in respect of the management charge and £65 for buildings insurance.

64. In respect of the service charge year 2022, the amount payable by way of service charge by the Applicant is £486, being the £450 management fee (£540 less £90 disallowed) plus £36 for insurance.

65. In respect of the service charge year 2023, the amount payable by way of service charge by the Applicant is £941 being £536 for insurance and £405 as management fee (£540 less £135 disallowed) for a management fee.

66. Under section 20(1)(b) and section 20ZA(1) of the Landlord and Tenant Act 1985 as amended, the Tribunal determines that it is reasonable to dispense with the requirement to serve notices under section 20 on two occasions subject to the following conditions: a. The Respondent must bear the cost to the Applicant of both the cost of obtaining the report from [NAME] [APPELLANT] [NAME] and the cost of [NAME] [NAME] attending the hearing of this case on 3 May 2024. The Applicant is to supply [NAME] [APPELLANT] and the Respondent with evidence of the cost within 28 days of receipt of this determination. The Respondent should regard [NAME] [RESPONDENT] report of considerable benefit to him as without it the Tribunal would not have had evidence that a substantial part of the works undertaken were of a reasonable standard. b. The Respondent must refund to the Applicant the Tribunal fees paid by him in bringing this case. c. In respect of the failure to serve section 20 notices in respect of the 2021 repair works, the cost subject to a 20% deduction from the cost of £42,420 to £33,936. The Applicants 25% share of this cost is £8,484. d. In respect of the failure to serve notices in respect of the 2020 repairs, the Tribunal grants dispensation to the Respondent subject to the condition that the sum of £234 is repaid or credited to the Applicant.

The Ancillary applications 67. The Applicant made ancillary applications under section 20C of the 1985 Act and under Paragraph 5A of Schedule 11 to the 2022 Act. It is important that the Applicant, in a case where he has obtained a ruling in his favour, is not later required to contribute to the Respondent’s legal costs.

68. The Tribunal therefore makes an order under section 20C of the 1985 Act that any costs incurred by the Respondent in connection with these proceedings are not to be regarded as relevant costs to be taken into account in determining the amount of the service charge payable by the Applicant.

69. The Tribunal also makes an order under Paragraph 5A of Schedule 11 to the 2022 Act extinguishing any liability to pay a particular administration charge in relation to the litigation costs of the Respondent in this case.

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Concluding Remarks 70. For the future, there are three alternative approaches to management of this property.

a) [NAME] [RESPONDENT], through the medium of the Respondent, may choose to continue to manage the Building. But he will need in future to observe all the terms of the [NAME] especially as it relates to service charges, perhaps bringing in assistance from [NAME] to assist (which can be properly charged to the [NAME]).

b) The Respondent could appoint a professional property manager to undertake all aspects of management. The cost would be fully chargeable to all the [NAME]. This is likely to be quite costly but would deliver reliable and accountable management for all the occupiers.

c) The three residential [NAME] have the legal right, if they choose to exercise them, both to purchase the freehold and to take over management of the Building. They could then appoint such [NAME] to assist, or a managing agent to work on their behalf.

Right of Appeal 71. A person wishing to appeal this decision to the Upper Tribunal (Lands Chamber) must seek permission to do so by making written application to the First-tier Tribunal at the [NAME] which has been dealing with the case ([EMAIL] ). The application must arrive at the Tribunal within 28 days after the Tribunal sends to the person making the application written reasons for the decision.

72. If the person wishing to appeal does not comply with the 28-day time limit, the person shall include with the application for permission to appeal a request for an extension of time and the reason for not complying with the 28-day time limit; the Tribunal will then decide whether to extend time or not to allow the application for permission to appeal to proceed.

73. The application for permission to appeal must identify the decision of the Tribunal to which it relates, state the grounds of appeal, and state the result that the party who is making the application for permission to appeal is seeking.