First-tier Tribunal Determines Service Charge Amount Under Right to Manage

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00BK/LUS/2022/0003 Property : [NAME] , 11 [ADDRESS] [POSTCODE]. Applicant : [redacted] Representative : [NAME]. At the hearing – Mr. [COUNSEL]. [NAME]. Respondent : [redacted] Representative : [RESPONDENT]. At the hearing – Mr. [COUNSEL]. [NAME]. Type of [NAME] : For the determination of the amount of accrued and uncommitted service charges under S.94(3) Commonhold ad Leasehold Reform Act 2002. Tribunal members : Tribunal Judge Aileen Hamilton-[NAME] : 10 [ADDRESS] [POSTCODE] Date of decision : 24 October 2022.

DECISION

2

Decisions of the tribunal (1) The tribunal determines in accordance with S.94(3) of the Commonhold and Leasehold Reform Act 2002, the amount of accrued and uncommitted service charge at the date of acquisition under the [NAME] was £388,821.94. The [NAME]

1. The Applicant seeks a determination pursuant to s.94(3) of the Commonhold ad Leasehold Reform Act 2002 of the amount of accrued and uncommitted service charge in relation to the [NAME] of the subject premises.

. The hearing 2. The Applicant was represented by Mr. [COUNSEL] of Counsel at the hearing and the Respondent was represented by Mr. [COUNSEL] of Counsel. Instructing solicitors for Mr. [COUNSEL] were in attendance as were some of the [NAME] of the property and [NAME].

3. Immediately prior to the hearing the parties handed in further documents, namely skeleton arguments and authorities. The tribunal considered these documents prior to and during the hearing.

4. For the purposes of the hearing and this decision, the tribunal relies on the document entitled ‘Hearing Bundle Prepared by the Respondents’. Numbered pages referred to in this decision correspond with the numbers in that bundle.

5. At the start of the hearing Mr. [NAME] asked that if the tribunal was not minded to adjourn proceedings whilst the criminal proceedings/investigation took place, that we should determine the effective date for the RTM. The background 6. The property which is the subject of this applicant is io 7. The Applicant served a Notice of Claim under Chapter 1 of the Commonhold and Leasehold Reform Act 2002 on the [NAME] and their agent on 13 December 2021. No counter-notice was served, and therefore in accordance with the legislation, the applicant acquired the [NAME] the premises on 28 April 2022.

3 8. Although it appears the respondents considered [NAME] an appeal against the acquisition, none has been made and the tribunal is satisfied that the date of acquisition was 28 April 2022.

9. The single issue before the tribunal is the amount of accrued or uncommitted service charges. In the [NAME] the applicants say that c £400,000 is accrued and uncommitted. This figure was amended before the hearing to £388,821.94. The issues 10. [NAME] presented the case on behalf of the respondents. This included an [NAME] for postponement or strike-out of the [NAME] on the basis that there were extant criminal proceedings against one of the directors of the [COMPANY] and allegations of fraud against another. Mr. [NAME] said that the respondents did not want ‘any come back’ from the applicants, if it was found that criminal activity had taken place and the service charge funds had been transferred. He suggested that the proceedings should be adjourned until the proceedings/investigations had been completed.

11. He said that his clients were also concerned as to whether the TUPE Regulations in relation to the members of staff ([NAME] and [NAME]) had been properly undertaken and completed, and again suggested that his client did not want to find itself liable in any dispute in this matter. Despite the applicants having produced signed witness statements from the [NAME] his client remained unsure whether the regulations had been properly complied with, and he said that the witness statements were confusing, and it appeared that at least one of the [NAME] was not aware of what their witness statement contained and had signed it without understanding it.

12. He said that if the tribunal was to make a finding of fact as to the date when the RTM took place and did that at the hearing, then his clients would have time to reconcile figures and prepare for the handover, and that any delay would not prejudice the parties, especially the [NAME] and [NAME].

13. Mr. [NAME] opposed the [NAME] for an adjournment. He contended that the respondents were attempting to frustrate the applicants’ statutory rights. He relied he said, on the wording of the Act, and the fact that, if the respondents were concerned that the directors of the company had acted improperly, then that was a matter for the [COMPANY] and not the respondent, any ‘come-back’ as suggested by the respondent would have to be defended by the applicants and was not a matter for the respondent. He said that, given the company had acquired the RTM on 28 April 2022, that any actions taken by the company since that date, including the transfer of the staff members, was a risk to the company and not the respondent.

4 14. He relied on [COMPANY] v McAteer [2015] I.C.R.87 and the Transfer of Undertakings (Protection of Employment) Regulations 2006/24 regs 2,3 and 4.

15. The tribunal retired to consider the preliminary issue. The Law:

16. S.94(3) of the Act enables a [COMPANY] to make an [NAME] to the tribunal to determine the amount of any payment which falls to be made under this section.

17. S.94(4) states ‘The duty imposed by this section must be complied with on the acquisition date or as soon after that date as is reasonably practicable. The Tribunal’s Reasons:

18. The tribunal was not persuaded by Mr. [NAME] submissions. We considered those of Mr. [NAME] to be more persuasive and agree that the effective date for the RTM was 28 April 2022. Having considered that to be the appropriate date, we are satisfied that the TUPE Regulations were effective in relation to the staff members on the same day. If the [COMPANY] has breached those Regulations in any way, then the fault will lie with them and not the [NAME]. Similarly, if the [COMPANY] in any way breaches the legislation in relation to the service charges, or the keeping of the funds then that is again a matter for the [NAME] and the Company. Finally, the tribunal takes some comfort from the fact that the [COMPANY] has appointed managing agents, who have appeared before the tribunal, and it is likely that any fund will be held by them in accordance with the legislation.

19. The tribunal was told by the applicants that on the effective date the service charge accounts showed a credit balance of £388,821.94. This is therefore the amount we find under S.94(3).

20. We were informed that there had been some further expenditure from that account since 28 April 2022 and the tribunal urged the parties to agree what deductions should be made so that any transfer of the funds could take place as soon as possible.

Name: [NAME]: 24 October 2022.

5 Rights of appeal By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the tribunal is required to notify the parties about any right of appeal they may have. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber), then a written [NAME] for permission must be made to the First-tier Tribunal at the [NAME] which has been dealing with the case. The [NAME] for permission to appeal must arrive at the [NAME] within 28 days after the tribunal sends written reasons for the decision to the [NAME]. If the [NAME] is not made within the 28-day time limit, such [NAME] must include a request for an extension of time and the reason for not complying with the 28-day time limit; the tribunal will then look at such reason(s) and decide whether to allow the [NAME] for permission to appeal to proceed, despite not being within the time limit. The [NAME] for permission to appeal must identify the decision of the tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal and state the result the party [NAME] the [NAME] is seeking. If the tribunal refuses to grant permission to appeal, a further [NAME] for permission may be made to the Upper Tribunal (Lands Chamber).