First-tier Tribunal Determines Service Charges and Legal Costs

OUTCOME: Allowed in Part

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case References : MAN/00CJ/LSC/2021/0094 MAN/00CJ/LAM/2025/0001

Properties : Apartment 6/19, 55 [ADDRESS], [POSTCODE]

Applicant: [redacted]

[NAME]: : [APPELLANT] & [APPELLANT] (Directors)

Respondent: [redacted] : [NAME] [APPELLANT] of Application : Landlord and Tenant Act 1985 – s 27A Landlord and Tenant Act 1985 – s 20C Commonhold and Leasehold Reform Act 2002 – Schedule 11, Paras 5 & 5A Landlord and Tenant Act 1987 – s 24

Tribunal Members : Judge [NAME] of Hearing : 18th November 2025 Date of Decision : 7th January 2026

DECISION

© [RESPONDENT] 2026

2 DECISIONS OF THE TRIBUNAL

(1) The amount payable by the Applicant to the Respondent by way of service charge for the service charge financial year 2017 was £2,451.47.

(2) The amount payable by the Applicant to the Respondent by way of service charge for the service charge financial year 2018 was £2,425.36.

(3) The amount payable by the Applicant to the Respondent by way of service charge for the service charge financial year 2020 was £2,529.72.

(4) The amount payable by the Applicant to the Respondent by way of service charge for the service charge financial year 2021 was £2,516.65.

(5) The amount payable by the Applicant to the Respondent by way of service charge for the service charge financial year 2022 was £1,534.09.

(6) The amount payable by the Applicant to the Respondent by way of service charge for one-off demand of 21st September 2021, and ancillary charges which have arisen thereon was NIL (£0.00).

(7) Under Section 20C Landlord and Tenant Act 1985, the costs incurred by the Respondent in connection with these proceedings until the date hereof which are to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the Applicant (subject to the terms of the relevant lease) shall be reduced by 50%.

(8) Under the Commonhold and Leasehold Reform Act 2002, Schedule 11, Paragraph 5A, the liability of the Applicant to pay administration charges in respect of litigation costs relating to the one-off demand of 21st September 2021 is extinguished.

(9) The proceedings in Case Reference MAN/00CJ/LAM/2025/0001 are further stayed for 1 month until 6th February 2026. At the end of the stay, the parties must inform the Tribunal whether they have reached agreement regarding the outcome of that application, or whether further directions are required.

3 REASONS

The applications

Service charges

1. The Applicant has sought a determination pursuant to s.27A Landlord and Tenant Act 1985 as to whether it is required to pay to the Respondent certain sums by way of service charge (and, if so, how much).

2. In the application originally dated 19th December 2021 (case reference MAN/00CJ/LSC/2021/0094) and as variously supplemented thereafter, the service charges for the financial years set out below were referred to the Tribunal:-

i. Year ending 2017 ii. Year ending 2018 iii. Year ending 2019 iv. Year ending 2020 v. Year ending 2021 vi. Year ending 2022

3. Additionally, the Applicant sought a determination of liability to pay a one-off service charge demand for “Lease renegotiation” on around 21st September 2021, in the sum of £926.92 (“the Renegotiation Costs”). On 2nd January 2022, a request was made on behalf of the Applicant to – in effect – include the Respondent’s service charge demand in relation to the Renegotiation Costs within the Tribunal’s determination.

Landlord’s costs

4. The Applicant seeks an order under Section 20C Landlord and Tenant Act 1985 that all or any of the costs incurred, or to be incurred, by the Respondent in connection with these proceedings before the First-tier Tribunal are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the Applicant.

5. The Applicant seeks an order pursuant to Commonhold and Leasehold Reform Act 2002, Schedule 11, Paragraph 5A, reducing or extinguishing the Applicant’s liability to pay administration charges in respect of litigation costs.

Appointment of a Manager

6. More recently, the Tribunal also received an application for the appointment of a manager, under s.24 of the Landlord and Tenant Act 1987 (together with a further application under s.20C of the 1985 Act).

This has been allocated case reference

4 MAN/00CJ/LAM/2025/0001. The application form proposes the appointment of “[NAME] / [NAME]” as the manager(s). That application was stayed on 14th August 2025 pending the outcome in case reference MAN/00CJ/LSC/2021/0094.

Background

7. The building at 55 [ADDRESS], [POSTCODE] (also known as “55 [RESPONDENT]”) is a modern converted mixed-use building, incorporating residential apartments alongside commercial units.

8. The Property is a residential apartment within the building and is subject to a long lease made on 1st September 2003 between [RESPONDENT] ([NAME]) [RESPONDENT] and [RESPONDENT] (“the Lease”). The Lease demised the Property for a term of 125 years from and including 24th June 2002. The Applicant is the current tenant under the Lease.

9. The Respondent is the current registered landlord of the reversionary interest of the Property immediately expectant upon expiry of the Lease. The ultimate freehold of the Property and of the 55 [RESPONDENT] building is owned by [RESPONDENT], a company incorporated in the British Virgin Islands.

10. The Lease makes provision for the Respondent to provide certain services, set out at Parts 2 and 3 of the Schedule 7 to the Lease. Schedule 7 also provides for the Applicant to pay a service charge in relation to the Respondent’s costs so incurred.

11. The final hearing took place remotely via CVP on 18th November 2025. The Tribunal did not inspect the Property beforehand. [NAME] and [APPELLANT] (directors) appeared on behalf of the Applicant. [COUNSEL] of counsel appeared on behalf of the Respondent.

12. The members of the Tribunal considered the parties’ oral and written submissions and evidence and documents which had been filed beforehand.

Grounds of the Service Charges Application

13. The Applicant had challenged the payability of service charges over the years in question on a variety of grounds, which were reviewed at the previous case management hearing on 26th June 2025. The directions which followed from that hearing noted that the majority of the issues raised were not issues that the Tribunal had jurisdiction to determine under Section 27A of the Landlord and Tenant Act 1985. The issues for final determination were thereby expressly limited to matters arising under Sections 27A and 20C of the

5 Landlord and Tenant Act 1985 and Schedule 11 to the Commonhold and Leasehold Reform Act 2002.

14. The issues which the Tribunal had to decide were:- i. What service charges were payable by the Applicant to the Respondents for the service charge years in question? ii. Is it just and equitable to preclude the Respondent from recovering some or all of its legal costs of the application through the service charge? iii. Should the Tribunal reduce or extinguish any administration charges sought from the Applicant by the Respondent?

Relevant Law

15. The relevant sections of the Landlord and Tenant Act 1985 read as follows:-

18 Meaning of “service charge” and “relevant costs” (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, improvements 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 for which the service charge is payable.

(3) For this purpose— (a) “costs” includes 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 or later period.

19 Limitation of service charges: reasonableness (1) Relevant costs shall be taken into account in determining the amount of a service charge payable for a period— (a) only to the extent that they are reasonably incurred, and (b) where they are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard; and the amount payable shall be limited accordingly.

(2) Where a service charge is payable before the relevant costs are incurred, no greater amount than is reasonable is so payable, and after

6 the relevant costs have been incurred any necessary adjustment shall be made by repayment, reduction or subsequent charges or otherwise.

20C 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.

27A Liability to pay service charges: jurisdiction (1) An application may be made to the appropriate 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 the appropriate tribunal for a determination whether, if costs were incurred for services, repairs, maintenance, improvements, insurance or management of any specified

7 description, a service charge would be payable for the costs and, if it would, as to— (a) the person by whom it would be payable, (b) the person to whom it would be payable, (c) the amount which would be payable, (d) the date at or by which it would be payable, and (e) the manner in which it would be payable.

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

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

16. Paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 provides as follows:-

Limitation of administration charges: costs of proceedings 5A(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— (a) “litigation costs” means costs incurred, or to be incurred, by the landlord in connection with proceedings of a kind mentioned in the table, and (b) “the relevant court or tribunal” means the court or tribunal mentioned in the table in relation to those proceedings

The Hearing

17. Prior to the hearing, Counsel for the Respondent had submitted a skeleton argument making the following concession:-

The Renegotiation Costs 51. The Applicant contends that the charge to [NAME] made in respect of the Renegotiation Costs was in fact recovery of the Litigation Costs; such sums not being due from the [NAME] but a liability of 55 [RESPONDENT] [COMPANY] (item 1) [14- 17].

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52. The Applicant’s share of the Renegotiation Costs which it seeks to challenge was £926.92 [238], to which late payment penalties were added.

53. The Respondent’s position is that the Renegotiation Costs and the Litigation Costs were different liabilities, and the Respondent has not sought to charge the Litigation Costs to the [NAME] [220, 233, para. 8].

54. However, the Respondent has made a commercial decision not to contest this issue. To be clear, the Respondent does not accept that its record keeping is in any way inadequate, or that the Litigation Costs were passed on to the [NAME], as alleged. Rather, the Respondent recognises that it has been unable to obtain supporting evidence for the recovery of Renegotiation Charges by way of service charge in time for this hearing, and so has elected to concede this point.

18. It was confirmed orally at the hearing that the Respondent was not contesting the Applicant’s position that the one-off service charge demand for “Lease renegotiation” on around 21st September 2021, in the sum of £926.92 (“the Renegotiation Costs”) was not payable.

19. The hearing was paused for about half an hour to allow the [NAME] to send another copy of the Respondent's bundle to the Applicants and to let them read it.

20. The [NAME] addressed the Tribunal on any remaining areas of dispute. They referred back to the Scott Schedule of issues which they had previously raised. Given that the Tribunal had already directed that any issues arising had to be limited to the factors relevant to Section 27A of the Landlord and Tenant Act 1985, the [NAME] struggled to articulate a coherent case. Their submissions, in essence, were that due to the various alleged breaches of leasehold regulations by the Respondent, they did not know if costs were being reasonably or properly incurred. When repeatedly pressed as to what quantitative or numerical difference that made to the service charges demanded by the Respondent, the [NAME] were unable to give a clear answer.

21. The Tribunal heard from Counsel for the Respondent in reply. She sought to address the points raised by the Applicants for completeness, but in any event they were all issues which the Tribunal had indicated lay outside of its jurisdiction.

22. The Tribunal has not been furnished by the Applicant with any clear or coherent challenge as to why the service charges (aside from the Renegotiation Costs) would or would not be payable. The Applicants have not, for example, demonstrated that any of the service charge

9 demands were invalid due to failure to comply with the lease terms or relevant legislation governing the requirements applicable to such demands; or that any of the costs in respect of which service charges were sought were precluded from recovery as a result of the lease terms or any legislation regulating the recoverability of such costs. Neither have they provided any evidence (such as comparable quotes) to suggest that a reasonable cost for the services or works ought to have been lower. Counsel for the Respondent characterised the Applicant’s challenges to the service charges as “speculation”. The Tribunal agrees with this view, in the absence of the Applicant being able to bring a more detailed or coherent case.

23. The Tribunal accordingly determines that the sums demanded in the various service charge years were payable, with the exception of the Renegotiation Costs (having already been conceded by the Respondent). The Tribunal has not been able to locate a service charge demand for the year ending 2019 and so no determination is made regarding that year.

Costs

24. Counsel for the Respondent opposed the Applicant’s applications to restrict the Respondent’s ability to recover its litigation costs through the service charge. She said this would interfere with the Respondent’s contractual rights of recovery. She identified that the Tribunal can only extend such an order to the Applicant and to two other named tenants. She asserted that the significant costs of the litigation had been caused in large part by the Applicant’s directors. She acknowledged that the Renegotiation Costs had been conceded by her client at the eleventh hour. She said that the documentation provided by the Applicant had been confusing and laborious to deal with throughout the proceedings. She referred to there having been five separate occasions when the Applicant’s directors had been required to clarify and articulate their issues. This had culminated at the previous case management hearing, when the Tribunal had assisted the parties in narrowing the issues, and the particular dispute over the Renegotiation Costs had been clearly articulated for the first time. Alternatively, she proposed that if the Tribunal were minded to make some order then it should be limited from the August directions until the date of the hearing.

25. Counsel also opposed the Applicant’s applications to restrict the Respondent’s ability to recover its litigation costs by way of administration charge, although she accepted that there was less that she could say about that as the late payment charges (about £120) related to the invoice for the Renegotiation Costs which had been belatedly conceded.

26. In response, the [NAME] submitted that they had been disputing the Renegotiation Costs right from the outset of the case. They also referred to the Respondent having failed to provide

10 copies of relevant documents which it was directed to do in November 2022. Lastly, their view was that it was their revised submissions which had flushed out the real issues.

27. The Tribunal has a wide discretion in making or refusing such orders. The Tribunal considers that both parties are at fault for the dispute having arisen and for it taking so long to come to a conclusion. Regarding the original grounds of the application (for the service charge years 2017 to 2022), the Applicant’s directors have remained fixated upon the various ancillary complaints and remedies that they have sought, despite being warned on numerous occasions that these were matters that the Tribunal could not deal with. This persisted even to the hearing itself, at which the Applicant’s directors were unable to explain how their longstanding complaints as to the majority of the service charge issues affected the actual amounts that they were required to pay. The vast majority of the written material presented to the Tribunal appeared to relate to those matters, and the Tribunal concurs with the Respondent’s view that the Applicant’s directors have made submissions in an overly lengthy, complex and confusing manner.

28. On the other hand, the Tribunal was unimpressed with the lateness of the Respondent’s concession regarding the payability of the Renegotiation Costs. The Tribunal had been able to discern the nature of the Applicants’ own confusion over the distinction between the costs of the RTM litigation and the renegotiation of the underlying lease relatively quickly, and it should not have taken four years for this issue to have been understood by the Respondent with the benefit of legal representation. Once the issue had been clearly identified, if the Respondent was unwilling or unable to press its case on that aspect then it should have made that decision much earlier.

29. The Tribunal does not have any substantial information or breakdown of what costs have been incurred by the Respondent in dealing with the proceedings to date, or any detail about what proportion of those costs could be attributed to dealing with the 2017-2022 service charge years as opposed to the Renegotiation Costs. The Tribunal considers it appropriate to take a “broad brush” approach. Overall, the Tribunal considers that both parties are more or less equally at fault for the extent and longevity of this dispute. The fair and proportionate order to make, taking into account the relative importance of the dispute to each party, is to make an order reducing the Respondent’s ability to recover legal costs as service charges by 50%.

30. The Tribunal has not received representations as to why a Section 20C order should be extended in favour of any other party, and so the Tribunal declines to do so.

31. In relation to the Respondent’s administration charges associated with the failure to pay the September 2021 demand in respect of

11 Renegotiation Costs, the Respondent’s decision to concede the payability of the underlying charges in their entirety inevitably leads the Tribunal to conclude that it would be unfair for the Applicant to pay any of those administration charges either.

Application for the Appointment of a Manager

32. The Tribunal is mindful that, in practice, the threshold for appointing a manager is a high one. It amounts to state interference with the private property and contract rights of individuals and companies. It also occupies the resources of the Tribunal on an ongoing basis. As such, management orders are not made lightly and normally require evidence of serious failings of leasehold or building management before the Tribunal will consider making one. The Tribunal will continue the stay of proceedings for one further month to allow the Applicant’s directors to digest its determination regarding service charges, and to decide whether they wish to continue with the application to appoint a statutory manager.

Name: Judge [NAME]: 7th January 2026

Rights of appeal

1. 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.

2. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber), then a written application for permission must be made to the First-tier Tribunal at the regional office which has been dealing with the case.

3. 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.

4. 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.

5. 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

12 case number), state the grounds of appeal and state the result the party making the application is seeking.

6. If the Tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).