First-tier Tribunal Limits Service Charges Due to Consultation Failures

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/OOAH/LSC/2023/0310 Property : 76 [ADDRESS], [POSTCODE] Applicant: [redacted] ([NAME] 2) [NAME] and [APPELLANT], ([NAME] 5) [NAME] [NAME] and [NAME] [NAME], ([NAME] 7) [NAME], ([NAME] 9) [NAME] and [NAME], ([NAME] 6) [NAME] and [NAME], ([NAME] 3) [COUNSEL], ([NAME] 4) [COUNSEL] [NAME] and [COUNSEL] : On 18th June 2024, [COUNSEL] and [RESPONDENT]; on 19th June 2024, [COUNSEL] Respondent : [redacted] : Ms [COUNSEL] [NAME] of counsel instructed by [COMPANY] of application : An application under section 27A Landlord and Tenant Act 1985 Tribunal : Judge Adrian Jack, Tribunal Member [NAME] of Decision : 3rd July 2024

DECISION

2

Background and procedural 1. By an application dated 10th June 2023, the applicants (all the tenants at the property, apart from the leaseholder of [NAME] 8) seek a determination under section 27A of the Landlord and Tenant Act 1985 as to whether service charges are payable in respect of the final amounts sought in the service charge years 25th June 2021 to 24th June 2022 and 25th June 2022 to 24th June 2023 and the estimated service charges claimed in the period from 25th June 2023 to 9th January 2024.

2. The property comprises a nine-[NAME] apartment block with a basement, ground floor and first floor. It was built by [COMPANY] (“[NAME]”), which was a special purpose vehicle incorporated by [COMPANY] (“Signature”) for the purpose of developing the property. Practical completion was in May 2021. On completion a two-year snagging warrantee was given by [NAME] and a ten-year structural warrantee by an independent provider. Some, if not all, the applicants purchased with the assistance of the Government’s help-to- buy scheme, where such warrantees were mandatory. Copies of the warrantees were not made available to us at the hearing. A major issue in this case is whether various claims should have been made under the warranties rather than claims against the tenants through the service charge. In the light of [NAME]’s failure to produce these documents, we are entitled to draw adverse inferences against it as regards the terms of the warrantees (the principle omnia presumuntur contra spoliatorem, applied in the famous case of Armory v Delamerie (1722) 1 Strange 505).

3. The tenants had formed a right-to-manage company called [COMPANY], which on 19th October 2022 served a notice of its intention to acquire the right-to-manage. The freeholder (“[NAME]”) served a counternotice disputing the [COMPANY]’s right to acquire the right-to-manage on the basis that insufficient tenants had become members of the [COMPANY]. On 11th January 2023 the [COMPANY] applied to this Tribunal under case no LON/00AH/2023/0001 for determination of this dispute. By a decision of 6th June 2023, the Tribunal determined that the [COMPANY] had served a valid notice. Permission to appeal was refused by this Tribunal and subsequently by the Upper Tribunal.

4. In a subsequent decision made 29th April 2024 in an application (case no LON/00AH/LSH/2024/0005) between the current applicants and [NAME], this Tribunal decided that the [COMPANY] had taken over the right-to-manage on 10th January 2024. It also determined that the estimated service charge payable by the Applicants for the period December 2023 to June 2024 should be apportioned so that only the pro rata share up to and including 9th January 2024 is payable. 5. [NAME] was originally represented in the current application by [COMPANY] (“[NAME]”), the managing agents, and [NAME] of that firm. Shortly before the hearing before us, [NAME] instructed [COMPANY], solicitors, to represent it. In turn [COUNSEL] instructed Ms [COUNSEL] [NAME] of counsel. [NAME] did not call any live evidence. No explanation was proffered as to why no one from [NAME] was able to attend.. Instead, Ms [NAME] made submissions, both orally and by way of a skeleton argument.

6. Directions had been given by Judge Shepherd on 10th January 2024. Judge Hamilton-Farey varied the directions on 14th May 2024 to give more time for compliance with the directions. [NAME] failed to comply with the directions. It did not give disclosure of relevant documents by 28th March 2024, nor any comments on the tenants’ [NAME] schedule by 21st May 2024, in [NAME] case either by the date ordered or at all. Nor did [NAME] serve any documents on which it relied in reply.

7. Instead on Friday 14th June 2024 Mr [NAME] applied for an adjournment. This was two working days before the two day hearing was due to commence on Tuesday 18th June 2024. He said that he had received no correspondence since 19th April 2024. However, he accepted in his application that he had received the bundle from the tenants by 31st May 2024, as directed. This included the amended directions. No explanation for [NAME]’s non-compliance was given, nor was Ms [NAME] able to give any further information.

8. At the hearing we heard this application as a preliminary point and indicated that we rejected the application for adjournment. In our judgment there was no adequate explanation given of [NAME]’s failure to comply with the directions. This matter was already quite stale. [NAME] was refusing to hand over the reserve fund which it held, so that the tenants (via the [COMPANY]) were prejudiced by the delay. In addition, the three tenants who were representing the applicants had had to take time off work in order to come to the Tribunal. Balancing all these factors and applying the Overriding Objective, in our judgment it was appropriate to exercise our discretion against granting the adjournment. The law on consultation 9. Ms [NAME] in our judgment accurately summarised the law in relation to consultation and the limitation of £250 to the costs claimable in the event that a proper consultation was neither carried out nor dispensed with by the Tribunal. She said in her skeleton: “17. Section 20 of the [Landlord and Tenant Act 1985] applies to qualifying works if the relevant costs incurred on carrying out the works exceed an amount that results in the relevant contribution of any tenant being more than £250 (Service Charges (Consultation Requirements) (England) Regulations 2003 (SI 2003/1987), reg.6). ‘Qualifying works’ means works on a building or any other premises. For the purposes of the £250 limit, the relevant qualifying works are not the totality of the

4 works carried out by the landlord in the relevant accounting period but those works which form part of a single set of works (Phillips v Francis [2015] 1 WLR 741).

18. What comprises a single set of works is a multi-factorial question, the answer to which is to be determined in a commonsense way taking into account all relevant circumstances; the latter are likely to include (i) where the items of work are to be carried out (whether they are contiguous to or physically far removed from [NAME] other); (ii) whether they are the subject of the same contract; (iii) whether they are to be done at more or less the same time or at different times; and (iv) whether the items of work are different in character from, or have no connection with, [NAME] other; however, this is not an exhaustive list, and the question is ultimately one of fact and degree. The way in which the works were planned and the landlord’s reasons for the way they were implemented are also relevant, although not decisive (Phillips v Francis).

19. Where section 20 applies to any qualifying works, the consultation requirements must either be complied with in relation to the works or dispensed with by (or on appeal from) the FTT. Where neither of these is the case, then the amount which the tenant can be required to contribute by way of service charges to relevant costs incurred on carrying out the qualifying works is limited to £250 (2003 Regulations reg.6).” Service charge year 2021-22 10. We turn then to the issues in dispute. Some matters in [NAME] service charge year were not in dispute. These points in the schedule we do not address. The figures can be obtained from pages 68 to 70 of the bundle.

11. The first matter in dispute is insurance. [NAME] charged £4,917.89 in respect of insurance from December 2021 to 2022 plus broker’s fee. A landlord is not obliged to accept the lowest insurance quote available, but it must act reasonably. [NAME] produced no documentation to show what steps it had taken to test the market. The rebuilding valuation had been increased from £1.2 million to £2.95 million. Although the tenants disputed that the increase in the rebuilding valuation was justified, they obtained quotes based on the higher valuation. The premium quoted at this rebuilding figure was £2,168.78. Ms [NAME] said that she could make no positive case. She submitted that coming out of Covid may have affected the sums, but this in our judgment was speculative. In the absence of evidence from [NAME] to justify the higher figure we limit the insurance figure to £2,168.78.

12. The next item is cleaning of the common parts. The applicants said that the cleaner came on a Friday to do the hallways and the staircase, all of which was carpeted. Invoices for £100.80 per month were produced. In our judgment a sum of about £25 per week is reasonable. Although the

5 tenants suggested the cleaning was “sporadic”, there was no proper evidence that the cleaners did not attend regularly. The invoices are sufficient prima facie evidence that the work was done. Around £25 for a visit is about the least a cleaner could expect to charge. We disallow nothing.

13. The landlord claims £128 per month for gardening. This was a small garden, about 50 feet by 30 feet. From the photographs it was well kept, but there was very little to do. [NAME] adduced no evidence of what testing of the market it carried out and did not explain was the £128 was to cover. In our judgment a figure of £32 per month would have been reasonable. We allow £384 for the year.

14. In respect of window cleaning, the tenants complain about the poor quality of the workmanship. There are emails from the tenants in June and December 2022. Mr [NAME] said in an email of 15th December 2022 that he would investigate, but nothing then seems to have happened. The tenants asked for a twenty per cent deduction. In our judgment this deduction is justified. We reduce £300 to £240. 15. [NAME] claim £185.22 in respect of key cutting. Again, it adduces no evidence as to what keys required cutting. Access to the common parts was via fobs, not by keys. There were some doors internally to house electricity meters etc and locks were subsequently fitted to these. The number of keys cut for [NAME] appears to have been excessive (and was certainly not explained). There is one invoice dated 11th January 2022 for £115.80 in respect of “2 sets” and another for £69.42 dated 28th April 2022 in respect of “6 keys”. The tenants offer £25 for this item, but the sums paid by the landlord to a [NAME] are not unreasonable in our judgment. It is the number of keys cut which in our judgment is unreasonable We allow £69.42 in respect of this item. [NAME] have not shown that two additional sets of keys were reasonably required.

16. In respect of the Fire, Health and Safety Risk Assessment, the tenants ask us to order that [NAME] hand this Risk Assessment over to the [COMPANY]. That is not an order which falls within the Tribunal’s jurisdiction. The tenants do not dispute the cost, put at £417.60. We disallow nothing. 17. [NAME] seek to charge £2,205.60 in respect of the installation of emergency lighting. This in our judgment should have been a matter for the original developer. Ms [NAME] said that [NAME] was now in February 2024 being dissolved. Its last accounts were drawn up to 21st October 2022. By 31st October 2022, it had negligible assets. That, she submitted, cast doubt on [NAME]’s ability to meet any claims under its two-year warranty in the period up to May 2023. In our judgment, this is speculative. [NAME] was part of a reputable development group, Signature. It is unlikely that Signature would have allowed a subsidiary to enter insolvency over such a modest item. In any event, [NAME] appears never to have raised the point with [NAME] or Signature. In

6 the absence of doing so, [NAME] are in a weak position to argue that making a claim would have been pointless. In our judgment we can properly draw inferences adverse to [NAME] from this failure. We disallow this item completely. 18. [NAME] seek to recover £759 in respect of the cost of works carried out pursuant to an electrical installation condition report made in March 2022. This was less than a year after practical completion. [NAME] have not produced the report. In our judgment, as with the previous item, this was a snagging issue for the original developer. We disallow this item. 19. [NAME] claim £1,677 in respect of “arial tech”. The tenants primarily wanted further information as to this item, but said it should have been a snagging item. In our judgment this is unlikely. It is common ground this was payable under the lease. An arial would not normally be a snagging item. We disallow nothing.

20. The £1,500 cost of a surveyor preparing a preventative maintenance schedule was said to be something the developer should have done. In our judgment, [NAME] acted properly in preparing such a schedule. The work was done and the surveyor was paid. No criticism was made as to quantum. In our judgment there was no basis on which [NAME] could have recovered that cost from [NAME] or Signature. We disallow nothing.

21. The tenants dispute the cost of [NAME] employing a surveyor to carry out a valuation for insurance purposes. They take two points. Firstly, they say that if the rebuilding costs put at £2.95 million were in truth so high, the original developer would have sold the flats at a loss. Secondly, the surveyors were based in Manchester and should not have been used. We disagree with both points. As to the first, the cost of rebuilding is quite different to the valuation of the flats on the open market. The costs of rebuilding may be more or it may be less than the value of the flats. As to the second, the surveyors were a national firm. The fact that the invoice came from the head-office in Manchester is irrelevant. We disallow nothing.

22. The tenants challenged the cost of roof repair charged at £3,054. We were shown photographs of the roof some nine months after practical completion. Part of the covering was pulled back from the ridge on the pitched roof. Ms [NAME] argued that [NAME] roofs were excluded from the two-year warrantee, but since this was a defect in the pitched roof this appears irrelevant (even assuming that there was an exclusion in respect of the [NAME] roof). In our judgment this was a matter which should have been covered by the two-year warrantee. We disallow this item.

23. Fire Health and Safety works in the sum of £868.49 should have been for the developer’s account, the tenants argued. We have seen a photograph of the green button and the emergency button by the door to which these works relate. In our judgment these were matters which the

7 developer should have dealt with. They were snagging matters. We disallow this item.

24. In respect of the fire stopping works claimed in the sum of £1,122, Ms [NAME] accepted that this was a snagging matter for the developers.

Accordingly, we disallow this item.

25. The service charge accounts were audited at a cost of £600 in this year (and £960 in the following year). The tenants disputed the need for this employment of an accountant. In our judgment the sum claimed is reasonable. The landlord is entitled to charge for an accountant’s services: see para 1(b)(ii) of Schedule 2 to the leases. We disallow nothing.

26. The tenants submitted that [NAME]’ management fee was unreasonable in the light of the poor service provided. They suggested that there should a deduction of a half. We agree that [NAME]’ service has been poor. However, there is a risk of double counting. We have disallowed various items in the service charge accounts completely. It would be wrong then to reduce [NAME]’ management charges further to reflect their inadequate management; the tenants have already benefited from the disallowance of the substantive claim. In our judgment a reduction of 25 per cent is appropriate. The management fee is accordingly reduced from £1,638 to £12,228.50. Service charge year 2022-23 27. The first disputed item is insurance. The same comments apply as above. We accept the tenants’ figure and allow £3,717.90.

28. The landlord claims £2,759.80 in respect of electricity for the common parts. This in our judgment is a surprisingly high sum for such a small area of common parts. In addition, the building benefits from solar panels on the roof. It is entirely unclear how the landlord accounts for the electricity generated in that way (or any surplus sold back to the net). [NAME] have not been able even to tell the tenants which companies are involved. Doing the best we can, we allow £500.

29. On the cleaning of the common parts, we repeat our comments above and disallow nothing.

30. Similarly for gardening: we allow £1,536.

31. Likewise for window cleaning, we deduct 20 per cent from £1,200 to allow £960.

32. There are two items in respect of the doors to cupboards in the common parts. The first for £990 is described as “Wooden Door gap closure”; the second for £900 as “FB Lock replacement and Pink foam to comply with Fire Health & Safety”. Originally these doors had no locks and were not compliant with fire regulations. It is unclear whether these issues would have been matters for the developer. The first invoice is dated 17th June

8 2022; the second 11th October 2022. The second set of works was clearly necessitated by the first safety report obtained in September 2022. It follows that the second set of works had to be done because of the failings in the carrying out of the first set of works. In our judgment only the second invoice is reasonably incurred. We allow a total of £900 to cover both these items.

33. There are then three items which (and we use this expression neutrally) are connected: “Emergency Call out for Drainage” £2,094; “Pump Replacement (Two pumps replaced in two separate occasions” £4,014; and “Tanker to Drainage” £2,020.80. The invoices are all dated 8th June 2022. The narrative to the first invoice says: “Various apartments reported blocked toilets and gurgling/backfilling. Drainage engineers sent as an emergency… [I]ssue appears to be from a sump pump on site in the basement. Access to this room is via a key not on site. Will need to reattend with keys. [On reattendance, the] system was not blocked but appears not to have a live feed from control panel to pump. System and build are new so likely covered by warranty, will look into and try to get resolved.” The second invoice says: “Operative attended and installed new required pump as instructed on same day due to no pumps working on site, leaving property at risk.” The third invoice says: “Attend to replace second pump as required. Replace 3 remaining faulty floats.” The last invoice says: “Tanker attended after hours to clear the build up and drain due to risk of flooding… [NAME] was not willing to move his car to allow the tanker access to the area it needed, stating it is not my property I don’t care. Tanker had to be rescheduled for the morning. (Tenant should be liable to pay for this.) 1,500 gallons was required to be removed.” 34. Unlike many other items, these matters are reasonably well- documented. The applicants had a number of discrete points, none of which in our judgment are well-founded. On the emergency call out, it would not necessarily be obvious what areas of the building would require access, so the cost of reattendance with the appropriate key is not unreasonable. The tenants suggested that this was not in truth an emergency. We disagree. If the toilets were blocked, this was serious and urgent. The warrantee to which reference is made is likely to be a manufacturer’s warrantee rather than (as the tenants submit) something falling under the developer’s warrantee. The plumbers appear to have made some investigations into the warrantee of the pump, but without being able to affect any recovery. Since over a year had elapsed since practical completion, it is perfectly possible the manufacturer’s warrantee had expired. We cannot in our judgment draw any inference against [NAME] in respect of this warrantee. There is no evidence what claim the landlord could sensibly have made against the tenant of [NAME] 4 in respect of his non-coöperation.

35. This leaves the question whether these constitute “one set of works” or more than one set of works. We have set out Ms [NAME] summary of the law above. Ms [NAME] submitted that the Tribunal should not go behind the different invoices. There were, she submitted, clearly

9 different incidents: first the emergency call out, then the renewed investigation, then the replacement of the pumps. The pumping of the 1,500 gallons was again separate to all this. We had, she submitted, to take a “commonsense” view applying all the various factors.

36. We agree that we have to take a commonsense multi-factorial view. In our judgment, however, this was in reality one incident. It is true that when the initial emergency call-out occurred, no one could have known what would be required to alleviate the problem, but that does not mean the works are not part of a seamless whole. Standing back, in our judgment the works in the invoices do comprise one set of works. Accordingly the £250 per [NAME] limit applies and the total in the service charge accounts is limited to nine times that figure or £2,250.

37. We should add that [NAME] has not made an application for dispensation under section 20ZA of the 1985 Act (which would have been the obvious course), nor did Ms [NAME] indicate that [NAME] intended to do so. Whether an application now would be an abuse of process is not a matter before us and we express no view on the point.

38. The next item is £162 claimed in respect of “Common parts Inventory”. No copy of the inventory has been produced and its purpose is unclear. The common parts are small with no furniture or wall decorations. We disallow this item.

39. Boundary wall cleaning and repair is claimed at £2,100. The description of the works is: “clean fencing of all staining, efflorescence and vegetation growth using an appropriate cleaning solution; undertake localised repairs or replacement of any damaged fence panels or concrete posts where requires; qualified gardener to main and trim garden hedges.” We have seen photographs, which suggest there was very little cleaning of the fencing to do. There were some missing wooden palings, but not many. There was already a contract with a gardener to maintain and trim the hedges. He appeared to have done a good job. Ms [NAME] was only able to submit that the work had been done. In our judgment £2,100 is far too much for the limited repairs which needed to be done. We agree with the £300 figure proposed by the tenants and limit this head to that sum.

40. Repairing a cracked ceiling in the common parts is claimed at £1,750, or £1,458.33 plus VAT. The invoice in support gives no details of time or cost expended. This was one crack which required redecoration. On its face the amount is excessive. The tenants obtained a quote for doing the work in two days at £250 a day. That in our judgment is reasonable. We allow £500.

41. The service charge accounts include £2,220.00 for a BNO standard audit report and £1,790.10 for a BNO advanced audit report. The tenants accepted that a standard audit was required, but said that they had obtained a quote for such an audit of £1,755. They disputed that an advanced audit report was required. Such reports are only required

10 when the standard audit had thrown up electrical issues. Ms [NAME] had no comment to make on the tenants’ submissions. We agree with what the tenants say. There is no evidence an advanced audit report was required. The landlord has failed to show what efforts were made to test the market. In these circumstances, we allow £1,755 to cover both items.

42. The landlord claims £2,100 in respect of roof joinery and timber fascia repair. We disallow the whole of this figure for the reasons advanced by the tenants. Firstly, any remedial work required would fall under the snagging responsibilities of the developer. Secondly, it is unclear what work was actually completed. There appears to be duplication with the gutter cleaning work.

43. A figure of £1,800 is claimed in respect of “Aluminium Windows and Doors siliconed and serviced”. The tenants’ point on this is simple. The windows were part of the demise of individual tenants. The landlord was under no obligation to carry out this work and cannot claim it through the service charge. Ms [NAME] was unable to make any submissions against this. We disallow the whole amount. 44. £570 is claimed in respect of “Safety Rubber Mat Installation to comply with Fire Health & Safety”. This amount is on its face excessive for one mat. No evidence has been adduced to justify it. The tenants have obtained a quote for £50 for a mat. We allow £50. 45. £468 is claimed in respect of “Handrail repair & FB lock to Electric Cupboard”. The lock claim is duplicative of the earlier item. We allow £234 (£195 plus VAT) in respect of the handrail.

46. The next two items are £300 for a drone survey and £1,260 for “Roof Tiles and Ridges Repair”. The drone survey is in fact of an adjacent building, not of the instant property. Further in an email of 14th November 2022 [NAME] itself accepted that this was a matter for the builders, not for them. We disallow these two items.

47. These two items are linked to other items: “Leak Investigation” £594; “Lead Repair” £1,440; and “Roof Leaks investigation and Repoint Brickwork” £1,680. For the same reason these items are disallowed. 48. £1,254 is claimed for “Drain CCTV and Manhole Water removal”. The tenants’ case is that this should have been a snagging matter for the developer. The landlord’s case is a blank. [NAME] appear not have raised the matter with the developer. No reason is advanced for their failure to do so. We find on balance that this was a matter for the developer and disallow this item.

49. A claim for £342 in respect of metering arrangements is made. This should in our judgment have been included in the £1,755 which we have allowed in respect of the electrical audit. We disallow this item. 50. £663 is claimed in respect of intercom and access control system fault finding. Repair of intercom and access control systems is claimed at

11 £1,200. Again, this in our judgment is a snagging item. We disallow these items.

51. A fire health and safety risk assessment is claimed at £408. Such surveys should only be required every two years. This assessment was therefore unnecessary and we disallow it. 52. £144 is claimed in respect of fire safety posters. There was in fact only one fire safety poster. The poster is a generic one to which the property’s address has been added. In our judgment, £144 is excessive for one poster of this nature. We allow £50. 53. £330 is claimed in respect of “hopper works”. Again, this is a snagging item. We disallow it.

54. The accountancy fee of £960 we allow for the reasons given in respect of the previous service charge year.

55. The management fee for the reasons already given we discount by 25 per cent from £2,840 to £2,130. Issue with [NAME] 2 56. In respect of [NAME] 2 there is a discrete issue as to the recoverability of the fees of a debt collection agency in the sum of £1,197. There was no issue that this was a matter properly before us. We have seen the correspondence between the tenants of [NAME] 2 and [NAME]. The tenants were seeking a payment plan. This was entirely reasonable. Firstly, the service charges which had been quoted when they purchased the [NAME] had been £900 per annum, whereas the amount sought by [NAME] was many times greater. Secondly, as we have held above, the service charges should have been substantially lower.

57. In these circumstances, the instruction of debt collectors was in our judgment unreasonable. [NAME] should have corresponded with the tenants. As is well know to them, any dispute as service charges is likely to be referred to this Tribunal by the County Court if any proceedings are brought. Forfeiture is not possible without a determination by this Tribunal or a Court as to the service charges which are due.

Accordingly, we disallow £1,197 charged against the tenants of [NAME]

2. Estimated service charges 24th June 2022 to 9th January 2023 58. The liability in principle in respect of the estimated service charges for the period 24th June 2022 to 9th January 2023 (when the [COMPANY] took over management) was determined by the Tribunal’s decision of 29th April 2024. The precise quantum still remained to be determined. Overnight between the two days of hearing, the parties were able to agree the figures. There was a sum of £170.38 potentially in dispute, but the tenants sensibly agreed that they would pay that, on the basis that the figures were estimates, not final figures. Accordingly there is nothing for the Tribunal to determine.

12 Costs 59. The Tribunal has a discretion as to who should pay the fees payable to the Tribunal. These comprise an issue fee of £100 and a hearing fee of £200. In our judgment, the tenants are very much the winner of the current proceedings. In these circumstances in the exercise of our discretion we consider that the landlord should pay the tenants the £300.

60. There were no other applications for costs.

DECISION 1. The Tribunal refuses the respondent’s application for an adjournment.

2. The Tribunal determines the disputed items in the service charge years 2021-22 and 2022-23 as set out above.

3. The Tribunal orders that the respondent do pay the applicants £300 in respect of the fees payable to the Tribunal.

4. The Tribunal otherwise makes no order for costs.

Judge Adrian Jack

3rd July 2024

Landlord and Tenant Act 1985 (as amended) Section 18 (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.

13 Section 19 (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 provisions 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. Section 27A (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 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. Section 20

14 (1) Where this section applies to any qualifying works or qualifying long term agreement, the relevant contributions of tenants are limited in accordance with subsection (6) or (7) (or both) unless the consultation requirements have been either— (a) complied with in relation to the works or agreement, or (b) dispensed with in relation to the works or agreement by (or on appeal from) the appropriate tribunal . (2) In this section “relevant contribution”, in relation to a tenant and any works or agreement, is the amount which he may be required under the terms of his lease to contribute (by the payment of service charges) to relevant costs incurred on carrying out the works or under the agreement. (3) This section applies to qualifying works if relevant costs incurred on carrying out the works exceed an appropriate amount. (4) The Secretary of State may by regulations provide that this section applies to a qualifying long term agreement— (a) if relevant costs incurred under the agreement exceed an appropriate amount, or (b) if relevant costs incurred under the agreement during a period prescribed by the regulations exceed an appropriate amount. (5) An appropriate amount is an amount set by regulations made by the Secretary of State; and the regulations may make provision for either or both of the following to be an appropriate amount— (a) an amount prescribed by, or determined in accordance with, the regulations, and (b) an amount which results in the relevant contribution of any one or more tenants being an amount prescribed by, or determined in accordance with, the regulations. (6) Where an appropriate amount is set by virtue of paragraph (a) of subsection (5), the amount of the relevant costs incurred on carrying out the works or under the agreement which may be taken into account in determining the relevant contributions of tenants is limited to the appropriate amount. (7) Where an appropriate amount is set by virtue of paragraph (b) of that subsection, the amount of the relevant contribution of the tenant, or [NAME] of the tenants, whose relevant contribution would otherwise exceed the amount prescribed by, or determined in accordance with, the regulations is limited to the amount so prescribed or determined. Section 20ZA (1) Where an application is made to the appropriate tribunal for a determination to dispense with all or any of the consultation requirements in relation to any qualifying works or qualifying long term agreement, the

15 tribunal may make the determination if satisfied that it is reasonable to dispense with the requirements. (2) In section 20 and this section— “qualifying works” means works on a building or any other premises, and “qualifying long term agreement” means (subject to subsection (3)) an agreement entered into, by or on behalf of the landlord or a superior landlord, for a term of more than twelve months. (3) The Secretary of State may by regulations provide that an agreement is not a qualifying long term agreement— (a) if it is an agreement of a description prescribed by the regulations, or (b) in any circumstances so prescribed. (4) In section 20 and this section “the consultation requirements” means requirements prescribed by regulations made by the Secretary of State. (5) Regulations under subsection (4) may in particular include provision requiring the landlord— (a) to provide details of proposed works or agreements to tenants or the [COMPANY] representing them, (b) to obtain estimates for proposed works or agreements, (c) to invite tenants or the [COMPANY] to propose the names of persons from whom the landlord should try to obtain other estimates, (d) to have regard to observations made by tenants or the [COMPANY] in relation to proposed works or agreements and estimates, and (e) to give reasons in prescribed circumstances for carrying out works or entering into agreements. (5A) And in the case of works to which section 20D applies, regulations under subsection (4) may also include provision requiring the landlord— (a) to give details of the steps taken or to be taken under section 20D(2), (b) to give reasons about prescribed matters, and any other prescribed information, relating to the taking of such steps, and (c) to have regard to observations made by tenants or the [COMPANY] in relation to the taking of such steps.] (6) Regulations under section 20 or this section— (a) may make provision generally or only in relation to specific cases, and (b) may make different provision for different purposes.

16 (7) Regulations under section 20 or this section shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

Section 20B (1) If any of the relevant costs taken into account in determining the amount of any service charge were incurred more than 18 months before a demand for payment of the service charge is served on the tenant, then (subject to subsection (2)), the tenant shall not be liable to pay so much of the service charge as reflects the costs so incurred. (2) Subsection (1) shall not apply if, within the period of 18 months beginning with the date when the relevant costs in question were incurred, the tenant was notified in writing that those costs had been incurred and that he would subsequently be required under the terms of his lease to contribute to them by the payment of a service charge. Section 21B (1) A demand for the payment of a service charge must be accompanied by a summary of the rights and obligations of tenants of dwellings in relation to service charges. (2) The Secretary of State may make regulations prescribing requirements as to the form and content of such summaries of rights and obligations. (3) A tenant may withhold payment of a service charge which has been demanded from him if subsection (1) is not complied with in relation to the demand. (4) Where a tenant withholds a service charge under this section, any provisions of the lease relating to non-payment or late payment of service charges do not have effect in relation to the period for which he so withholds it. (5) Regulations under subsection (2) may make different provision for different purposes. (6) Regulations under subsection (2) shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

17 The Service Charges (Consultation Requirements) (England) Regulations 2003

SCHEDULE 4 PART 2

CONSULTATION REQUIREMENTS FOR QUALIFYING WORKS FOR WHICH PUBLIC NOTICE IS NOT REQUIRED

Notice of intention 1.—(1) The landlord shall give notice in writing of his intention to carry out qualifying works— (a) to [NAME]; and (b) where a [COMPANY] represents some or all of the tenants, to the association. (2) The notice shall— (a) describe, in general terms, the works proposed to be carried out or specify the place and hours at which a description of the proposed works may be inspected; (b) state the landlord’s reasons for considering it necessary to carry out the proposed works; (c) invite the making, in writing, of observations in relation to the proposed works; and (d) specify— (i) the address to which such observations may be sent; (ii) that they must be delivered within the relevant period; and (iii) the date on which the relevant period ends. (3) The notice shall also invite [NAME] and the association (if any) to propose, within the relevant period, the name of a person from whom the landlord should try to obtain an estimate for the carrying out of the proposed works. Inspection of description of proposed works 2.—(1) Where a notice under paragraph 1 specifies a place and hours for inspection— (a) the place and hours so specified must be reasonable; and (b) a description of the proposed works must be available for inspection, free of charge, at that place and during those hours. (2) If facilities to enable copies to be taken are not made available at the times at which the description may be inspected, the landlord shall provide to any tenant, on request and free of charge, a copy of the description.

18 Duty to have regard to observations in relation to proposed works 3. Where, within the relevant period, observations are made, in relation to the proposed works by any tenant or [COMPANY], the landlord shall have regard to those observations. Estimates and response to observations 4.—(1) Where, within the relevant period, a nomination is made by a [COMPANY] (whether or not a nomination is made by any tenant), the landlord shall try to obtain an estimate from the [NAME]. (2) Where, within the relevant period, a nomination is made by only one of the tenants (whether or not a nomination is made by a [COMPANY]), the landlord shall try to obtain an estimate from the [NAME]. (3) Where, within the relevant period, a single nomination is made by more than one tenant (whether or not a nomination is made by a [COMPANY]), the landlord shall try to obtain an estimate— (a) from the person who received the most nominations; or (b) if there is no such person, but two (or more) persons received the same number of nominations, being a number in excess of the nominations received by any other person, from one of those two (or more) persons; or (c) in any other case, from any [NAME]. (4) Where, within the relevant period, more than one nomination is made by any tenant and more than one nomination is made by a [COMPANY], the landlord shall try to obtain an estimate— (a) from at least one person [NAME] by a tenant; and (b) from at least one person [NAME] by the association, other than a person from whom an estimate is sought as mentioned in paragraph (a). (5) The landlord shall, in accordance with this sub-paragraph and sub- paragraphs (6) to (9)— (a) obtain estimates for the carrying out of the proposed works; (b) supply, free of charge, a statement (‘the paragraph (b) statement’) setting out— (i) as regards at least two of the estimates, the amount specified in the estimate as the estimated cost of the proposed works; and (ii) where the landlord has received observations to which (in accordance with paragraph 3) he is required to have regard, a summary of the observations and his response to them; and (c) make all of the estimates available for inspection. (6) At least one of the estimates must be that of a person wholly unconnected with the landlord.

19 (7) For the purpose of paragraph (6), it shall be assumed that there is a connection between a person and the landlord— (a) where the landlord is a company, if the person is, or is to be, a director or manager of the company or is a close relative of any such director or manager; (b) where the landlord is a company, and the person is a partner in a [NAME], if any partner in that [NAME] is, or is to be, a director or manager of the company or is a close relative of any such director or manager; (c) where both the landlord and the person are companies, if any director or manager of one company is, or is to be, a director or manager of the other company; (d) where the person is a company, if the landlord is a director or manager of the company or is a close relative of any such director or manager; or (e) where the person is a company and the landlord is a partner in a [NAME], if any partner in that [NAME] is a director or manager of the company or is a close relative of any such director or manager. (8) Where the landlord has obtained an estimate from a [NAME], that estimate must be one of those to which the paragraph (b) statement relates. (9) The paragraph (b) statement shall be supplied to, and the estimates made available for inspection by— (a) [NAME]; and (b) the secretary of the [COMPANY] (if any). (10) The landlord shall, by notice in writing to [NAME] and the association (if any)— (a) specify the place and hours at which the estimates may be inspected; (b) invite the making, in writing, of observations in relation to those estimates; (c) specify— (i) the address to which such observations may be sent; (ii) that they must be delivered within the relevant period; and (iii) the date on which the relevant period ends. (11) Paragraph 2 shall apply to estimates made available for inspection under this paragraph as it applies to a description of proposed works made available for inspection under that paragraph. Duty to have regard to observations in relation to estimates 5. Where, within the relevant period, observations are made in relation to the estimates by a [COMPANY] or, as the case may be, any tenant, the landlord shall have regard to those observations.

20 Duty on entering into contract 6.—(1) Subject to sub-paragraph (2), where the landlord enters into a contract for the carrying out of qualifying works, he shall, within 21 days of entering into the contract, by notice in writing to [NAME] and the [COMPANY] (if any)— (a) state his reasons for awarding the contract or specify the place and hours at which a statement of those reasons may be inspected; and (b) there he received observations to which (in accordance with paragraph 5) he was required to have regard, summarise the observations and set out his response to them. (2) The requirements of sub-paragraph (1) do not apply where the person with whom the contract is made is a [NAME] or submitted the lowest estimate. (3) Paragraph 2 shall apply to a statement made available for inspection under this paragraph as it applies to a description of proposed works made available for inspection under that paragraph.