First-tier Tribunal Reduces Unreasonable Service Charges for Tenants

OUTCOME: Allowed

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Case Reference

: MAN/00BY/LSC/2024/0201

Property : [ADDRESS] [POSTCODE]

Applicant: [redacted] to the directions dated 13 March 2025

Respondent: [redacted] : [APPELLANT] of [NAME] : Landlord and Tenant Act 1985-s27A Commonhold and Leasehold Reform Act 2002- Sch11 para5A

Landlord and Tennant Act 1985- s 20C

Tribunal Members : Judge R Anderson

Mr H Lewis; FRICS

Date of Hearing:

17 October 2025

Date of Decision : 26 January 2026

DECISION

Decision:

1. The Tribunal determines that certain items within the [NAME] estate service charge budgets for 2023 and 2024 are not payable or are payable only in reduced amounts, as detailed below. Accordingly, the total amounts recoverable in respect of the 2023 service charge is £16055.19 and in respect of the 2024 service charge is £19,419.82.

FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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2. The Tribunal makes an order under section 20C of the Landlord and Tenant Act 1985 restraining the Respondent from recovering the costs of these proceedings through the service charge.

Procedural Background

3. This is the Tribunal’s judgment following a hearing listed at Liverpool Employment Tribunal on 17 October 2025, preceded by a site inspection. The Applicants comprise 54 lessees of flats within Blocks A, B C and E at [ADDRESS]. The Respondent is the freeholder [RESPONDENT], represented by [RESPONDENT].

4. At the hearing the following people appeared on behalf the Applicants:

[redacted] Mr [APPELLANT], an original applicant also appearing on behalf of Mr [APPELLANT] Mr [APPELLANT], one the original applicants Mrs [NAME], Mr [NAME] wife

This decision collectively refers to submissions and evidence from the above as from the Applicants.

5. Mr [RESPONDENT] and Miss [COUNSEL] who are employees of the [NAME], [RESPONDENT], who are also the management company in respect of the Property. This decision collectively refers to submissions and evidence from the above as from the Respondents.

6. The Directions dated 13 March 2025 recorded the parties and issues and required disclosure of service charge budgets, demands and accounts for 2023 & 2024. The [NAME] estate budgets show a total of £85,212 for 2023 and £80,458 for 2024, with apportionment matrices across 233 units.

7. Despite directions requiring the Respondents to produce the service charge accounts for 2023 and 2024 these were not produced until the outset of the hearing when the Respondents produced summaries of the actual service charge spend for both years (set out against the budgets) along with some additional evidence of the amounts spent. With the agreement of the Applicants the Tribunal allowed the documents to be considered at the hearing.

8. The two documents can be summarized in the table below:

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2023 2024 Item Budget Actual Budget Actual External General Maintenance £1500.00 £0.00 £1500.00 £0.00 [NAME] £3000.00 £960.00 £0.00 £2761.00 Improvements to Estate Entrance £5352.00 £0.00 £4500.00 £0.00 Electrical Maintenance £500.00 £0.00 £500.00 £0.00 Drain and Gully Clearence £500.00 £0.00 £500.00 £0.00 [NAME] £2000.00 £556.63 £1000.00 £576.00 [NAME] £3000.00 £4572.93 £3000.00 £17522.00 CCTV Maintenance £1500.00 £0.00

Communal Electricity £6000.00 £3000.00 £6000.00 £6000.00 [NAME] £1000.00 £0.00 £1000.00 £0.00 Fire Risk Assessment £650.00 £0.00 £650.00 £0.00 Third Party Liability Insurance £3000.00 £65.63 £3000.00 £1570.69 Management Fees £16,310.00 £8155.00 £17,729.00 £17374.25 Onboarding Fee £2000.00 £0.00

Company Secretarial Fees £500.00 £450.00 £0.00 £395.00 Service Charge Accounts £400.00 £0.00 £544.00 £544.00 Accountancy Fees £0.00 £450.00 £453.00 £0.00 Out of hours £3000.00 £1500.00 £1500.00 £3250.00 Professional Fees £0.00 £6989.97 £0.00 £20.740.48 [NAME] £5,000.00 £0.00 £5000.00 £5000.00 [NAME] £30,000.00 £0.00 £30,000.00 £30,000.00 [NAME]

£3600.00 £0.00

Total

£85,212.00

£27,00.16

£80,458.00

£105,734.11

9. The [NAME] position at the outset of the hearing was that the tribunal should allow the amounts that appear in the two columns marked Actual, being allow £27,00.16 for the 2023 service charge (although the [NAME] had miscalculated the total figure and their document stated it was £27,192.16) and £105,734.11 for 2024 service charge.

10. The Applicants helpfully observed that they considered that the total claimed for 2023 represented a reasonable sum had the Landlord provided the services claimed but it was their position that many of those services had not been provided.

The Relevant law

11. Section 27A of the Landlord and Tenant Act 1985 empowers the Tribunal to determine whether a service charge is payable and, if so, by whom, to whom, the amount, the dates and the manner of payment. The Tribunal also determines the reasonableness and payability of administration charges under Schedule 11 to the Commonhold and Leasehold Reform Act 2002, and may make an order under

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section 20C LTA 1985 preventing the landlord from recovering costs of proceedings through the service charge.

Determination

12. It is self-evident where the Respondent has accepted that no cost was incurred in respect of an item, then the Tribunal will not allow any recovery in respect of that item, with one exception set out below.

The 2023 Service Charge

13. In respect of the 2023 claim the key issues challenged by the Applicants were the electricity, professional fees and the management fees.

14. The Applicants expressed some concern about the quality of some of the other services claimed namely ground maintenance, [NAME], [NAME] and the out of hours service but the Respondents had provided evidence of payments for those services, and the Tribunal was satisfied that they had been provided and were reasonable.

15. In respect of the electricity, the [NAME] position was there was no separate electrical supply to the common parts to justify the claim. The respondent was unable to produce any evidence of either the supply or an invoice or payment for the supply. Accordingly, the Tribunal did not allow this item.

16. In respect of professional fees, the Respondents were unable to provide a satisfactory explanation as to how and why these fees were incurred and on that basis the Tribunal was not prepared to allow any recovery in respect of that item.

17. In respect of the management fees, the [NAME] position was that this item should be disallowed entirely to reflect the poor standard of management provided by the Respondent. The Respondent stood by their fee on the basis that the services had been provided, however, they were not able to assist the Tribunal with how the fee had been calculated. The Tribunal determined that some management service had been provided but found that the standard of the site was poor and that the actual services provided could not justify a management fee which amounted to over a third of the total service charge claimed after the discount for electricity.

18. Taking the services actually provided into account and the Tribunal experience of what a reasonable fee would be by reference to both the services provided and the level of the service charge allowed, the Tribunal determined the correct amount to allow for the management fee was £2500.00.

19. The Tribunal also raised and it was accepted by all parties that there was no good reason why there should not be a sinking fund accrual in 2023 service charge and

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therefore the £5000 sinking fund contribution should be added back into the allowable service charge for 2023.

20. For the avoidance of doubt the Tribunal allowed the following amounts for the 2023 service charge: Item Amount allowed [NAME] £960.00 [NAME] £556.63 [NAME] £4572.93 Third Party Liability Insurance £65.63 Management Fees £2500.00 Company Secretarial Fees £450.00 Accountancy Fees £450.00 Out of hours £1500.00 [NAME] £5000.00

Total

£16055.19

The 2024 Service Charge

21. The key items challenged by the Applicants were electricity, professional fees, estate management fees, [NAME], out of hours service and the [NAME].

22. Again, the Applicants did raise some issues in respect of the other services provided namely ground maintenance and [NAME], however, again the Tribunal was satisfied there was evidence of these items.

23. In respect of electricity and professional fees, the same issues arose as in the 2023 claim and for the same reasons, the Tribunal did not allow any recovery in respect of either of these items.

24. In respect of the [NAME], the Respondent quite rightly conceded that this was not an item which was recoverable under the service charge and accordingly, the Tribunal disallowed this item.

25. In respect of the [NAME], there was cogent evidence from the Applicants that the increase in fees for the [NAME] was as a result of the Landlord’s management company failing to properly manage the bins on site which led to having to change the provider. The Respondents provided some evidence of attempts to address this issue but these appeared to be limited to sending one or two circulars to the residents. The Tribunal accepted the evidence of the [NAME] that there had been significant increase due to mismanagement and considered that the appropriate amount to allow was the same amount as was allowed in 2023.

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26. In respect of the out of hours service, again there was evidence from the Applicants that there had been no discernable increase in the service provided and indeed there was anecdotal evidence that the out of hours service was not always available. In those circumstances the Tribunal considered the correct amount to allow would by reference to the 2023 figure, but allowing a modest increase and accordingly Tribunal determined the appropriate amount to allow was £1750.

27. In respect of management fees, again the Tribunal found that there had been some services provided but that the amount claimed was entirely disproportionate to both the services provided and the service charge as a whole. Apply the same reasoning outlined above, the Tribunal found that the appropriate sum to allow was £2500.

28. For the avoidance of doubt the Tribunal allowed the following amounts for the 2024 service charge: [NAME] £2761.00 [NAME] £576.00 [NAME] £4572.93 Third Party Liability Insurance £1570.69 Management Fees £2500.00 Company Secretarial Fees £395.00 Service Charge Accounts £544.00 Out of hours £1750.00 [NAME] £5000.00

Total

£19,419.82

S20C Landlord and Tenant Act declaration

29. In the circumstances, where the Respondent failed to provide the necessary documents until the day of the hearing and that the Applicants achieved a significant deduction in respect of both years service charges even against the [NAME] revised position the Tribunal were satisfied it was appropriate to make the s20c declaration that the Respondent be barred from recovering any of the fees of these proceedings via the service charge.

Judge Anderson 2025

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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 Regional Office which has been dealing with the case. The [NAME] should be made on Form RP PTA available at: https://www.gov.uk/government/publications/form-rp-pta-[NAME]-for- permission-to-appeal-a-decision-to-the-upper-tribunal-lands-chamber

The [NAME] for permission to appeal must arrive at the Regional Office 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).