First-tier Tribunal Rejects Tenants' Appeal Request

OUTCOME: Refused

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Case Reference

: CAM/12UB/LSC/2021/0061

HMCTS

: Paper

Property

: 117-131 (Odds) The Cherry Building and 133- 171 (Odds), [ADDRESS] [POSTCODE]

Applicants (Tenants) : [NAME_1] identified in the Schedule to the Application Representative

: [NAME_2]

Respondent (Landlord): [COMPANY_5]

: [NAME_6] of Counsel instructed by [NAME_10] of Application : Application for Review or Permission to Appeal

Tribunal

: Judge J R Morris

Mr G [NAME_12]

Date of Original Decision: 4th March 2022 Date of Application : 29th April 2022 (Extension of time granted) Date of Decision : 16th May 2022 ____________________________________

DECISION ____________________________________

© CROWN COPYRIGHT 2022

Decision of the Tribunal

1. The Tribunal has decided not to review its Decision and refuses permission to appeal to the Upper Tribunal because it is of the opinion that there is no realistic prospect of a successful appeal against its Decision.

FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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2. In accordance with section 11 of the Tribunals, Courts and Enforcement Act 2007 and rule 21 of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010, the applicant / respondent may make further application for permission to appeal to the Upper Tribunal (Lands Chamber). Such application must be made in writing and received by the Upper Tribunal (Lands Chamber) no later than 14 days after the date on which the First-tier Tribunal sent notice of this refusal to the party applying for permission to appeal. Where possible, you should send your application for permission to appeal by email to [EMAIL], as this will enable the Upper Tribunal (Lands Chamber) to deal with it more efficiently.

3. Alternatively, the Upper Tribunal (Lands Chamber) may be contacted at: 5th [ADDRESS] [POSTCODE] (tel: [PHONE]).

Reason for the Decision

4. The reason for the decision is that the Tribunal had considered and taken into account all of the points now raised by the Applicant, when reaching its original decision.

5. The original Tribunal’s decision was based on the evidence before it and the applicant has raised no legal arguments in support of the application for permission to appeal.

6. For the benefit of the parties and of the Upper Tribunal (Lands Chamber) (assuming that further application for permission to appeal is made), the Tribunal has set out its comments on the specific points raised by the applicant in the application for permission to appeal, in the appendix attached.

Judge J R Morris

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APPENDIX TO THE DECISION REFUSING PERMISSION TO APPEAL

For the benefit of the parties and of the Upper Tribunal (Lands Chamber), the Tribunal records below its comments on the grounds of appeal. References in square brackets are to those paragraphs in the main body of the original Tribunal decision.

Original Application and Decision

1. On 28th September 2021 the Applicants applied for a determination under section 27A of the Landlord and Tenant Act 1985 as to whether the service charges incurred for qualifying works (“the Works”) were reasonable and payable.

2. They also applied for Orders under section 20C of the Landlord and Tenant Act 1985 and paragraph 5A of Schedule 11 of the Commonhold and Leasehold Reform Act 2002 which are not in issue in respect of this Application.

3. An order under Rule 13 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 was also applied for and is in issue in respect of this Application.

4. The Works were for the instruction of a specialist flue contractor, namely [NAME_35] ("[NAME_15]"), to attend the Property and carry out the removal of the current flue system and install a new flue system.

5. It was apparent that an important part of the Applicants’ objection to the cost of the Works was that they were only necessary due to defects for which [NAME_16] One [NAME_16] Two [NAME_16] (UK) (“[NAME_17]”) were liable. The Applicants requested that [NAME_16] One [NAME_16] Two [NAME_16] (UK) be made a party of these proceedings which the Procedural Judge rejected as they were not the Freeholder or Landlord. However, the Judge agreed that the argument that [NAME_17] should have been asked to remedy the defects could be raised and with regard to the Applicant’s contention, [NAME_17] was ordered to produce any documents in its possession in respect of the 2019 works to the flues, in particular the recommissioning certificate and any report. A report and specification by [COMPANY_19] was provided.

6. The freehold title was transferred and the reversion to the long leases in the Property was assigned to the Respondent, [COMPANY_5], on 26th July 2019.

7. As at 2018 [NAME_21] (“[NAME_20]”) was the managing agent for the Property. On 1st February 2019 Respondent appointed [COMPANY_23] (“[NAME_22]”) as its managing agent for the Property to carry out all of the Respondent’s obligations and duties under the Leases, ensure that all statutory requirements had been complied with and collect the service charges

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that have fallen due. On 1st September 2021 [NAME_22]’ appointment ceased, and [NAME_24] (“Premier”) were appointed in [NAME_22]’ place.

8. The Tribunal determined that the costs of the Works were reasonable and payable by the Applicants to the Respondent under the Service Charge.

9. The Tribunal does not make an Order under Rule 13 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013.

The Present Application

10. The Applicants seek a review or permission to appeal the Tribunal’s decision dated 4th March 2022 on the ground that the Tribunal failed to take account of the failure by the Respondent Landlord to carry out proper maintenance which amounted to historical negligence. The Applicants are of the view that the need to replace the flues is due to the Landlord’s failure to maintain them. As a result, the cost of replacing the flues should be met by the Respondent Landlord. The Applicants make the following submissions in support of their ground which they say the Tribunal did not take into account.

Submissions in Support of the Ground to Review or Appeal

Submission 1

11. The Landlord did not commission appropriate flue maintenance for years. Reference was made to paragraphs 23, 24 and 41 of the Present Application which stated in summary:

23. The Maintenance agreements for the heating system for the time between 2013 and 2018 with [NAME_25] do not mention the flue system and are similar to the agreement with [NAME_15] provided in the bundle. A maintenance quote from [NAME_26] was provided by the landlord which also did not include the flue maintenance or inspection.

24. & 41. A statement from the landlord's own previous managing agents, [NAME_20], was provided and clearly stated their observation that the state of the flue (and degradation of the heating system) is most likely from neglect:  Contractor has been paid for works that were not carried out.  CNC is a good example of this. (NB: CNC is the previous service provider for plant room)  Plant room was not serviced for the best part of a year, the equipment must be serviced yearly!  Leaking flue (see picture) why was this never noted and addressed?”

Tribunal’s Response to Submission 1

12. As stated at [88] of the Decision, no evidence was adduced either in respect of the Original Application or the Present Application with regard to the

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contracts for flue maintenance between 2013 and 2018, such as copies of the agreement with CNC, and whether the maintenance or lack of it during this period led to the need to replace the flues in 2021.

Submission 2

13. The Landlord did not maintain the flue when advised to do so. Reference was made to paragraph 4 of the Application which stated in summary:

4. [NAME_15] and their advisers did state that there were serious issues which would require substantial repair. The reports provided in the disclosure by [NAME_16] do show a very serious concern which threatens the system to be shut down due to the leaks, identified by rusting cylinders.

Tribunal’s Response to Submission 2

14. The Tribunal considered this point at [90]

“Apart from the 2018 report the previous maintenance invoices dated 29th March 2019, 3rd September 2019, 26th March 2020 and 16th October 2020, were provided which itemised what work had been undertaken and reported on the condition of the system. The 16th October 2020 maintenance invoice recommended the replacement of the flue with a stainless-steel version and the next maintenance visit on 7th April 2021 informed [NAME_22] that the flue system had failed and required replacement.”

15. The Landlord engaged [NAME_15] to carry out the maintenance of the heating installation including the flues as indicated by the maintenance invoices. Only the [NAME_15] report on the maintenance invoice dated 16th October 2020 and 7th April 2021 referred to work required to the flue and this was that the flue should be replaced.

Submission 3

16. The Landlord did not perform the appropriate repairs for years. Reference was made to paragraphs 2, 3 and 5 of the Application which stated in summary:

2. [NAME_17] did not rectify the leaking flue, but merely ordered a ‘clean’ of the installation in April 2019. This has been confirmed by evidence provided by the landlord when requesting information from [NAME_27].

3. [NAME_16] did instruct the initial installation company to rectify the issue. However, the works performed were only for a clean and evidently not addressing the leaks: “We can offer a clean and inspection as attached quote”

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5. It was confirmed by [NAME_28] during his witness statement, that [NAME_16] accepted the leaking flue issue in 2018 as their fault to repair.

Tribunal’s Response to Submission 3

17. The recommissioning including any work required regarding the flue was the responsibility of [NAME_17]. The recommissioning was an agreement between the Applicants, [NAME_30] in particular, and [NAME_17], not the Respondent Landlord as determined at [77] to [80] of the Decision

Submission 4

18. The Applicants submitted that the Landlord did not inspect the quality of the minimal work that they did commission. Reference was made to paragraphs 7, 11, 12 and 13 of the Application which stated in summary:

7. The quote did suggest that “all coloured residue build up on steel will be cleaned” which is evidently not the case when comparing photos from 2019 and 2021. This would have been evident if the property managers had inspected the works as part of normal due diligence.

11., 12., & 13. In support of the lack of checks the Applicant stated:  [NAME_28] confirmed during the hearing that [NAME_16] did not perform any checks on the works conducted.  [NAME_31] confirmed during the hearing that [NAME_22] did not check on the work either, and relied fully on [NAME_15] for checks.  Mr [COMPANY_33] from [NAME_15] did confirm during the hearing that checks of the flue system are not performed by [NAME_15], and that they only do a visual inspection inside the plant room of easily visible parts.

Tribunal’s Response to Submission 4

19. As stated with reference to Point 3, the recommissioning including any work required regarding the flue was the responsibility of [NAME_17]. The recommissioning was an agreement between the Applicants, [NAME_30] in particular, and [NAME_17], not the Respondent Landlord. Any checking under the recommissioning agreement was a matter between [NAME_17] and [NAME_30] as determined at [ 74] to [80] of the Decision.

Submission 5

20. The Landlord did not comply with lease covenants. Reference was made to paragraphs 18, 19, 20, 21 and 22 of the Application which stated:

18. The Landlord’s covenants in the lease provide:

Schedule 5 -Services, Part 1 Building Communal Area Services (Part A)

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1. To keep the Building Communal Areas [which includes the Energy Centre, Heat Installations and the Heat Interface Unit] in good repair and condition (…)

7. To keep the Energy Centre and the plant and machinery housed within the Energy Centre and the Heat Installations serving the Premises [also known as the Property] in good repair order and condition including the renewal and replacement of all worn or damaged parts” and

Part 3 Block Communal Area Services (Part C) 3. To keep all Conduits… in good repair and condition.”

19. The arranged repairs have not been carried out as required and the required good condition of the flue has not been ensured.

20. [NAME_31] provided in his witness statement “After the completion of the works, I had a report done and this stated that the flues were still leaking, giving me the impression that the leaks had never fully been repaired.” This clearly demonstrated that the Landlord accepted that the agreed flue repair has never been carried out. If the landlord or its property managers had checked the works after supposedly being completed or had merely asked the contractors what works have been done (as part of the landlord’s managing covenant) it would have been evident that just cleaning the flue was insufficient and inadequate.

21. This statement was repeated in an email to [NAME_15] by [NAME_31]: “This isn’t something new and something that has been there since your management with [NAME_20]”.

22. If the Landlord does not have the power to hold [NAME_17] responsible, then they would have needed to inform residents of the situation.

Tribunal’s Response to Submission 5

21. As stated in [81] to [87] of the Decision, there had been ongoing problems with the flues. The argument of the Applicants in the Original Application focused on [NAME_17] being liable for the cost of the new flue system installed in 2021 for which the Applicants were being asked to pay.

Submission 6

22. It was independently verified that the resulting state of the flue leading to the need for replacement was the result of neglect (24, 33)

24. Residents provided a statement from the Landlord's own previous managing agents, [NAME_20], clearly stating their observation that the state of

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the flue (and degradation of the heating system) is most likely from neglect.

33. [NAME_31] from [NAME_22] provided evidence of leaking flue pictures (only of inside the plant and not of the leaks inside the risers) claiming that these were from 2020 only. However, based on the evidence provided by [NAME_16], residents have demonstrated that the photos showing the leak inside the plant room were a mixture from photos taken in 2018 (before the accepted repair) and 2020 (identifying the need for full replacement), showing the exact same poor state of the flue. This highlights that the same problem was known for years and had not been resolved.

Tribunal’s Response to Submission 6

23. The Tribunal considered the evidence, its findings and Decision with regard to the condition of the flues prior to their replacement.

24. The Tribunal found at [74] of its Decision that, from the evidence of the correspondence between the Managing agents, [NAME_17] and the contractors, recounted at [29], the flues were found to be leaking in 2018.

25. In 2018 [NAME_15], the maintenance contractor, attributed the leaks to defective installation which was accepted by [NAME_17] whose contractors advised cleaning as a means of remediation [74] and [76].

26. The Applicants submitted that the flues should have been part of the recommissioning in 2019 to 2020 [51] ff. Whether or not this was the case no evidence was adduced to support the need to recommission the boilers was due to a lack of maintenance of either the boilers or the flues [89].

27. The flues were considered to be of a material which is not in accordance with current standards which would require a stainless-steel flue for a condensing boiler. This was recognised by the contractors [NAME_15] on 16th October 2020 recorded at [59] and by [COMPANY_34] state that the flue that was originally installed is a product that they do not recommend for use with condensing appliances due to the jointing method recorded at [57] referred to at [82] and [83] by the Tribunal.

28. The Tribunal noted [84] a report by contractor, [NAME_26], dated 7th June 2021, that at least some of the problems with “the boiler flue would have been prevented if the condensate traps had been cleaned and free flowing allowing the condensate to be removed quickly from the system rather than flooding sections of the flue. If the flue is not in good condition that can affect the performance of the boiler. If the boiler is not working efficiently it may start to produce high levels of harmful carbon monoxide”.

29. The Tribunal went on to state [85]: “From this report two points are noted: a) to reduce the build-up of condensate and resultant corrosion to the flue, the traps need to be kept clean;

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b) if the flue is in poor condition the boiler may produce high levels of carbon monoxide. The findings of this report were not addressed by either party other than to say that it showed the flues were leaking carbon monoxide. The report did not suggest that the flue did not need replacement.”

30. The greatest concern from the report was the build-up of condensate in the flue, which not only causes corrosion but may affect the operation of the boiler causing an increase in carbon monoxide [92].

31. The Tribunal referred again to the [NAME_26] dated 7th June 2021 at [91] stating “This suggests that with different maintenance the Works would not have been necessary. If this were the case the fault would lie with [NAME_15] as the maintenance contractors. However, if the Applicants were to have submitted this the Tribunal would have needed more cogent evidence than the report.”

32. The Tribunal, having examined the evidence and its findings in the Decision with regard to the condition of the flues prior to their replacement, is of the opinion that there were several possible reasons for the need to replace the flues: a) Defective installation by [NAME_17]; b) Inappropriate remedial action under the auspices of [NAME_17]; c) Inappropriate construction by current standards by [NAME_17]; d) Failure to keep the condensate traps clean and free flowing in the course of maintenance; and e) Deterioration due to the age of the installation.

33. The Tribunal makes no findings as to whether a) the installation was defective, b) the remedial action was inappropriate or c) that the construction of the flue was inappropriate, as these are disputes between the Applicants and [NAME_17] possibly with the involvement of the NHBC (National House Builders Confederation) Buildmark Warranty [75].

34. [NAME_17] may have been the Landlord until 2013 it is not any longer and therefore alleged failings of [NAME_17] are not those of the Landlord. [NAME_30], the Applicant’s Representative, on his own without any other Leaseholders or the Management Company, made a claim against [NAME_17] in the County Court with regard to the heating system and its failure and an out of court settlement (the Agreement) was reached. At the hearing the Managing Agent made it clear that it was unaware of anything contained within the Agreement between [NAME_17] and [NAME_30]. Similarly, the Tribunal was not aware of the terms of the Agreement made between [NAME_30] and [NAME_17]. [NAME_30] nor [NAME_17] divulged the terms of the Agreement other than it was for the complete recommissioning of the heating system. It was not clear to what extent the flues were included in this work. [NAME_30] argued that the flues were integral to the heating system which the Tribunal would not necessarily disagree with. However, the fact [NAME_17] did not replace the leaking flues, but merely ordered a clean of the installation either as part of repairs or the recommissioning is a matter between [NAME_30] and [NAME_17] not

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the current Landlord and the Managing Agent. Any alleged shortcomings by [NAME_17] in fulfilling the Agreement is for the County Court to consider.

35. With regard to d) the [NAME_26] report dated 7th June 2021 stated that the items on the boiler flue would have been prevented if the condensate traps had been cleaned and free flowing. However, no information regarding the traps, their condition, the cleaning required, the extent of any condensate flooding etc was provided. The Applicants submit that maintenance contractors [NAME_15] only carried out a visual inspection and did not carry out any cleaning or maintenance work on the flues. However, with regard to the maintenance so far as the Landlord was concerned: 1) there was a flue clean in 2019 as recommended by [NAME_17]’s contractor, following the discovery of the leaks in 2018, 2) there was a recommission of the boiler in 2019 by [NAME_17] in 2019 to 2020 and 3) maintenance work carried out by [NAME_15] in March 2019, September 2019, March 2020 and October 2020 when no issues regarding the flue were found. On the face of it so far as the Respondent Landlord was concerned the boilers and flues were being maintained.

36. The Tribunal found that the [NAME_26] dated 7th June 2021, the statement made by the then Managing Agent, [NAME_20], in the email of 21st January 2021 and other emails of the Managing Agents, [NAME_22] raised the possibility of shortcomings in the maintenance of the flues which may have been a contributory factor to their needing to be replaced. However, the onus is on the Applicants to show that, notwithstanding reasons a), b) and c) which were [NAME_17]’s responsibility and e) which is fair wear and tear, on the balance of probabilities, the replacement of the flues was due to the Respondent Landlord failing to ensure they were maintained.

37. The Tribunal found that the Applicants had not discharged that burden [93].

38. The Tribunal’s Original Decision was based on the evidence and submissions before it and the Respondent has raised no new legal arguments or additional evidence in support of the application for review or permission to appeal. The Tribunal has decided not to review its Original Decision and refuses permission to appeal to the Upper Tribunal.

Submission re Rule 13 Application 39. On the understanding that the Tribunal would review the Decision in favour of the Applicants following their submissions the Applicants applied to have their Application under Rule 13 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 reconsidered and an order made for the Respondent Landlord to pay their costs.

Tribunal’s Response to Rule 13 Application

40. The Tribunal has determined not to review or grant permission to appeal and therefore has not reconsidered its decision not to make an order under Rule 13.

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Case Reference

: CAM/12UB/LSC/2021/0061

HMCTS

: Paper

Property

: [NAME_2]

Respondent (Landlord): [COMPANY_5]

: [NAME_10] of Application : Application for Review or Permission to Appeal

Tribunal

: Judge J R Morris

Mr G [NAME_12]

Date of Original Decision: 4th March 2022 Date of Application : 14th April 2022 Response

: 13th May 2022 Date of Review Decision: 17th June 2022

___________________________________

DECISION ON REVIEW ____________________________________

© CROWN COPYRIGHT 2022

Decision

1. The Tribunal has decided to review its Decision dated 4th March 2022 under rule 55 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 because it is satisfied that the Respondent would be successful on a ground of appeal in respect of a part of the Decision for which it has sought review or permission to appeal.

2. The Tribunal makes an Order under section 20C of the Landlord and Tenant Act 1985 that 20% of the Respondent’s costs in connection with these FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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proceedings should not be regarded as relevant costs to be taken into account in determining the amount of any Service Charge payable by the Applicants.

Reasons

Background

3. On 4th March 2022 following an Application for a determination under section 27A of the Landlord and Tenant Act 1985 (the 1985 Act) the Tribunal made an Order under section 20C of the Landlord and Tenant Act 1985 that the Respondent’s costs in connection with those proceedings should not be regarded as relevant costs to be taken into account in determining the amount of any Service Charge payable by the Applicants.

4. On 8th October 2021 the Respondent sought a review or permission to appeal under rules 53 and 55 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 in respect of the Tribunal’s Decision to make an order under secton 20C of the Landlord and Tenant Act 1985.

The Grounds for Review or Permission to Appeal

5. The Respondent requested a review because the Respondent considered it would be successful on appeal for the following reasons:

Reason 1

6. The Respondent referred to [113] of the Tribunal’s Decision which stated:

“With regard to the conduct, the Respondent’s legal representative had asked for an extension of time on 14th December 2021. This was granted on 16th December 2021 with an order that they were “to use their best endeavours” to provide documentation in order for the Applicants to examine the papers before the Christmas break. By an email on 20th December 2021 the legal representatives informed the Tribunal that they chose to interpret this so as not to provide the Landlord’s statement of response until the extended time. The Tribunal replied on 20th December 2021 that the Tribunal expected the Applicants to be provided with “at least the gist”. This was not done, which was not compliant with Rule 3 of the Tribunal Procedure (Property Tribunal) (Residential Property) Rules 2013. In addition, the Respondent’s legal representatives attempted to unilaterally extend the Applications to cover Further Works, as referred to in the Dispensation Application, which resulted in about a half of the material in the Respondent’s Bundle for both Applications relating to these Further Works. Neither of these factors was helpful to the progress of the case.”

7. The Respondent submitted that the Tribunal was not correct. a) Documentation was provided to the Applicants on 21st December 2021 as was acknowledged by [NAME_30] on 31st December 2021. b) The “gist” of the Landlord’s response was provided to [NAME_30] in an email timed 12:06 on 23rd December 2021.

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c) No time was spent on the documents relating to the “Further Works” by the Tribunal during the hearing or the Applicants in addressing those matters.

Reason 2

8. The Respondent referred to [114] of the Tribunal’s Decision which stated:

“Early in the hearing the Tribunal commented to the Applicants’ Representative that on reading the papers it appeared that the dispute over payment for the replacement flue was a dispute between the Applicants and [NAME_17] which, if they could not reach agreement was a matter for the County Court. The Tribunal was disappointed that this point was not made in correspondence by the Respondent to the Applicants with a view to settling the matter so far as the Respondent was concerned, well before the hearing. The Respondent had the benefit of expert legal advice, professional managing agents and all the documentation and access to [NAME_17] well in advance of the hearing. The communal heating system is an essential part of the common parts and ongoing issues that occur within 5 years of completion warranted greater investigation by the managing agents and more than a bland acceptance of [NAME_17]’s statement that it was out of warranty. The Property is still within the NHBC Buildmark Warranty. The Tribunal found from the correspondence and other documentation available that the relationship and respective liabilities of the parties was not made clear by the Respondent or its advisers who are in a dominant position. If it had been these proceedings would probably not have taken place.”

9. The Respondent submitted that:

a) Counsel for the Respondent made the point at the Case Management Conference that “the dispute over payment for the replacement flue was a dispute between the Applicants and [NAME_17] which, if they could not reach agreement was a matter for the County Court.” Nevertheless, the Procedural Judge allowed the Applicants to raise the issue as part of their application and the Tribunal Judge did not raise it as an issue at the Hearing. b) The Tribunal did not invite the parties to make representations regarding the Managing Agent not following up [NAME_17]’s statement that the flues were out of warranty as a reason for making the order under section 20C. The Respondent did not have access to [NAME_17] despite attempts to request information which was acknowledged by the Procedural Judge who made a Third-Party Disclosure Order requiring [NAME_17] to produce documentation. c) The Applicants combative approach made it likely that a section 27A Application would be made regardless of any action by the Respondent. d) The Respondent made a without prejudice offer to the Applicants prior to the hearing which in the event was exactly what the Tribunal ordered. The offer was raised at the hearing but the Tribunal does not appear to have given due consideration to it.

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10. The Tribunal was not provided with a copy of this offer in the Bundle and there was no reference to it in the index. At the Tribunal’s request the Respondent provided a copy to the Tribunal following this Application for Review. On receiving the letter, it was apparent to the Tribunal that it was withheld from the Bundle because it was a without prejudice offer. However, the letter makes it clear that if the offer is rejected the Respondent reserved the right to refer to the terms of the correspondence when the Tribunal comes to consider whether or not to make an order under secton 20C of the 1985 Act. The relevant part of the offer states:

“The Service Charges

The application to determine the reasonableness of the service charges is limited to the Works in the sum of £13,954.08. In summary, it seems to be the case that the leaseholders’ position is that they should not be paying anything at all. However, our assessment is that an amount will be payable. If dispensation is granted, our client is confident that they will recover in excess of the statutory limit of £250.00 for the Works.

Settlement Terms

Given the impending hearing on 22 January 2022, our client is mindful of the increasing costs being incurred by all parties in determining the applications.

Accordingly, our client proposes the following terms in settlement of the applications:

1. The leaseholders’ consent to dispensation being granted to the Works and the Further Works;

2. The leaseholders’ contribution to the Works only will be limited to £10,500.00 equating to a contribution per leaseholder of £375.00; and 3. Our client will agree to an Order pursuant to Section 20C of the Landlord & Tenant Act 1985 that their costs incurred in dealing with the applications will not be passed to the leaseholders via the service charge.

If, as appears, the leaseholders perceive that the cost of the Works should be borne by the developers then, unlike our client, they can seek reimbursement of the contribution from them.

If the above is acceptable, we propose to embody the terms of settlement into a Consent Order to be approved by the Tribunal.

Should our client’s offer be rejected, whilst they will be making representations against the issuing of a Section 20C Order in any event, our client reserves the right to refer to the terms of this correspondence when determining such an Order. Should the Tribunal refuse the granting of a Section 20C Order, our client’s costs will be sought via the service charge and which in turn, will only seek to increase the leaseholders’ liabilities under the service charge, something which our client is seeking to avoid by way of this offer.

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Given the need for our client to attend to their statement of case in reply and to complete their bundles by 20 December 2021, the terms of this offer shall remain open for acceptance until 4:00pm on Wednesday 8 December 2021 after which the same will be withdrawn.”

Reason 3

11. The Respondent referred to [115] of the Tribunal’s Decision which stated:

“The Tribunal is of the opinion that the parties should effectively pay their own costs of the proceedings. Therefore, the Tribunal finds it is just and equitable to make an Order under section 20C of the Landlord and Tenant Act 1985 that the Respondent’s costs in connection with these proceedings should not be regarded as relevant costs to be taken into account in determining the amount of any Service Charge payable by the Applicants.”

12. The Respondent submitted that it was successful and therefore it was not just and equitable to deprive it of its costs taking into account that it had not acted improperly or unreasonably and was forced to defend an unsuccessful application.

Applicant’s Response

13. The Applicants made the following response to the Respondent’s Application.

Response to Reason 1

14. The Respondent claims that all information was sent to the Applicants in a timely manner. The Applicants submitted that this claim is incorrect and referred the Tribunal to the Tribunal’s letter of 20th December 2021 in which it was said “It is not obvious that [NAME_9] have used their best or indeed any endeavours to comply with the letter”. The Applicants said that they had made it clear that information was required before the start of the Christmas break to ensure that the documents can be studied in time as the Applicants have other responsibilities during work weeks. The Applicants submitted that the Respondent did not communicate even the gist of their statements of case before the Christmas break, which the Applicants made clear in their correspondence to the Tribunal of 31st December 2021.

Response to Reason 2

15. The Applicants submitted that the Application was not against [NAME_17] only but, as detailed in the Applicants’ letter of 29th April 2022, that it was also against the Respondent on the basis of historic negligence.

16. The Applicants submitted that the Respondent’s representatives made it impossible for the Applicants to obtain information from either the Managing Agents or [NAME_17]. [NAME_17] insisted that it would only communicate with the managing agents and the property managers regarding the communal areas. They refused to pass on any information received by

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claiming that these fall under the GDPR privacy rules. Documents can be found in the bundle.

17. The Applicants submitted that as detailed in their letter from 29th April 2022 they had held [NAME_17] responsible twice for the defective flue works but on both occasions the Respondent Landlord failed to ensure that the arrangements achieved were implemented at no costs for the tenants.

18. The Applicants submitted that they had used an evidence-based approach in making their application whereas the Respondent provided as little information as possible to tenants at any one time.

Response to Reason 3

19. The Applicants’ stated that the Respondent submits that just because “they won” they should be awarded costs. The Applicants submitted that the Tribunal discussed this in detail in both decisions and the Respondent has not made any additional points and the argument should be rejected.

20. The Applicants added that they strongly believe that any proceedings could have been avoided if the Respondent and its Managing Agents had tried to work with residents on the different issues on the estate, but unfortunately this has been rejected by the Respondent on numerous occasions.

Discussion

21. The Tribunal considered the parties’ submissions.

Reason 1

22. With regard to the Respondent’s submissions in respect of Reason 1 for Review the Tribunal found as follows:

23. The Respondent submitted that the Respondent was not invited to make representations about the correspondence of 14th December 2021 when an extension was requested by the Respondent which was granted on 16th December 2021 with an order that they were “to use their best endeavours” to provide documentation in order for the Applicants to examine the papers before the Christmas break. By an email on 20th December 2021 the legal representatives informed the Tribunal that they chose to interpret this so as not to provide the Landlord’s statement of response until the extended time. The Tribunal replied on 20th December 2021 that the Respondent should provide at least the “gist” of its case to the Applicants.

24. This exchange was referred to by both the Applicants [100] and the Tribunal in relation to the section 20C application and Counsel for the Respondent’s reply is recorded at [104]:

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“With regard to the conduct of the proceedings Counsel said that the Respondent had asked for an extension of time which had been granted and that it had complied with the amended Directions.”

Submission a)

25. The documentation provided to the Applicants on 21st December 2021 and acknowledged by [NAME_30] on 31st December 2021 related to the Further Works which were not a part of these proceedings. Therefore, these added nothing to the case.

Submission b)

26. The Tribunal notes that the compliance referred to in [104] was via the email dated 23rd December 2021 which stated:

“The gist is that the landlord will say that they have acted reasonably at all times, not only in respect of what works have been undertaken, but also concerning the costs that have been incurred regarding the Works of which are recoverable from the tenants under the leases. The landlord will deny the tenants’ reasoning to avoid the liability to pay or reduce the costs of the Works due to historic neglect and/or that third party contributions ought to have been pursued by them.”

27. It is for the Tribunal to determine to what extent the content of the email is sufficient compliance with the Direction and if not whether it should contribute to making an Order under section 20C. In the event it found that the statement was perfunctory. Some indication of the reasons why the Respondent is not liable for example reference to [NAME_17]’s liability, and the Managing Agents involvement in respect of maintenance of the boiler and flue systems and the maintenance contractor’s reports.

Submission c)

28. Counsel for the Respondent at [114] acknowledged that the Respondent’s unilaterally seeking to have the Further Works dealt with at the same time as the Works had increased the Respondent’s bundle by half. The Tribunal did not agree that a determination in respect of the Further Works should be made. Therefore, the Tribunal considered that the costs incurred in preparing half the Bundle should not be included in the costs for the proceedings and this was a consideration when making the order under section 20C.

Reason 2

29. With regard to the Respondent’s submissions in respect of Reason 1 for Review the Tribunal found as follows:

Submissions a) and b)

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30. The Tribunal acknowledges the issue that “the dispute over payment for the replacement flue was a dispute between the Applicants and [NAME_17] which, if they could not reach agreement was a matter for the County Court” was referred to at the Case Management Conference and early on in the hearing.

31. Nevertheless, the Applicants believed that the Respondent or its Managing Agent should have recognised the defects which they felt resulted from [NAME_17]’s failures at the time of construction. They argued that the Respondent should have then taken action against [NAME_17]. They submitted that the failure to do so was historic negligence. It was also part of the Applicant’s case that the Managing Agent did not follow up [NAME_17]’s statement that the flues were out of warranty. The Respondent submitted that the Respondent was not invited to make representations regarding the Managing Agent not following up [NAME_17]’s statement that the flues were out of warranty as a reason for making the order under section 20C.

32. It was submitted by the Applicants that the failure by the Respondent and its Managing Agent was a reason for making an order under section 20C as recorded at [99] of the Decision. The point having been made by the Applicants and it was for the Respondent to refute it when asked what submissions the legally represented Respondent had following the Applicant’s submissions regarding the making of an order under secton 20C.

33. The Tribunal decided the dispute over payment for the replacement flue was a dispute between the Applicants and [NAME_17]. It also found that there was no historic neglect that made the cost of replacing the flue in June 2021 unnecessary or more expensive. Notwithstanding this the Tribunal considered that the bland acceptance of [NAME_17]’s position by the Managing Agent had contributed to the proceedings being brought. It took into account that

“the communal heating system is an essential part of the common parts and ongoing issues that occur within 5 years of completion warranted greater investigation by the managing agents and more than a bland acceptance of [NAME_17]’s statement that it was out of warranty. The Tribunal found from the correspondence and other documentation available that the relationship and respective liabilities of the parties was not made clear by the Respondent or its advisers who are in a dominant position.” [113]

34. The making of the Third-Party Disclosure Order was not an acknowledgement by the Procedural Judge that the Respondent was not able to obtain documentation from [NAME_17]. Irrespective of whether the Respondent had a copy or indeed wanted a copy of any documentation, the Order was to require [NAME_17] to produce the documents to both the parties.

Submission c)

35. The Applicants were no more combative than many other parties and their representatives taking into account the proceedings are basically adversarial.

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Submission d)

36. The Tribunal considered the contents of the offer letter which it was seeing for the first time in the course of considering this review. The Tribunal noted that notwithstanding that the letter was without prejudice it reserved the right to produce the letter in support of its case against an order being made under section 20C of the 1985 Act.

37. The Tribunal found that the letter required agreement to dispensation from the consultation requirements for the Works and Further Works. Taking into account the Tribunal’s decision in respect of the Works the offer was reasonable. The Further Works were not part of the proceedings but there was no evidence to suggest that the Leaseholder sought to accept the offer save for dispensation relating to the Further Works.

38. The Tribunal found that taking into account the Tribunal’s decision in respect the section 27A Application the offer made to reduce the demand to £10,500.00 and agree to an Order pursuant to Section 20C of the Landlord & Tenant Act 1985 was reasonable. The Respondents also inform that the Leaseholders can seek reimbursement of their contribution from [NAME_17] if, as they believe, [NAME_17] should bear some liability for the Works.

Reason 3

39. With regard to the Respondent’s submissions in respect of Reason 3 for Review the Tribunal found as follows:

40. The Tribunal does not award costs other than under rule 13 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013. The decision for the Tribunal is whether it is just and equitable to restrict in part or whole the Respondent’s contractual right under the Lease to recover the costs it incurred in defending the secton 27A Application through the Service Charge. Although the Tribunal is not awarding costs just because the Respondent was successful, nevertheless in determining whether or not to make an order under section 20C of the 1985 Act it must consider both the conduct of the parties and the outcome of the proceedings. When it made its determination, it was not aware of the without prejudice letter and the terms that were offered. If it had it would have given more weight to the co-relation between the outcome and the terms offered in the letter.

Conclusion

41. The Tribunal found that the Applicants had at the hearing, in their representations in respect of their section 20C Application, raised all the points referred to by the Tribunal in its Decision. The Respondent in turn had an opportunity to respond to those points at the hearing. Therefore, the Tribunal did not consider this a reason for reviewing its decision to make an order under section 20C of the 1985 Act (Identified by the Tribunal as Reason 2 b)).

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42. The Tribunal decided not to review its decision in making an order under section 20C of the 1985 Act because:

1) The Tribunal found that a clearer expression of the Respondent’s case prior to the Christmas break would have reduced the later correspondence between the parties (Identified by the Tribunal as Reason 1 a) and b)).

2) The Tribunal found that the Respondent’s costs incurred in respect of the written representations regarding section 27A Application for Further Works should be discounted because they were not included in the proceedings (Identified by the Tribunal as Reason 1 c)).

3) The Tribunal found that the Applicants were not unduly combative (Identified by the Tribunal as Reason 2 c)).

43. Notwithstanding the above the Tribunal decided it would review its decision in making an order under section 20C of the 1985 Act for the following reasons:

1) The Tribunal found it had not given sufficient weight to the raising by Counsel for the Respondent at the Case Management Conference the point that “the dispute over payment for the replacement flue was a dispute between the Applicants and [NAME_17] which, if they could not reach agreement was a matter for the County Court” (Identified by the Tribunal as Reason 2 a)).

2) The Tribunal found it had not taken account of the Respondent’s without prejudice letter offering terms on which to settle the matter as this had not been produced until the application to review due to its without prejudice nature (Identified by the Tribunal as Reason 2 d)).

3) The Tribunal found that if it had known the terms of the letter it would have given more weight to the outcome of the proceedings taking into account the offer in the letter.

44. Therefore, the Tribunal reviews its Decision of 6th March 2020 as follows:

The Tribunal replaces its Order under section 20C of the Landlord and Tenant Act 1985 that the Respondent’s costs in connection with these proceedings should not be regarded as relevant costs to be taken into account in determining the amount of any Service Charge payable by the Applicants.

With the following:

The Tribunal makes an Order under section 20C of the Landlord and Tenant Act 1985 that 20% of the Respondent’s costs in connection with these proceedings should not be regarded as relevant costs to be taken into account in determining the amount of any Service Charge payable by the Applicants.

Judge JR Morris

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APPENDIX - RIGHTS OF APPEAL

1. If a party wishes to appeal the 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.

2. 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.

3. 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.

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