First-tier Tribunal Rejects Unreasonable Service Charges

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL [NAME] (RESIDENTIAL PROPERTY) Case reference : LON/00AH/LSC/2025/0958 Property : 232B [ADDRESS], [POSTCODE] Applicant : [redacted] : N/A Respondent : [redacted] : Chiltern Hills Estate Agency Type of application : For the determination of the liability to pay service charges under section 27A of the Landlord and Tenant Act 1985 and liability to pay administration charges under para. 5A, Schedule 11 of the Commonhold and Leasehold Reform Act 2002 Tribunal members : Judge McKeown Venue : 10 [ADDRESS] [POSTCODE] Date of decision : 2 December 2025

DECISION

2 Decisions of the tribunal (1) The tribunal determines that the following sums as set out in the invoice dated 8 April 2025 (INVOICE 232B-2025) are not lawfully due and owing: (i) Service charges for 2025 - £1,250; (ii) Additional service charges for emergency roof repairs £1,216.67; (iii) Management charges for 2025. (2) The tribunal makes an order under section 20C of the Landlord and Tenant Act 1985 and/or para. 5, Sch. 11 Commonhold and Leasehold Reform Act 2002 so that none of the landlord’s costs of the tribunal proceedings may be passed to the lessees through any service charge. (3) The tribunal determines that the Respondent shall pay the Applicant £341 within 28 days of this Decision, in respect of the reimbursement of the tribunal fees paid by the Applicant. (4) If the Applicant wishes to pursue an application pursuant to r.13(1) The Tribunal Procedure (First-tier Tribunal) ([NAME]) Rules 2013,het must make it, in writing and on notice to the Respondent by 4pm within 28 days of the date on which this decision is sent to the parties. The application 1. The Applicant seeks a determination pursuant to s.27A of the Landlord and Tenant Act 1985 (“the 1985 Act”) and Schedule 11 to the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”)] as to the amount of service charges and administration charges payable by the Applicant.

2. The Tribunal issued directions on 18 August 2025.

3. On 31 October 2025, the Tribunal ordered that unless the Respondent complied with direction 5 of the directions of 18 August 2025, he would be debarred from defending and the case would be decided on the papers.

4. It was noted in the order of 31 October 2025 that there have been four sets of proceedings for a s.27A determination in respect of service charges for previous years, and in each case the Tribunal has found that no service charges were payable, and this application essentially raises the same issues as in previous determinations in respect of the service charges for 2024 and 2025.

3 5. The previous cases appear to be: (a) LON/00AH/LSC/2014/0538 (17 March 2015); (b) LON/00AH/LSC/2018/0267 (6 November 2018); (c) LON/00AH/LSC/2011/0871 (12 December 2012); (d) LON/00AH/LSC/2011/0871 (11 January 2013); (e) LRX/10/2013 (6 March 2013); (f) LON/00AH/LBC/2011/0106 (10 January 2012); (g) LON/00AH/LSC/2023/0361 (9 February 2023).

6. The Tribunal has not been able to find these decisions.

7. In accordance with the orders of 31 October 2025, the Tribunal has determined the case on the papers. The Respondent did not comply with the requirements of the order of 31 October 2025 and has been debarred from defending. The Tribunal received confirmation by email dated 31 October 2025 that the Applicant had not responded to Applicant or served any documents.

8. The Applicant has provided a “Formal Response to Directions” as well as a witness statement. The Respondent has not provided any documents. The background 9. The property which is the subject of this application is a second-floor leasehold flat in a converted two-storey Victoria building comprising 3 flats in total. It is approximately 100 years old.

10. The Respondent is said to be the Applicant’s landlord.

11. Neither party requested an inspection and the tribunal did not consider that one was necessary, nor would it have been proportionate to the issues in dispute. The Lease 12. The Applicant is the leaseholder under a lease dated 15 September 1982, originally made between [COMPANY] and [COMPANY]. The Lease include the following covenants:

4 (a) Cl. 2(3)(i) – to pay to [NAME] a service charge equal to a one-half share of the expenses of the matters set out therein, including repair and insurance; (b) Cl. 2(3)(i)(e) – obligation to pay the costs and expenses incurred by [NAME] in employing managing agents to manage the building; (c) Cl. 2(3)(ii)(a) – the amount of the service charge and other charges hereinabove covenants to be paid shall be ascertained and certified by a certificate (hereinafter called ‘the certificate’) signed by the Lessors auditors or accountants or managing agents (at the discretion of [NAME]) acting as experts and not as arbitrators annually and so soon after the end of [NAME]’s financial year as may be practicable and shall relate to such year in manner hereinafter mentioned; (d) Cl. 2(3)(ii)(b) – financial year is from 7th April- 6 April; (e) Cl. 2(3)(ii)(c) – a copy of the certificate for each such financial year shall be supplied by [NAME] to [NAME] on written request and without charge to [NAME]; (f) Cl. 2.3(ii)(d) – contents of the certificate; (g) Cl. 2.3(ii)(f) – [NAME] shall with every half- yearly payment of rent reserved hereunder pay to [NAME] the sum of £37.50 in advance and on account of the service charge; (h) Cl. 2(3)(ii)(g) – as soon as practicable after the signature of the certificate [NAME] shall furnish to [NAME] an account of the service charge payable by [NAME] for the year, in question due credit being given therein for all interim payments made by [NAME] in respect of the said year and upon the furnishing of such account showing such adjustment as may be appropriate there shall be paid by [NAME] to [NAME] the amount of the service charge as aforesaid or any balance found payable or there shall be allowed by [NAME] to [NAME] any amount which may have been overpaid by [NAME] by way of interim payment as the case may require; (i) Cl. 3 – [NAME]’s covenants, including to repair and keep the Property insured. The Law Service charges

5 13. Section 18 of the Landlord and Tenant Act 1985 provides: “(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 service, 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 estimate 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.

14. Section 19 of the 1985 Act provides: “(1) Relevant costs shall be taken into account in determining the amount of a service charge payable for a period— (a) only to the extent that they are reasonably incurred, and (b) where they are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard; and the amount payable shall be limited accordingly. (2) Where a service charge is payable before the relevant costs are incurred, no greater amount than is reasonable is so payable, and after the relevant costs have been incurred any necessary adjustment shall be made by repayment, reduction or subsequent charges or otherwise” 15. Section 27A provides:

6 “(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

7 (d) has been the subject of determination by an arbitral tribunal pursuant to a post-dispute arbitration agreement. (5) But the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment 16. In [NAME] v Hounslow LBC [2017] EWCA Civ 45 the Court of Appeal said that “reasonableness” has to be determined by reference to an objective standard, not the lower standard of rationality.

17. In [NAME] v Westminster LBC [2014] UKUT 327 (LC) it was said that where the Tribunal is satisfied that there are significant defects in the standard of works, it would be almost certainly wrong in principle for it to make no limitation on service charges under s.19(1)(b).

Administration charges 18. Paragraph 1 of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 provides as follows- (1) In this Part of this Schedule “administration charge” means an amount payable by a tenant of a dwelling as part of or in addition to the rent which is payable, directly or indirectly— (a) for or in connection with the grant of approvals under his lease, or applications for such approvals, (b) for or in connection with the provision of information or documents by or on behalf of the landlord or a person who is party to his lease otherwise than as landlord or tenant, (c) in respect of a failure by the tenant to make a payment by the due date to the landlord or a person who is party to his lease otherwise than as landlord or tenant, or (d) in connection with a breach (or alleged breach) of a covenant or condition in his lease.

19. Paragraph 2 of Schedule 11 to the Act provides that a variable administration charge is payable only to the extent that the amount of the charge is reasonable.

20. Paragraph 5 of Schedule 11 to the Act provides as follows- (1) An application may be made...for a determination whether an administration charge is payable and, if it is, as to—

8 (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) Sub-paragraph (1) applies whether or not any payment has been made. (3) ... (4) No application under sub-paragraph (1) 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. (6) ...

S.20 Landlord and Tenant Act 1985 21. The consultation requirements apply to qualifying works and qualifying long term agreements. The provisions apply where a landlord intends after 31 October 2023 either to enter into a qualifying long term agreement or to carry out qualifying works.

22. The basic principle of recoverability under section 20 is that the consultation requirements must be complied with, and if they are not complied with, or if compliance has not been dispensed with by the Tribunal, the amount of the relevant costs incurred on carrying out the works or under the agreement which may be recovered through the service charge is limited to the “appropriate amount”.

9 23. The application of the provisions is regulated by the Service Charges (Consultation Requirements)(England) Regulations 2003 – SI 2003 No.1987. “The appropriate amount” is –

• in respect of a qualifying long term agreement, an amount which results in the relevant contribution of any tenant in respect of any accounting period exceeding £100 or • in respect of qualifying works, an amount which results in the relevant contribution of any tenant exceeding £250.

24. The “relevant contribution” is the amount that the tenant may be required under the terms of the lease to contribute (by the payment of service charges) to relevant costs incurred on carrying out the works or under the agreement. 25. Section 20ZA(2) provides the following definitions: • “Qualifying works” are “works on a building or other premises”.

• “Qualifying long term agreement” is an agreement entered into by or on behalf of the landlord or a superior landlord for a term of more than twelve months, subject to any exceptions prescribed by the Secretary of State. There are a number of exceptions set out in para. 3 of the Regulations.

26. The requirements for qualifying works (for which a public note is not necessary) are, in summary, as follows: • Notice of intention to enter into agreement to be given to each tenant and any [COMPANY], describing, in general terms, the relevant matters or specifying a place and hours at which a description may be inspected free of charge (which arrangements must be reasonable) • state the reasons why the agreement or works are necessary • invite written observations and give address to which they may be sent, state period for delivery (which is 30 days from date of notice) and date when that period ends • invite nomination of a person from whom the landlord should try to obtain an estimate • Landlord must have regard to any observations made and must try to obtain an estimate from [NAME] persons (or some of them)

10 • Landlord must then prepare at least two proposals for provision of the goods or services or works, at least one from a [NAME] and including any estimate received from a [NAME] • Landlord must give notice to each tenant and [COMPANY] specifying time and place where all the estimates can be inspected and invite observations as above and must have regard to any observations made • on entering into a contract for the carrying out of the qualifying works, the landlord must give notice to the tenants and any [COMPANY] as above.

The issues 27. The Tribunal has seen an invoice dated 8 April 2025 (from [COMPANY]) for, among other things: (a) Service charges for 2025 - £1,250; (b) Additional service charges for emergency roof repairs - £1,216.67 (1/3 share of roof repairs which cost £3,650) (c) Management charges for 2025 - £1,250.

28. It is this demand/invoice which appears to be challenged and it is these charges that the Tribunal considers.

29. There is also a challenge in respect of 2024. It is said that no formal service charge demands, breakdowns audited accounts or notice were served for 2024.

30. Having considered all of the documents provided, the tribunal has made determinations on the various issues as follows. 2024 31. The Tribunal does not have any evidence that service charges were demanded for 2024. The application asserts that no lawful demand was served, but there is no evidence, therefore, that charges for 2024 were sought from the Applicant.

32. If the charges referred to in the invoice of 8 April 2025 do relate to 2024, then the Tribunal deals with them as set out below. Emergency repairs/roof repair contribution - £1,216.67

11 33. If these charges are in advance (i.e. for financial year 2025) then this does exceed the amount permitted by cl. 2.3(ii)(f).

34. If these charges relate to charges incurred in 2024 (i.e. not in advance but now incurred), the Tribunal finds as follows:

35. This fact that the Applicant has been charged 1/3 share rather than a ½ share would not, of itself, mean that these charges were not payable – the charge being less than that referred to in the Lease.

36. As stated above, the Service Charges (Consultation Requirements) Regulations 2003 provide that consultation requirements are triggered if the landlord plans to carry out qualifying works or enter into a qualifying long-term agreement which would result in the contribution of any tenant being more than £250. The cost which is the subject of the application exceeds this threshold. There was no compliance with the consultation requirements or s.20 Landlord and Tenant Act 1985. This charge would therefore be limited to £250.

37. It is also the case, however that, pursuant to s.21B Landlord and Tenant Act 1985, a demand for the payment of a service charge must be accompanied by a summary of the rights and liabilities of the tenants of dwellings in relation to service charges. The form and content of that summary is found in the Service Charges (Summary of Rights and Obligations, and Transitional Provisions) (England) Regulations 2007, reg.

3. The text of the summary prescribed by the regulations is set out in Appendix A. If the landlord fails to comply with s.21B, the tenants are not liable to pay the service charges until such time as it does, i.e. the tenants’ liabilities are not extinguished, but are suspended (again, assuming there is no other bar to the validity of the charge).

38. As there has not been compliance, the Tribunal cannot find that these charges are validly due from the Applicant at this time.

39. The Tribunal also cannot find the charges to be reasonable on the information it has.

40. In addition, there has not been compliance with the requirements contained in the Lease for certified accounts.

41. The Tribunal finds that these charges not payable.

Service charges - £1,250

12 42. If these charges are in advance (i.e. for financial year 2025) then this does exceed the amount permitted by cl. 2.3(ii)(f).

43. If these charges relate to charges incurred in 2024 (i.e. not in advance but now incurred), the Tribunal finds as follows:

44. There has not been compliance with s.21B.

45. The Applicant alleges that no service had been provided and says that the Respondent has failed to insure, manage or provide essential services. The Tribunal cannot find the charges to be reasonable on the information it has.

46. In addition, there has not been compliance with the requirements contained in the Lease for certified accounts.

Management charges - £1,250 47. If these charges are in advance (i.e. for financial year 2025) then this does exceed the amount permitted by cl. 2.3(ii)(f).

48. If these charges relate to charges incurred in 2024 (i.e. not in advance but now incurred), the Tribunal finds as follows:

49. There has not been compliance with s.21B.

50. The Applicant alleges that no service had been provided and says that the Respondent has failed to insure, manage or provide essential services. The Tribunal cannot find the charges to be reasonable on the information it has.

51. In addition, there has not been compliance with the requirements contained in the Lease for certified accounts.

Other matters 52. As noted in the orders of 18 August 2025 and 31 October 2025, the Tribunal cannot and does not consider the issue of Ground Rent. Further, as stated in the orders, if the Applicant wishes to pursue the appointment of a manager, he will need to make a separate application under s.24 Landlord and Tenant Act 1987.

13 53. The Applicant seeks an order requiring the freeholder to repair internal ceiling damage. This is outside the Tribunal’s jurisdiction.

Application under s.20C/Sch. 11 and refund of fees 54. The Applicant makes an application for a refund of the fees that he had paid in respect of the application/ hearing1. The tribunal orders the Respondent to refund the fees paid by the Applicant of £114 (application fee) and £227 (hearing fee) within 28 days of the date of this decision.

55. The Tribunal notes the reference to an application for costs pursuant to r.13(1) of the Tribunal Rules 2013. If the Applicant wishes to pursue this application, it must make it, in writing and on notice to the Respondent by 4pm within 28 days of the date on which this decision is sent to the parties. The Tribunal will then consider the application and issue any necessary directions.

56. The Applicant applies for an order under section 20C of the 1985 Act. The Tribunal finds that it is just and equitable in the circumstances for an order to be made under section 20C of the 1985 Act and/or para. 5A, Sch. 11 2002 Act, so that the Respondent may not pass any of its costs incurred in connection with the proceedings before the tribunal through the service charge.

Name: Judge McKeown

Date: 2 December 2025

Rights of appeal By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) ([NAME]) 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 application for permission must be made to the First- tier Tribunal at the regional office which has been dealing with the case. 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.

1 The Tribunal Procedure (First-tier Tribunal) ([NAME]) Rules 2013

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