First-tier Tribunal Rules Against Unreasonable Service Charges

OUTCOME: Allowed

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00AG/LSC/2024/0101 Property : [NAME], [ADDRESS], London, Nw5 1be Applicants : [redacted] [NAME] (4) [NAME] (5) [NAME] and [NAME] (6) [NAME] and [NAME] (7) [NAME] [NAME] (As Attorney For [NAME]) (8) [NAME] and [NAME] [NAME] (9) [NAME] (10) [NAME] and [NAME] (11) [NAME] [NAME] (12) [COUNSEL] (13) [COUNSEL] : [COUNSEL] Solicitors Respondent :

[redacted] : [COUNSEL] of [NAME] : For the determination of the liability to pay service charges under section 27A of the Landlord and Tenant Act 1985 Tribunal members : Judge H [NAME] : 10 [ADDRESS] [POSTCODE] Date of decision : 6th November 2024 February 10th 2025 Date of reviewed decision DECISION ON REVIEW

Decisions of the tribunal The tribunal determines that no service charges are payable by the Applicants in respect of payments to the reserve fund demanded for the service charge year ending 31st December 2023 in connection with estimated costs of proposed major works. The tribunal makes the determinations as set out under the various headings in this Decision. The [NAME] The Applicants seek a determination pursuant to s.27A of the Landlord and Tenant Act 1985 (“the 1985 Act”) as to the amount of service charges payable by the Applicants in respect of payments to the reserve fund demanded for the service charge year ending 31st December 2023 in connection with estimated costs of proposed major works. The hearing The following Applicants appeared in person - Mr [NAME] (Flat 14) Mr [NAME] (Flat 5) Ms [NAME] (Flat 8). They were represented by Mr [COUNSEL] of Counsel at the hearing. Also in attendance for the Applicants was Mr [NAME] of [NAME] the surveyor employed as an expert witness by the Applicants. The Respondent was represented by Ms [COUNSEL] of Counsel. In attendance for the Respondent are Mr [COUNSEL], a director of [RESPONDENT] ([NAME]) and the Respondent’s witness, Mr [RESPONDENT] a Partner with [NAME] ([NAME]) Surveyors. The Applicant asked that its expert witness be allowed to give oral evidence and be cross-examined. The Respondent had no objection to this. It pointed out that its witness was not an expert witness for the purpose of the [NAME]. The tribunal therefore granted the [NAME]. The background

The property which is the subject of this [NAME] comprises 14 apartments with parking spaces within a 19th Century Church previously known as Highgate Baptist Church. It is an historically significant building. The leasehold apartments are high specification and retain some features of the church. They are high value properties. 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 Applicants are leaseholders of 13 of the flats in the property. [NAME] is the freeholder and the [NAME] [NAME] are HLM Property Management. The Applicants hold long leases of the property which require the landlord to provide services and the tenant to contribute towards their costs by way of a variable service charge. The relevant specific provisions of the lease are referred to below. The lease Clause 1 of the lease sets out the Accounting Period which is defined as commencing on 1 January and expiring on 31 December. Under clause 2.4 of the lease, the lessee is required to pay “the Lessee’s Proportion of the expenditure which the Lessor may from time to time during the Term properly pay or incur in connection with the provision of services to and maintenance of the Building and the [ADDRESS] and such other services set out in Clause 6. 19 as provided in the Fifth Schedule and at the times and in the manner provided in the Fifth Schedule.” Under clause 4.4 the lessee covenants to “Pay to the Lessor the Interim Maintenance Charge or the Further Interim Maintenance Charge (as hereinafter defined) at the times and in the manner provided in the Fifth Schedule hereto PROVIDED ALWAYS that the amount payable is calculated in accordance with

clause 2.4”” Clause 6.3 contains covenants by the lessor relating to expenditure of the maintenance charge. Under clause 6.3.1 the lessor covenants: “6.3.1 To maintain renew and keep in good and substantial repair and condition: 6.3.1.1 The main structure of the Building including the principal internal timbers and the exterior walls and the foundations the roofs main structure exterior of the Building and all boundary walls and fences thereof with its Conducting Media main water tanks main drains gutters and rain water pipes (other than those included in this demise or in the demise of any other Flats) 6.3.1.2 All Conducting Media within the Building as may by virtue of the terms of this Lease be enjoyed or used by the Lessee in common with the owners lessees or occupiers of the other Flats 6.3.1.3 The Common Parts of the Building (including re-carpeting redecoration and furnishing where necessary) 6.3.1.[ADDRESS] 6.3.1.5 All other parts of the Building not included in the foregoing subparagraphs 6.3.1.1-6.3.1.4 and not included in this demise or the demise of any other Flats”. Clause 6.4 provides that the lessor may employ various persons including [NAME] [NAME] and in particular, clause 6.4.3 provides that the lessor may “Employ such surveyors builders architects engineers tradesman accountants or other professional parties as may be necessary or desirable for the proper maintenance safety and administration of the Building” Clause 6.6 contains a provision for a sinking fund and provides that the lessor will “……set aside (which setting aside shall for the purposes of the Fifth Schedule hereto be deemed an item of expenditure incurred by

the Lessor) such sums of money as the Lessor shall reasonably require to meet such future costs as the Lessor shall reasonably expect to incur in replacing repairing maintaining and renewing those items which the Lessor has hereby covenanted to replace repair maintain or renew The Fifth Schedule contains detailed provisions relating to the Service charge. The Applicants summarised the relevant provisions as follows: “Building Maintenance Expenditure” is the total expenditure incurred by the lessor in any Accounting Period in carrying out its obligations under clause 6 (paragraph 1(i)); The lessee is liable to pay an Interim Maintenance Charge in advance which is payable on 24 March and 28 September in respect of each Accounting Period (or such other date as specified by the lessor in writing) (paragraph 3); The lease provides for an adjustment at the end of the Accounting Period whereby the lessor can issue a further demand if the Interim Maintenance Charge is less than the costs incurred or, if the costs incurred are less than the Interim Maintenance Charge, any surplus will be credited to the next Interim Maintenance Charge (paragraphs 4 and 5).)a) Part 11 of the Fifth Schedule defines the amount of the Lessee’s Proportion for each lessee. The issues At the start of the hearing the parties identified the relevant issues for determination as follows: The payability and/or reasonableness of £520,000 of the £596,924.44 service charges demanded for service charge year ending 31st December 2014 relating to payments to the Reserve Fund. In particular Whether the demand dated 12th December 2023 is valid

Whether the sum of £520,000 is a reasonable amount for the Respondent to have demanded in advance, particularly in the light of the amount of reserves already held Whether all of the proposed costs are recoverable under the lease Whether the proposed costs are reasonably incurred and reasonable in amount Having heard evidence and submissions from the parties and considered all of the documents provided, the tribunal has made determinations on the various issues as follows. The lease The background to the challenge On 12 December 2023 the [NAME] issued service charge demands in relation to the service charge year ending 31 December 2024. The total amount demanded from the 14 leaseholders of the property was £596,924.44. A service charge budget which accompanied the demands showed that, of this amount, £520,000 related to a “Reserve Fund”. The money demanded to the Reserve Fund equates to 87% of the total sums demanded and an average of £37,142.86 per flat. The notes to the budget stated that the purpose of the £520,000 was: “To build a fund for any major works required at the development. There are major works planned for 2024 and, to ensure that there are enough funds for the major project, we have increased the reserves for the year. This will include the rectification of the leaks and decoration works internally and externally.” The budget was based on a Condition Report and Condition Survey Budget prepared by Mr [NAME] of [NAME]. Mr [NAME] is no longer with [NAME].

The validity of the demand The Applicants argue that the demand dated 12 December 2023 is invalid because it does not comply with the terms of the lease. The lease provides, at paragraph 3 of the lease set out above, that the Interim Maintenance Charge is payable “on the twenty-fourth day of March and the twenty-eighth day of September in each year (or upon such other dates as the Lessor may specify in writing from time to time)” The Applicants argue that the demand made on 12 December 2023, however, demanded payment within 28 days of the issue date (which would be 9 January 2024) and stated that the payment on account was due on 1 January 2024. Quite apart from being inconsistent, neither of these dates were 24 March 2024. Unless, therefore, the Respondent had previously notified the Applicants that the Interim Maintenance Charge would be due on 1 January and 1 July of each year, the demand was invalid. The Respondent made no response to this argument. The tribunal’s decision The tribunal determines that the demand dated 12th December 2023 is invalid. Reasons for the tribunal’s decision The tribunal accepts the argument of the Applicant that the demand fails to comply with the terms of the lease. Theoretically this could be the end of the [NAME]. However, as the Respondent is able to serve a valid demand, it is in the interests of justice and proportionate for the tribunal to determine provide guidance on the issue of reasonableness of the amount demanded so that this decision guidance can inform the new service charge demand. The guidance below is limited to the reasonableness of the individual items demanded. The tribunal also considered it was reasonable for the Respondent to choose not to stagger the works and to make these demands without using the reserves to contribute

to the costs of the proposed works. This guidance is not determinative and any new demand for estimated costs can be the subject of a s.27A [NAME]. The reasonableness of the demand for £520,000 The Applicants argue that not all of the proposed costs are recoverable under the lease. They challenge in particular the cost of cleaning the stone work. The Applicants argue that not all of the proposed costs are reasonably incurred or reasonable in amount. Their arguments are set out in summary on the schedule attached as an Appendix to this decision with the Respondent’s response. The Applicants argue that the demand fails to take into account the impact of such sizeable demands on the leaseholders. They suggest that the proposed works should have been either delayed to allow reserves to be built up over a longer period and/or the works should have been staggered for the same reason. They argue that a key factor in assessing reasonableness is the impact on the leaseholders, given the sheer size of the demands (averaging £37,142.86 per flat). This should have been taken into account by the Respondent when deciding what works to carry out, when to carry them out whether the works could be staggered. See, for example, [NAME] v [NAME] is nothing to suggest that any consideration was given to the impact on leaseholders and how it could be alleviated. The Applicants submit that it would only be reasonable to demand such a large sum in one go, if there is an extremely good reason why works need to be carried out now and cannot be either deferred (so as to give time for the reserves to be built up) or commenced but spread over several years, so avoiding imposing such on onerous burden on the leaseholders. As stated above, that is particularly so given the fact that there are already existing reserves. As the Respondent has not advanced such an argument and there is nothing to indicate that the burden on tenants was considered when deciding to make the demand or which justified

demanding £520,000 they argue the amount is unreasonable. Further, even if the Respondent had good reason for commencing some of the works, there was no reason why all the works would need to be carried out at the same time and could not be carried out in stages. One example (specifically mentioned by Mr [NAME]) relates to the cost of interior repairs and interior redecoration. The Applicants also argue that the type of works included in the [NAME] should be carried out over a planned preventative maintenance program. As Mr [NAME] states at paragraph 36 of his report, such repairs are “usually over a 10 year period. Costs can be allocated to appropriate contracts, phased over years and updated, usually following annual inspections, after which adjustment can take place to suit current condition and available funding from capital reserves and sinking funds.” It appears that no consideration was given to this, however. Rather, it appears that [NAME] (the surveyors instructed by the Respondent) were asked to prepare a schedule of all works which they considered appropriate and the Respondent then decided, based on that schedule/report to therefore issue a single demand to recover the entirety the proposed works and did not consider whether such works could be deferred or staggered. In particular, it appears that no consideration was given to whether works should be commenced which could be funded by the existing reserves, with other works being deferred. That was unreasonable. As stated in paragraph 100 of Mr [NAME] report: “Costs may be spread by undertaking works over different service charge years.” Similarly, there is nothing to suggest that the Respondent or [NAME] gave any consideration to whether cheaper alternatives could be adopted, involving less expense for the leaseholders, given the financial impact on the leaseholders. See, for example, [RESPONDENT] v London Borough of Hounslow The Respondent provided a brief reply [NAME] the following points The church conversion is a high value development that all

leaseholders have invested in. Mr [NAME] has agreed that the majority of works are substantially required. The report notes the costs are budgetary. The extent and cost of the building repairs is not determined until a specification is produced and tendered. The costs of the repairs would be considerably more if split over 2 or 3 years. Phased works would also fall outside of the terms of the lease. Future works would then fall outside the agreed external repair dates. There is a reference to cleaning. This is an integral part of a repair of this nature and the term of repair used in the lease is broad enough to cover this item under discussion. Using the leases of flat 14 and flat 8, given the purchase price and currently accessible online property portal prices, the Respondent notes that the apartments are the sixth most expensive properties in the area with values of £1,769,090 and £1,090,000 respectively. Based upon the property value, the repair costs are relatively small and proportionate in terms of repair and upkeep for the properties in question. Mr [RESPONDENT] for the Respondent provided extensive evidence of the reasonableness of the proposed works. His evidence was based upon the report drawn up by a newly qualified surveyor at the time of preparation of the report who has since left the firm. The Tribunal notes that Mr [NAME] made concessions on the Scott Schedule following arguments from the Applicants. Mr [COUNSEL], the expert instructed by the Applicants, also provided extensive evidence, which from his perspective, demonstrated that the proposed works were either unnecessary, excessive or could reasonably be phased over a number of years.

The tribunal noted Mr [NAME] relied on some estimates provided by [COMPANY]. The tribunal was not persuaded by these estimates. They appeared rough and ready, were adjusted by Mr [NAME] to a more robust amount, and related to works which would not all be carried out directly by [COMPANY] but by firms with which it would contract in respect of the scaffolding for example. DBR were not present at the hearing for cross examination. In submissions the Respondent argued that it had behaved reasonably in its calculation of the likelihood of costs, that the fee rates are reasonable and standard for the type of major work project that is the subject of the [NAME]. It reminded the tribunal that it had relied on professional advice which was cogent, detailed and justified. The figures that have been produced are reasonable. It also argued that phasing works would add to the management costs of carrying out all necessary works. The Applicant submitted that Mr [APPELLANT] evidence should be preferred. Mr [NAME] did not inspect but relied on a previously prepared inspection report. [NAME] owed duties to its client, the landlord. The landlord however owed duties to the leaseholders at least to take their interests into account. In the opinion of the Applicants, whenever there was any risk that further works might be required, the costs of those works were added to the budget. The Applicants had particular concern about the costs of the investigations which it argued were either not necessary or would be free of charge. They pointed to the contingency figure which provides a pot of money for unpredicted works. The Applicants also raised the Respondent reducing the estimated costs of the scaffolding, suggesting that just as that figure was too high, it was likely that all the figures were too high. The tribunal’s decision The tribunal determines guidance is that the amount payable in respect of the estimated costs for major works is £355,387.

This sum is calculated as follows: Total for the works £189,185 Plus contingency at 10% £ 18,918 £208,103 Plus preliminaries at 12.5% £ 26,013 £234,116 Plus Overheads and Profits at 15% £ 35,117 £269,233 Plus Professional Fees at 10% £ 26,923 £296,156 Plus VAT at 20% £59,230 Total £355,387 Reasons for the tribunal’s decision The tribunal is grateful for the helpful and extensive evidence provided by the surveyors for both parties. The tribunal has added to the schedule its conclusions on reasonable amounts. The reasoning behind the adjustments is set out below. The tribunal’s starting point is a reluctance to interfere in decisions about works which are based upon a thorough and professional investigation of the maintenance and repair requirements of the block. It is right and proper for the Respondent to ensure that it has in hand the necessary funds for carrying out required works. The report was carried out by a reputable firm of surveyors. There were some suggestions from the Applicants that Mr [NAME] who wrote the report was lacking in experience. The tribunal found that there was nothing in the evidence to suggest anything other than that a proper job was done by Mr [NAME]. However, the tribunal agrees with the Applicants that the Respondents appear to have taken the report from [NAME] and not

properly managed it. The report appears to identify and address every eventuality in relation to the repair and maintenance of the property. Estimated service charge demands based on that report were inevitably going to be very high. In the opinion of the tribunal what should have happened after the [NAME] [NAME] received the report was a thorough evaluation of the report, taking into account the terms of the lease, the affordability of the works from the perspective of the leaseholders, and taking a less risk averse approach to the current condition of the property and the possibility that further investigations would be required. The Tribunal has done its best with the information available to it to determine provide guidance on the reasonableness of the estimated costs of individual items. Its guidance suggests confirming/reducing the following estimated costs for the following reasons: Further investigations. The tribunal reduced the amount from £4950 to £0.00. It agreed with the Applicants that as there is a substantial contingency built into the estimate, that contingency can be used to address further issues that might arise. It also agreed with the Applicants that there is a strong possibility that contractors will carry out investigations at little or no charge. Façade repairs The tribunal confirmed the estimated cost of £82,231.05 proposed by the Respondent. The tribunal noted that this sum was highly disputed but took into account that the Respondent quantified the works during three days of inspections compared to a relatively brief inspection by DBR which was then increased by Mr [RESPONDENT]. Roof repairs The tribunal agreed the Respondent’s estimated cost of £6,270 drawing on its own expertise. It considers that it is extremely

difficult to estimate the number of slates that are damaged or will become damaged during the course of roof works. The Respondent is right to take a cautious approach. Grounds repairs The Respondent demanded a contribution of £16,087.50. The Applicants are prepared to accept a sum of £4,364.06. They argue that some of the works are maintenance works which should be carried out separate from the major contract. The tribunal recognised that there was a clear need for some works to be carried out but considered that those works should be prioritised. It determined that a sum of £7,500 should be allowed for these works and that priorities should be agreed with leaseholders. Internal repairs The Respondent has demanded £1,996.50 for internal repairs. The Applicants suggest £1,502.50. This does not seem a significant difference to the tribunal who therefore confirm the Respondent’s figure. The Applicants also argue that the internal repairs do not need to be carried out at the same time as the major works. The tribunal does not accept this argument determining that in the case of internal repairs it is for the Respondent to decide upon the timing. Scaffold The Respondent demands a sum of £68,038.00 for scaffolding. This is a reduction from the original estimated cost and is based upon estimates received from [NAME]. On this basis the tribunal confirms, the amount. The Applicant’s alternative figure of £50,000 is based upon an estimate from [COMPANY] who are not [NAME] and who do not appear to have spent a great deal of time on preparing the estimate. Flat roof covering (west) overhaul The Respondent demands a figure of £5,000 for this work. It says

that the cleaning and inspection of the felt covering and rooflights is to establish the monies potentially required. In this instance the tribunal agrees with the Applicant. £5,000 is a great deal of money to demand when there is no certainty any monies are required. If it appears that works are required as the contract progresses then a more accurate sum should be demanded, or monies taken from the contingency sum. Flat roof covering (east) The Respondent has demanded £8,000 as the estimated cost for this work. In this instance the tribunal is prepared to agree this figure. There is clear evidence of a need for work as the Applicant’s figure of £1,440 illustrates. The tribunal considers that the Respondent is entitled to rely on the advice of its surveyor’s report in connection with this item. Balcony roof x 2 The Respondent is demanding £5,000 for this work. Mr [RESPONDENT] has replied to Mr [NAME] criticisms and counter-proposal in a reasonable manner using his professional judgement and the tribunal confirms his demand. Boundary wall The Respondent is demanding £2,500 to rebuild a section of the wall. The tribunal was not persuaded by the evidence that a rebuild was necessary. It agrees with the Applicant that repointing is a sufficient response to the problems with the wall. It reduces the amount demanded to £150 which it considers a reasonable estimate for repointing the section of wall which is cracked. Repair water service intakes Amount demanded withdrawn by the Respondent. Store cupboard repairs Amount demanded withdrawn by Respondent.

Full façade clean The Respondent has demanded £23,400 for the cleaning of the façade of the building. The Applicants do not consider that cleaning falls within the terms of the lease. The tribunal disagrees with the Applicants. It considers that cleaning does fall within clause 6.3.1 of the lease. Cleaning is an important part of the maintenance of the property. However, it also considers that cleaning the stonework, particularly when the conversion of the property is relatively recent is an optional extra. It has reduced this amount to £0.00 but suggests that the item be negotiated with the leaseholders who may consider that a clean façade adds to the value of the property. Interior redecorations Challenge withdrawn as £12,000 is a reasonable sum. The tribunal determines that it falls within the discretion of the Respondent to carry out the interior redecorating at the same time as the other major works. Road suspension for welfare facilities The Respondent has demanded £37,800 to suspend the parking restrictions on 2 car parking bays. During the course of the hearing two leaseholders gave evidence that they would allow their parking spaces to be used for the period of the major works. In the opinion of the tribunal this will not lead to a nil cost, cabins will still have to be hired to provide the necessary welfare facilities. However, it reduces the estimated costs to £10,000. Contingency The tribunal agrees a contingency cost of 10% Preliminaries The tribunal agrees preliminaries costed at 12.5% Overheads and profits The Respondent has demanded 20% for overheads and profits. The

Applicant argues that this should be a nil sum. The tribunal found it difficult to understand the argument of the Applicant. Contractors are entitled to their profits and overheads. Demanding these monies does not mean that the landlord is profiting from the works. However, the tribunal considers that in a project of this size 20% is excessive and allows 15% Professional fees The Respondent has demanded an estimated 15% of total project value for professional fees. The tribunal considers that in a project of this size professional fees should be charged at 10%. The parties should be aware that if there is a need for further investigations and further works are required then it will be perfectly proper for the Respondent to raise further service charge demands. It may also be that the actual costs exceed those that the tribunal has determined are reasonable as estimated costs. There was some indication at the hearing that the Applicants considered that if the estimates were too low then the Respondent would have to shoulder the additional financial burden. That is not the case. However, of course it will be open to the Applicants to challenge the reasonableness of the actual costs incurred. [NAME] under s.20C and refund of fees The parties are invited to make written submissions on the Applicant’s 20C [NAME] and on the refund of fees within 21 days of this decision. Name: Judge H Carr Date: 6th November 2024 10th February 2025

Schedule DISPUTED SERVICE CHARGES S/C YEAR ENDED 31 DECEMBER 2024 Case Reference: LON/00AG/LSC/2024/0101 Premises: [NAME], [ADDRESS] [POSTCODE] Case Reference: LON/00AG/LSC/2024/0101 Premises: [NAME], [ADDRESS] [POSTCODE] References to item numbers are references to the item number on page 1 of the Budget (as defined in the Applicants’ statement of case) Item (in [NAME]) Cost (claimed in [NAME]) Tenant’s Comments (References to paragraph numbers are to Mr [NAME] report.)

The figures set out reflect the costs which Mr [NAME] believes are reasonable for carrying out the works. However, as such these figures do not take into account the Applicants’ case that not all the costs should be carried out at the same time, as a result of which the sum of £520,00 demanded for reserves should be lower still. [NAME] to our report responding to the Mr [NAME] observations. We have used in our report Mr [NAME] paragraph numbers and refer you to our comments in our report in relation to each point below. We have added a column to respond to Mr [NAME] estimate of the costs. [NAME] updated cost Leave Blank (for the tribunal) 1 (further investigations) £6,600 Sum accepted: £0.00. It is not accepted that the proposed investigations are necessary. See paragraphs 38 to 43. See section in [NAME] report referring to paragraphs 38 to 43. Mr [NAME] agreed that the bowing should be investigated.

We can survey the roof level flashings if leaseholders cooperate with access to their flats, avoiding the need for a MEWP. £4,950.00 £0.00 sProf2. Façade repairs £82,231.05 Sum accepted: £29,025.00. The proposed works and proposed costs are excessive. See paragraphs 44 to 54. See section in [NAME] report referring to paragraphs 44 to 54. We have quantified during three days of inspections, the number of repairs and types of repairs and used stone repair contractor's rates. Mr [NAME] cost was obtained from a suitable contractor who inspected the building for one hour. We consider this firm have underestimated the number of repairs. £82,231.05 £82,231.05 3. Roof repairs £6,270.00 Sum accepted: £2,000.00. It is not accepted that the proposed works and costs are necessary and/or reasonable. See paragraphs 55 to 62.

See section in [NAME] report referring to paragraphs 55 to 62. There are widespread slate displacements. This is a substantial roof incorporating numerous rooflights with flashings and box gutters. £2000 is insufficient monies in consideration of the potential for repairs. £6,270.00 £6,270.00 4. Grounds repairs £16,087.50 Sum accepted: £4,364.06. Some costs are maintenance which should be carried out prior to any major works and other works are not urgent and should not be included in any major works contract. They should be included in day-to-day maintenance. Pressure washing paving is unnecessary. Renewal of bind gates is unnecessary. See paragraphs 63 to 65. See section in [NAME] report referring to paragraphs 63 to 65. Key differences of opinion: 1 the surfaces should be cleaned after scaffold has been placed over them for more than 4 months; 2 the gate is not adequately strong for the location and requires£1 replacement to avoid recurrence of damage;

3 letter boxes are broken and consultation is needed to decide how to address it.

4. Omission of necessary repairs on the grounds that the [NAME] agent should manage the works is not agreed on all matters. There are benefits for some works to be designed by the contract administrator and installation checked by the main contractor and contract administrator. Costs will be recovered from leaseholders in both scenarios. £16,087.50T £7500 5. Internal repairs £1,996.50 Sum accepted: £1,502.50. If the repairs are carried out, £1,502.50 is a reasonable amount. However, the internal works need £1,996.50 for be carried out at the same time as external façade repairs and would actually be uncompetitivefor these if carried out by the same contractors. They should not, therefore, be carried out as part of the major works. See paragraphs 66 to 67. See section in [NAME] report referring to paragraphs 66 to 67. Mr [NAME] has inspected more recently but we suspect missed the displaced section of trunking. Repairs will need to be re-assessed when the specification is prepared. [NAME] of our rates provides a more competitive cost within the main contract.

£1,996.50 £1,996.50 6. Scaffold £80,000.00 Sum accepted: £50,000.00. It is accepted that scaffolding will be needed, but £80,000 is unreasonable in amount. See paragraph 68 and the quote from [COMPANY] at appendix E. See section in [NAME] report referring to paragraphs 68. Refer to Appendix A of [NAME] report with estimate from scaffold contractor. We have adjusted our cost accordingly. £68,038.00 £68,038.00 8. Flat roof covering (west) – overhaul £5,000.00 Sum accepted: £0.00. See item 3 (above) and paragraphs 55 to 62 See section in [NAME] report referring to paragraphs 55 to 62. DBR Cleaning and inspection of the felt covering and rooflights is required as a minimum. The purpose of the process is to establish

monies potentially required. £5,000.00 £0.00 9. Flat roof covering (east) – overlay and replace 50% of substrate £8,000.00 Sum accepted: £1,440.0 See item 3 (above) and paragraphs 55 to 62. See section in [NAME] report referring to paragraphs 55 to 62. £8,000.00 £8,000 10. Balcony roof x 2 – relay with liquid membrane £5,000.00 Sum accepted: £1,200.00. See item 3 (above) and paragraphs 55 to 62. See section in [NAME] report referring to paragraphs 55 to 62. We consider that Mr [NAME] estimate is incorrect for the roof covering overcoating. The lower roof requires minor repairs only but an overcoat warranted system may have economic benefits

whilst the scaffold is available. £5,000.00 £5,000 11. Boundary wall (north east) – Rebuild and tie in masonry to pier £2,500.00 Sum accepted: £45.00. It is not accepted the proposed works are necessary. See paragraphs 69 to 70. See section in [NAME] report referring to paragraphs 69 to 70. Repointing is not an adequate repair of vertical and lateral displacement. £2,500.00 £150 12. Repair water service intakes £600.00 Sum accepted: £0.00. The proposed works are unnecessary and only very minor decorations £2,500 are required, which are already included in item 15. See paragraph 71. See section in [NAME] report referring to paragraphs 71.

Mr [NAME] has inspected more recently. £0.00 £0.00 13. Store cupboard repairs £600.00 Sum accepted: £0.00 There are no defects which need remedying. See paragraph 72. See section in [NAME] report referring to paragraphs 72. Mr [NAME] has inspected more recently. £0.00 £0.00 14. Full façade clean £23,400.00 Sum accepted: £0.00 It is not accepted that the cost of cleaning is within clause 6.3.1 of the Lease. In the alternative, it is not accepted that it is necessary or reasonable to clean the façade. See paragraphs 73 to 80 and appendix H See section in [NAME] report referring to paragraphs 73 to 80. Cleaning

is a form of repair and in relation to stonework in a dirty condition, cleaning is necessary to enable inspection and prevent damage. Mr [NAME] has recommended that this position is referred to a conservation surveyor or other suitable specialist. Our budget should be increased to allow for the fees required - see item 24 below £23,400.00 £0.00 15. Interior redecorations £12,000.00 Sum accepted: £12,000/£20,500 If the works are carried out then £12,000 is agreed. Indeed, Mr [NAME] agrees that redecoration is necessary he has obtained an estimate which is actually higher than that proposed by the Respondent. However, there is no need for such works to be carried out at the same time as the external works. See paragraph 81 to 83 of his report. See section in [NAME] report referring to paragraphs 81 to 83. Disagreement on quantum. The landlord intends to undertake a project for repair and redecoration. The landlord would prefer to implement one contract but internal repairs can be programmed separately.

£12,000.00 £12,000 16. Road suspension for welfare facilities £37,800.00 Sum accepted: £0.00. It appears that this sum is to cover the cost of hiring/renting 2 car parking bays from the local authority, to position site welfare. It is disputed that this is necessary or reasonable. Welfare accommodation/facilities can be located on site and, in any event, the costs of this should be included within the price paid to the contractors (as its the case with the quote from [COMPANY]). See paragraph 84 to 85. See section in [NAME] report referring to paragraphs 84 to 85. The proposed locations for welfare are not feasible except in the car park. More than one leaseholder with adjacent spaces will need to allow use of their spaces for more than four months. If leaseholders can confirm agreement and any terms for compensation, the costs applying may be adjusted. [NAME] costs presented relate to a main contractor with the addition of consultant fees and VAT. £37,800.00 £10,000 18. Contingency

(10%) £28,808.51 Sum accepted: £13,767.19 A reasonable amount is lower. This is partly because the underlying costs are lower. See also paragraphs 103-105. See section in [NAME] report referring to paragraphs 38 to 43. [NAME] and Mr [NAME] has used 10% to determine the contingency. £14,000 + VAT is not a large sum for unforeseen variations on a substantial building. £27,577.31 10 % 20. Preliminaries 12.5% £39,611.69 Sum accepted: £25,000.00. This cost is lower as the other costs are lower and the claimed amount is too high. See paragraphs 106 to 107. See section in [NAME] report referring to paragraphs 106 to 107. Rate applied by [NAME] is 12.5%. BCIS advise the use of the rate of 20% - note the combined rate with overheads and profit is 32.5%

£37,918.79 12.5% 22. Overhead and Profit 20% £71,301.05 Sum accepted: £0.00. No additional sum should be allowed for overhead and profits. The landlord is not entitled to any profit element and any sums claimed by contractors should be included in the cost of the works. See paragraph 108. See section in [NAME] report referring to paragraphs 108. [NAME] rates do not include for main contractor’s overheads and profit. There is no provision for the landlord in this process. Practice varies but open presentation of overheads and profit in cost is satisfactory. £68,253.83 15% 24. Professional fees £64,170.94 Sum accepted: £15,196.27. A rate of 15% (used by FTT) is too high.

See paragraphs 109 to 112. See section in [NAME] report referring to paragraphs 109 to 112. [NAME] have allowed 15% as there will be more services required than contract administration. £61,428.45 10% 26. VAT @ 20% £87,395.48 Sum accepted: £33,431.80 Agreed at rate of 20% £94,190.29 TOTAL £590,372.69 Sum accepted: £197,471.82 £578,060.69 355

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] 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).