First-tier Tribunal Rules on Reasonableness of Service Charges

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case Reference

:

CHI/00HN/LSC/2024/0089

Property

:

336 [ADDRESS] [POSTCODE]

Applicant: [redacted]

[NAME] -Flat 1 [APPELLANT] 3 [COUNSEL] [NAME] 2 [COUNSEL] 4

Representative

:

In person

Respondent: [redacted]

:

Mr [COUNSEL] of Application

:

Liability/determination as to the reasonableness of Service Charges

Tribunal Member(s)

: [NAME] (Lawyer chair) [NAME] (Surveyor) [NAME] (Lawyer)

Date and Venue of Hearing

:

30th April 2025

Date of Decision

:

13 May 2025

DECISION

Decision of the Tribunal:

1. The Tribunal concluded that some of the elements of service charges in each year are not chargeable to the tenants, either by virtue of the provisions of the lease or due to an insurance claim, and in respect of some of the charges that they are unreasonable in amount.

2

Application

2. The Applicants are the tenants of Flat 1, Flat 2, Flat 3 and Flat 4.

3. The application is dated 19th May 2024 and was received on 19th May 2024.

4. A determination is sought pursuant to the Landlord and Tenant Act 1985 Section 27(A) for a determination as to service charges for the year 1 being 2020/2021 year 2 being 2021/2022, year 3 being 2022/2023 and indications for 2023/2024 in relation to an estimated service charge bill.

5. The Applicants also seek an order pursuant to Sc 20C of the Landlord and Tenant Act 1985 and paragraph 5A of Schedule 11 of the Commonhold and Leasehold Reform Act 2002.

Directions: 6. Directions were given on the 9th January 2025. The directions noted that the Respondents had not attended a conciliation hearing listed on 13th November 2024 to take place on 9th January 2025 and the Tribunal was satisfied that the Respondents were aware of the hearing date.

7. Directions included the following; • The Applicants’ application and documentation provided with their position statements would stand as their statement of case. • Should a response not be forthcoming from the Respondents they would be barred from taking further part in the proceedings. • The hearing was listed remotely on 13th February 2025. • The respondents shall send to the Applicant a signed and dated statement with Statement of Truth by 24th January 2025, and in default would be barred from adducing any evidence in the proceedings. • The Applicant may send a concise response by 7th February 2025.

8. On 13th February 2025 a barring order was made against the Respondents due to their failure to comply with directions previously made.

9. On 19th March 2025 the Tribunal heard an application for removal of the barring order against the Respondents. The application was granted and the Respondent was given permission to rely on documents sent to the Applicants

3 on the evening of 30th January 2025. No other documents were permitted to be included in the bundle.

The Background:

10. The building is a brick built property with a shop on the ground floor and 3 flats above. Flat 4 is a side extension on the ground floor. The lease: There is no issue between the parties as to the entitlement of the Respondents to charge the tenants (service charges) in respect of its obligations nor the tenants to pay such charges and the Tribunal satisfied itself as to the terms of the lease in this respect.

The other relevant parts of the lease provided dated 26th April 2019 are as follows;

"The Premises" means the property hereby demised as described in the Third Schedule hereto including for purposes of obligation as well as grant the ceilings floors cisterns tanks sewers drains pipes wires ducts and conduits specified in the said Schedule

The Second Schedule above referred to The reserved Property

All the main structural parts of the building forming part of the ……. but not the window frames of Premises nor the glass of the windows of the Premises …….

The Seventh Schedule

6. Without prejudice to the generality of the foregoing clauses herein the lessor shall keep the driveways footpaths and forecourts situate within the property and the common hallways and the bin area but not the refuse bins themselves in good and tenantable repair and condition and appropriately lit

The 8th Schedule Regulations to be Observed by the Lessee 2. The windows of the Premises shall be kept clean …

7. The Lessee shall clean the windows of the Premises as often as may be necessary.

THE SIXTH SCHEDULE above referred to Covenants by Lessee with Lessor

By paragraph 16 the Applicants are liable for 1/3 of the cost of maintenance of the Common Hallways and a fair and reasonable proportion of the other costs of the Landlord complying with its obligations under the Seventh Schedule. The service charge costs for the Common Hallways was referred to as the “Internal Expenses” and the other service charge costs as the “External Expenses”.

4 The Law:

10. Section 27A(1)An application may be made … 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. An application may also be made for a determination, if costs were incurred for services, repairs, maintenance, improvements, insurance or management of any specified description as to whether a service charge would be payable and if so by virtue of Section 27(A)(2) 1) by whom payable 2) to whom payable 3) the amount payable 4) the date payable on which 5) the manner in which payable.

11. Section 18 of the 1985 Act defines service charges and “relevant costs” and section 19 provides as follows; “Relevant costs shall be taken into account in determining the amount of service charge payable for a period – (a) Only to the extent that they are reasonably incurred, and (b) (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. The Hearing:

12. The matter was listed for a remote hearing.

13. The Tribunal read and the papers in the bundle and heard the submissions from Ms [COUNSEL] on behalf of Applicants and Mr [COUNSEL], solicitor advocate on behalf of the Respondents.

14. The years in question in which the Applicants seek the determination of the Tribunal is as follows; 2020/2021 2021/2022 2022/2023 2023/2024 Estimated.

5 15. The Tribunal was told by both parties, and it was agreed that a company called BML is a management company used by the Respondents in respect of some of the management aspects of the property and raising of service charge invoices.

Insurance premiums 16. In relation to each year the Tribunal heard submissions on the insurance charges in respect of the property. The Applicant told the Tribunal that for the preceding year (2019/2020) the total insurance was £900. Following the Freeholder’s purchase of the property they cancelled the insurance for that year and reinsured with another company. When the first service charge came in thereafter the tenants queried the amount of insurance premium and obtained alternative quotes, also providing to the freeholders the policy schedule.

17. Mr [NAME] made his submissions that it was not possible to tell if the policies provided a similar level of cover due to the lack of availability of the whole policy document. He also told the Tribunal that the information available did not enable a comparison of matters such as customer service, rates of accepted claims and other terms and conditions.

18. The insurance premiums charged by way of service charges are as follows

2020/2021

£2,054.80 including broker’s fee 2021/2022

£3,070.60 including broker’s fee 2022/2023

£3,798.57 including broker’s fee 2023/2024 estimated £3,988.40 including broker’s fee

19. The Tribunal considered all the relevant documents in the Applicant’s bundle, particularly those at pages 50, 52, page 53/54, 56 and 58. Page 58 was a quotation from an [NAME] who had previously provided cover for the property (page 50 bundle).

20. The Tribunal has concluded that the amounts charged to the Applicants are unreasonable in amount, appearing excessive when considered with other comparable insurance cover and conclude that a reasonable amount in respect of each year is as follows; 2020/2021

£995 plus a broker’s fee of £50 2021/2022

£1,160 plus broker’s fee of £50 2022/2023

£1,408 plus broker’s fee of £50 A likely reasonable amount for 2023/2024 is

£1699 plus broker’s fee of £50

Window cleaning 21. In relation to the window cleaning the Applicants relied on the terms of the lease which provides that it is the lessees who are responsible for

6 the cleaning of the windows, by virtue of the Second and Eighth Schedules of the Lease as set out above.

22. Mr [NAME] conceded this but argued that the tenants should not be entitled to a “windfall” by reason of the fact that they had enjoyed clean windows for the years in question and therefore should pay something.

23. The Tribunal disagrees with this argument and makes a determination that window cleaning should be deleted from all service charges.

Surveyor’s charges for i) preparing Insurance Reinstatement and ii) Surveyor’s Preparation of Preventative Maintenance Schedule 24. In relation to service charges relating to these two items the Applicants argued that these fees were excessive. Ms [NAME] told the Tribunal that the Reinstatement Schedule may well have been a desktop valuation and questioned how they could have viewed the back garden to the property.

25. The Tribunal considered this and noted that the report had referred to artificial grass which appeared to indicate that a visual inspection had taken place. The Tribunal also considered that such charges are a disbursement by surveyors governed by a professional body and that it is more likely than not that these works were carried out, that a visual inspection took place and they are a reasonable charge. The Tribunal therefore allowed these charges for each relevant year in full.

Bin cleaning 26. The Tribunal noted the provisions of the lease in relation to bin cleaning. They were also told that Ms [NAME] had been told by BML that this charge to the tenants had been an error and this was confirmed by the Respondents.

27. The Tribunal determination is that this is not a proper charge to the tenants under the provisions of the lease and is therefore not payable for any relevant year.

Gutter cleaning and repairs

28. For each year the tenants were charged the following in respect of gutter cleaning; 2020/2021 £750 Gutter cleaning 2021/2022 £1,374 Inspection unblockage and local repairs 2022/2023 £1442.40 Gutter downpipe inspection and cleaning 2023/2024 £1,500 (estimated)

7 29. Ms [NAME] told the Tribunal that she had obtained a quotation (at page 81 of the bundle) and that this included minor repairs. The quotation was £395 plus VAT (£474 inclusive of VAT).

30. For the year 2020/2021 Mr [RESPONDENT] referred the Tribunal to page 20 of the Respondent’s bundle and an invoice from Management 2 Management and which referred to repairs to corrosion of cast iron elements.

31. For the years 2021/2022 Mr [RESPONDENT] brought page 98 of the Respondent’s bundle to the attention of the Tribunal which were invoices from BML. This included a charge of £895 plus and extra £250 for repairs. He commented that no quotation was provided for this year from the Applicants.

32. For 2022/2023 the Tribunal was taken to the main bundle pages 77/78 and page 83 and Ms [NAME] asserted that the actual charges were unreasonable in amount.

33. Ms [NAME] challenged as to whether or not there were such cast iron elements at all and that all guttering had the appearance of uPVC.

34. Mr [RESPONDENT] took the Tribunal to pages 118 and 119 of the Respondent’s bundle, both of which were BML invoices in respect of gutter cleaning/repairs. The primary invoices, namely the invoices from the contractor which had actually undertaken the work, were not available.

35. The Tribunal concluded that the guttering has the appearance of uPVC and there is no guttering at the side of the property. The Tribunal saw the photograph at page 21 of the Respondent’s bundle showing a valley gutter and considered the quotation at page 81 of the Applicant’s bundle. The Tribunal conclude that charging for gutter cleaning and repairs is a reasonably incurred charge but that the amounts charged are unreasonable for a building of this size and type. The Tribunal has determined that a reasonable amount for each year is as follows 2020/2021 £500 inclusive of VAT 2021/2022 £550 inclusive of VAT 2022/2023 £650 inclusive of VAT 2023/2024 £750 inclusive of VAT Considering CPI, the quotations provided and that charges are likely to increase in line with CPI moving forwards. Accountant’s Fee Internal 36. For each year included in the service charge Ms [NAME] argued that the accountants fee for internal expenses auditing was less than external

8 auditing and that as there are fewer flat occupiers and the work should be less a greater fee is unreasonable for any given year.

37. The Tribunal considered whether a larger fee of some £40 between the external charges rendered in respect of accounting was unreasonable and declined to find this to be the case. The charges are therefore reasonable in full.

Storm Damage for year 2021/2022 £1,416 and sealing hole in roof £480

38. Ms [NAME] told the Tribunal that the charges for 2021/2022 related to a storm in February 2022. She took the Tribunal to page 99 of the main bundle which is an email from the managing agents which stated that the roof repair costs had been accepted under the policy of insurance, that the work was done in the July and included in the service charge in December.

39. In relation to the hole Ms [NAME] took the Tribunal to page 106 of the main bundle that stated that such work was not being charged for.

40.Ms [NAME] also commented that it was very difficult to ascertain what were the correct invoice amounts as the invoices were raised by BML and all the contractors’ invoices were not available to them and that this was not the correct way to manage the flats (invoicing coming through BML without supporting documentation.)

41. Mr [NAME] told the Tribunal that all the invoices were passed through BML, and that more than one contractor had been involved. He referred the Tribunal to page 101 of the Respondent’s bundle.

42. The Tribunal concluded that Mr [RESPONDENT] explanation for these sums was not clear and could not follow with his explanation of multiple contractors working on site and during which periods. The Tribunal concluded that these sums were likely to have been covered by insurance and if there had been any defects in workmanship that were not so covered the Respondents should have dealt with this.

43. The Tribunal therefore found that both the repairs and the repair to the hole were as a result of storm damage, that these amounts were not reasonably chargeable to the Applicants and should be deleted in full.

44. The Tribunal does note that there was no evidence of any insurance excess being payable so could not determine this aspect of any insurance claim.

9 45. The Tribunal adds that it agrees that transparency is a key component of service charges and in the event that the Respondents utilise the services of BML then supporting invoices should be provided as well from contractors.

[COMPANY] 46. Ms [NAME] told the Tribunal that for each year they did not know whether anyone actually attended, that records were not kept at the premises and the key was always in the fire alarm. She queried whether the tenants should be charged for services that they cannot be sure are ever being carried out.

47. Mr [NAME] countered this by referring the Tribunal to invoices which had been provided in respect of such testing services.

48. The Tribunal asked Ms [APPELLANT] whether she or any other tenant was always within the property and could give clear evidence that testing never took place, but this was not possible.

49. The Tribunal concluded in the absence of any evidence at all of fraud by the testing providers that this charge was payable in full and that a monthly test was appropriate. The Tribunal could not find that the fact that the tenants were not aware of such testing meant that it had not taken place.

Fire Health and Safety Risk Assessment 50. Ms [NAME] queried the necessity of yearly risk assessments and the fact that it always appeared to be carried out by a different firm. The Tribunal was told that she had been advised by the Lease advisory Service that a risk assessment should be carried out every 4 years and updated every 2 years and asked why a full assessment was required in relation to such a small block. Ms [NAME] also told the Tribunal that such recommendations as were made were not carried out.

51. Mr [NAME] told the Tribunal that this work is carried out and is a reasonable charge.

52. The Tribunal concluded that this is a matter of health and safety of the tenants and is a reasonable charge and reasonable in amount for each relevant year.

Key cutting and locksmith call out 53. Ms [NAME] questioned why a local firm could not be used that would be cheaper.

54. In relation to the specific charge, she also took the Tribunal to the invoice at page 93 of the main bundle which indicated a charge out of £73.33 inclusive of VAT was due to an abortive call out to Flat 2.

10 55. The Tribunal did not agree that only a local firm could be used for such works but do conclude that Flats 1, 3 and 4 should not have been charged for the abortive call out to Flat 2, that this was unreasonable in relation to those flats and this charge should rest with Flat 2 alone.

Supply and Fit of new Signage 2022/2023

56. Ms [NAME] told the Tribunal that no signage had been put up other than by the other Applicant, being a tenant at the property. Mr [APPELLANT] was unable to assist the Tribunal and no photographic evidence of such signage was available from the Respondents.

2023/2024 57. For the years 2023/2024 the Tribunal note that at the time of the application this was described as an estimate although by the time of the hearing the Tribunal had in the bundle the Service Charge account that had been issued by the managing agents dated 3 December 2024, which is described as “ Accurate Service charge account December 2023/2024”.

58. The matters upon which the Tribunal was requested to make a determination was as follows; i. Insurance premiums ii. Fire health and safety risk assessment iii. Fire health and safety testing and repairs iv. Gutter cleaning v. Window cleaning vi. Accountant’s fee [internal vii. Drains service viii. Common parts electricity

59. The Tribunal has already made a determination about items i) to vi) inclusive in relation to other years and also indicated the level of insurance premiums it would consider reasonable for 2023/2024.

Common Parts Electricity

60.In relation to the common parts electricity the Tribunal was told by Ms [NAME] that the respondents were not choosing price competitive providers and that the price went up accordingly once a fixed price tariff came to an end.

61. Mr [NAME] told the Tribunal that the tenants had enjoyed lower rates due to the fixed price tariff in earlier years. The Tribunal could not find that the charges (as estimated) are unreasonable but comments that a competitive provider should be considered by the respondents within a reasonable period of time.

Drain Services

11 62. The Tribunal was told that the drains of this property adjoin Number 338 and so query this figure. Also, that it has been included in service charges most years but work not then ultimately carried out. Were this the case, and in the absence of primary invoicing evidence, this would not be an item to be so charged.

63. The Tribunal is unclear whether or not the above items i) to xiii) are the only potential challenges to the 2023/2024 “estimated” bill but has only given indications on those matters challenged by the Applicants and not the estimated bill as a whole.

Section 20C / Schedule 11 application 64. In relation to the application by the Applicants for an order pursuant to both Sc 20C of the Landlord and Tenant Act 1985 and paragraph 5A of Schedule 11 of the Commonhold and Leasehold Reform Act 2002 the Tribunal has concluded that such an order should be made in the circumstances of this case, it finding it to be just and equitable so to do. Rights of Appeal

65. A person wishing to appeal this decision to the Upper Tribunal (Lands Chamber) must seek permission to do so by making written application to the First-tier Tribunal at the Regional office which has been dealing with the case.

66. The application must arrive at the Tribunal within 28 days after the Tribunal sends to the person making the application written reasons for the decision.

67. If the person wishing to appeal does not comply with the 28-day time limit, the person shall include with the application for permission to appeal a request for an extension of time and the reason for not complying with the 28-day time limit; the Tribunal will then decide whether to extend time or not to allow the application for permission to appeal to proceed.

68. The application for permission to appeal must identify the decision of the Tribunal to which it relates, state the grounds of appeal, and state the result the party making the application is seeking.

Name: [NAME] (Lawyer Chair) [NAME] (Surveyor) [NAME] (Lawyer)

Dated: 13 May 2025

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