First-tier Tribunal Rules on Service Charge Disputes in Alexandra House

OUTCOME: Allowed

1

FIRST-TIER TRIBUNAL

[NAME]

(RESIDENTIAL PROPERTY)

Case Reference

: BIR/OOFN/LIS/2018/0071 BIR/OOFN/LLC/2019/0005 BIR/OOFN/LLD/2019/0006

Property

: Apartments 53, 58, 60, 65, 94 and 117 [NAME], 47 [ADDRESS] [POSTCODE]

Applicant

: [redacted] [COMPANY] (2)

Representative : [COMPANY] (1) [COMPANY] (2)

Respondents

: [redacted] [NAME] [NAME] (Apartments 53, 58, 60 &65)

Type of Application : Service Charges

Date of hearing : 10th, 11th and 12th September 2019 3rd February 2020 Centre City Tower Birmingham

Tribunal : Judge D [NAME] of Decision : 24 April 2020

DECISION

© CROWN COPYRIGHT 2020

2 Background

1. [NAME] is a residential development comprising 179 residential apartments [NAME] let subject to the terms of a long lease. The development was completed in 2004- 2006 by [NAME] ([COMPANY] who are part of the [COMPANY]. In 2011 Saxon sold the freehold of the Property to [NAME] [RESPONDENT] (“the Landlord”). The [NAME] function under the long leases is reserved to the Landlord. All other management and service charge functions are discharged under the Lease by [COMPANY] (“the Management Company”). For the period 2008 to 2019 the Management Company employed [COMPANY] (“[NAME]”) as its [NAME] agents. [NAME] are also part of the [COMPANY].

2. On 21st October 2015 a Tribunal (“the 2015 Tribunal”) issued a Decision in relation to service charges for the period ended 31st December 2007 to 31st December 2012 (BIR/OOFN/LIS/2013/0043 and others). The Lead Respondent in those proceedings was [RESPONDENT] (who is also the First Respondent in the present proceedings).

3. By application dated 26th November 2018 the Management Company made Application to the Tribunal for determination of liability to pay and reasonableness of service charges under section 27A of the Landlord and Tenant Act 1985 (“the 1985 Act”). The named Respondent was [APPELLANT] who is the [NAME] of Apartments 94 and 117. The application sought a determination in relation to service charge years 2013 to 2018. However, pending finalisation of the accounts for service charge year ended 31st December 2018, the Management Company has not sought a determination from this Tribunal in relation to service charge year 2018. Mr [NAME] does not object to that course of action.

4. The Landlord has been joined as [NAME] Applicant in relation to reasonableness and payability of [NAME] premiums only. The [NAME] of Apartments 53, 58, 60 and 65, [NAME], has successfully applied to be joined as [NAME] Respondent. Both Respondents have made application for Orders under section 20 C of the 1985 Act and Paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”).

5. The Tribunal has considered a Bundle of documents (pages 1 – 2451) which contains financial information and supporting invoices for the period 2013-2017. Page references in this Decision are, unless otherwise stated, to the page numbers in the Bundle. A copy of a specimen lease (“the Lease”), in common form, dated 4th August 2006 and made between [COMPANY] (1), [NAME] (2) and the Management Company (3) whereby the Apartment was demised for 125 years from and including 1st January 2003 at an initial rent of £150 per annum is at pages 30 – 54.

3 6. These matters were initially heard over 3 days, 10th – 12th September 2019, in Birmingham. The Management Company was represented by Miss [NAME] of [COMPANY]. Mr [RESPONDENT] of [RESPONDENT] (on behalf of the Landlord) attended on the morning of the first day of hearing only to address the question of the reasonableness of [NAME] premiums. Mr [NAME] represented both himself and Mr [NAME]. The Tribunal also received evidence from Mr [COUNSEL], who until his retirement in 2019 was a representative of [COUNSEL], and from Mr [COUNSEL] in his capacity as Director of the Management Company. Representatives of [NAME] who are the new [NAME] agents from August 2019 also attended.

7. At the conclusion of the first three days of hearings the Tribunal issued Directions (dated 18th September 2019) in relation to the following 5 outstanding issues:

1. When were service charge demands served upon the Respondents and were those demands in the appropriate from (including summary of rights and obligations)? 2.Have Certificates and Interim Payment Certificates been prepared and given in accordance with Part 1 of Schedule 5 to the Lease? 3. Apportionment (on a percentage basis) of Expenses between [NAME] expenditure and car parking expenditure.

4. Tenant’s Share of the Expenses. Apportionment (on a percentage basis) of Expenses (both [NAME] and car parking) to be paid by [NAME] of Apartments 53, 58, 60, 65, 94 and 117.

5. Applications under Paragraph 5A, Section 20C and Rule 13.

8. Pursuant to those Directions the Tribunal has considered undated Submissions on behalf of Management Company received on 31st October 2019, undated Supplementary Submissions on behalf of the Management Company received on 1st November 2019, Landlord’s Reply dated 4th December 2019 and Written Submissions on behalf of the Respondents dated 22nd November 2019. It is regrettable that the Management Company’s Submissions and Supplementary Submissions have not been numbered sequentially following on from the Bundle (pages 1 – 2451).

Accordingly, in this Decision references to documents exhibited to the Management Company’s Submissions (31st October 2019) are to pages AS 1 – 692 and to the Management Company’s Supplementary Submissions (1st November 2019) are to SS 1 – 119.

9. On or around 7th October 2019 Mr [NAME] requested an oral hearing in relation to the 5 outstanding issues. A further hearing took place in Birmingham on 3rd February 2020. The Management Company was represented by [NAME] of [COMPANY]. Mr [NAME] represented both himself and [NAME]. [RESPONDENT] on behalf of the Landlord indicated to the Tribunal that they would not be in attendance due to their client’s [COMPANY] involvement with the outstanding issues. At that hearing the Management Company was given leave to file further evidence. The Tribunal has considered the Witness Statement of [NAME] ([NAME]) on behalf of the

4 Management Company dated 18th February 2020 and Respondents’ Reply dated 21st February 2020.

10. In accordance with Directions the parties have prepared a Scott Schedule which is attached to this Decision and records the Tribunal’s determination in relation to the disputed items of service charge expenditure 2013 – 2017.

Inspection

11. The Tribunal inspected the Property on the morning of 9th September 2019. The development consists of five linked buildings (Alexandra, Rutland, Courtyard, Wimbledon and Southampton) surrounding a central gravelled courtyard. The main pedestrian entrance is located in the Alexandra Building. Vehicular access is via [ADDRESS]. Alexandra Building (Apartments 1-37) is four storey building on the corner of [ADDRESS] and [ADDRESS]. It was built in 1897 by one of the largest boot lace manufacturers and exporters in the world. It is listed in [NAME] and described as “the finest warehouse in Leicester and one of the finest in the country”. The exterior is clad in buff terracotta. Rutland Building (Apartments 38 -75) is a five storey building linked to the Alexandra Building. There is a middle staircase between Alexandra Building and Rutland Building. Courtyard Building (Apartments 76 – 124) is a new build of eight storeys which is linked to Rutland Building. Wimbledon Building (Apartments 125 – 161) is a five storey building which sits between Courtyard and Southampton Buildings. Southampton Building (Apartments 162 -179) is a four storey building which is linked to Wimbledon Building. Southampton Building is also linked to Alexandra Building thus completing the circuit of five linked buildings which surround the central gravelled courtyard. There are 5 lifts (one for [NAME] building). [NAME] building has a flat roof with 5M membrane. The roof has a “man safe” system.

12. The development comprises 179 Apartments. There are 81 two bedroom Apartments. The rest are one bedroom Apartments. All of the two bedroom Apartments (except one) have car parking rights in the underground car park accessed from [ADDRESS]. However, there are no allocated car parking spaces. The underground car park has a myriad of pillars making designated parking impracticable. Parking of residents’ vehicles is carried out on their behalf by the on site valet parking operatives. Valet parking is staffed 24 hours [NAME] day, seven days [NAME] week, 365 days a year. There is no caretaker at the Property. Instead one of the valet parking operatives closes the valet parking office from 10:30 to 11:15 and walks around the Property taking meter readings and checking for obstructions in the communal areas. The valet parking office also monitors the [NAME] panels and acts as an unofficial help desk for residents. Communal staircases, lifts and corridors were clean and well maintained. There was some fading to certain areas of the carpeting. This is a still a new development (completed 2006) and the communal areas and exterior of the buildings were still in good condition and well maintained.

5 Service Charge Demands

13. The Management Company has produced copy service charge demands for the period 2013-2017 in relation to Apartment 94 (AS 4-46), Apartment 117 (AS 47-79) and Apartments 53, 58, 60 and 65 (AS 80-239). We were told by Miss [NAME] that the Management Company, out of an abundance of caution, had reserved all demands in October 2019 (Apartments 94 and 117 (SS 1-39) and Apartments 53, 58, 60 and 65 (SS 40 -119)). Miss [NAME] also told the Tribunal that all demands were for “on account payments” and that the only “balancing charge” raised was for service charge year 2013. A schedule of demands has been prepared at AS 580. Demands for 2013, 2014, 2015 and the first instalment for 2016 were served by post. Mr [NAME] confirmed that, although he denied receipt of some of the demands, his address in [ADDRESS], Wilmslow was correctly stated. The [NAME] instalment for 2016 and the 2017 demands were sent by email to “[NAME]”. Mr [NAME], although again disputing receipt of some demands, confirmed that was his correct email address.

14. Service Charge machinery is set out in Part 1 of Schedule 5 of the Lease (page 45). The “Accounting Period” is defined at clause 1.1 as “the period of twelve months ending on the last day of December (or another date specified by the Management Company) every year”. Clause 3 of Part 1 to Schedule 5 is of particular relevance:

“3.1 Before the start of [NAME] and six months into [NAME] (subject to paragraph 3.3) the Management Company may give to the Tenant an Interim Payment Certificate for that Accounting Period (the First and [NAME]).

3.2 The Tenant is to pay the Interim Payment in advance in two equal instalments on 1 January and 1 July in that Accounting Period

3.3 If the Management Company does not give the Interim Payment Certificate to the Tenant before the start of an Accounting period it may give it to him at any time afterwards and the Tenant is to pay immediately any money which he would already have paid had the Interim Payment Certificate been given to him before the start of the Accounting Period

3.4 As soon after the end of [NAME] as is reasonably practicable the Management Company is to give the Tenant the Certificate for that Accounting Period which is to contain:

3.4.1 A summary of the expenditure incurred by the Management Company in respect of the Expenses: and

3.4.2 A statement of the amount of the Tenant’s Share of the Expenses.

6 3.5 Immediately the Tenant receives the Certificate:

3.5.1 Where he has not received an Interim Payment Certificate for that Accounting Period he is to pay the Tenant’s Share of Expenses specified in the Certificate

3.5.2 Where he has received an Interim Payment Certificate for that Accounting Period then either:

3.5.2.1 The Tenant is to pay the shortfall to the Management Company; or

3.5.2.2 The Management Company is to credit the excess to the Tenant’s next payment of the Tenant’s Share of the Expenses.”

15.

Accordingly, under the terms of the Lease in relation to the “on account payments” due in January and July 2013 -2017 the Tribunal has to consider whether Interim Payment Certificates have been “given” under clause 3.1 which would trigger the obligation to make payment under clause 3.2. In relation to the 2013 “balancing charge” the wording of clause 3.5 requires the Tribunal to consider whether or not the Tenant has “received” a Certificate which would trigger a requirement to pay “immediately”. We will consider the precise form of Certificates required in the next section of this Decision. For the present we will examine the question of service and, in particular whether Certificates have been “given” and, where appropriate, “received”.

16. Clause 8 of the Lease contains service provisions in relation to Notices (page 40):

“8.1 A Notice given under this Lease must be in writing and may be served:

8.1.1 Personally; 8.1.2 By first class post; 8.1.3 By facsimile transmission; or 8.1.4 By leaving it for the Tenant at the Apartment.

8.2 A notice is deemed to be served:

8.2.1 At the time of service if it is served personally; 8.2.2 Forty eight hours after it is posted (excluding the hours of any day which is not a Working Day) if it is served by post; or 8.2.3 At the time of transmission if it is served by facsimile transmission”

17. Mr [NAME] argues that service of demands by email from July 2016 onwards is not good service. Having considered the Bundle it is clear that there has been extensive and successful email traffic between Mr [NAME] and the Management Company. We find that he has clearly acquiesced to service by email. Mr [NAME] has confirmed that

7 the Management Company has been using his correct email address. We also find that the wording of clause 8 of the Lease is not exhaustive and does not prevent service by email. The point was considered in G&O [COMPANY] v Khan [2014] UKUT 96 (LC):

“It is clear that the wording is not exhaustive of the methods of service and is not intended to prescribe the only methods of service to be utilised. On the contrary, I find that the provision is permissive in that it does not prevent other means of service of the demands. In other words, it does not displace other methods of actual service of demands for payment”.

18. It is conceded by the Management Company that the name of the Landlord in some of the demands is incorrectly given as [NAME].[COMPANY] rather than [COMPANY]. Mr [NAME] argues that the Respondents obligation to pay is suspended until the correct information is furnished. He relies on sections 47 and 48 of the Landlord and Tenant Act 1987. However, in [NAME] Management [COMPANY] v North [2015] UKUT 0091 (LC) at paragraph 56 the Deputy President held in relation to section 47:

“Alternatively, the only effect of the sanction, if it were to be applicable, would be to cause the charges not to be “due from the tenant to the landlord”. Since the charges were due to the Management Company the lessee’s obligation to pay them would be unaffected”.

Accordingly, Mr [NAME] submission on this point fails because the Respondents’ obligations are to pay service charges to the Management Company under clause 2 of Part 1 of Schedule 6 to the Lease. The 2015 Tribunal reached a different conclusion no doubt because the decision in [NAME], having been handed down by the Upper Tribunal on 19th March 2015 was not referred to in argument at the hearing before the FTT which took place 7th – 10th April 2015, albeit that the final Decision was not issued until October of that year. The decision in [NAME] is conclusive and we do not, therefore, have to consider the effect of reservice of demands in October 2019 by the Management Company at a time when it would appear that the freehold had been transferred by way of internal reorganisation to RMB102 [COMPANY] (transfer in July 2019 registered on 7th October 2019 – Title number LT49549).

19. Mr [NAME] disputes receipt of demands for both instalments in 2014 and 2015 and also the [NAME] (July) 2016 instalment. The 2014 and 2015 demands would have been sent by post whereas the July 2016 instalment would have been sent by email. Those demands are all “on account” payments and under clauses 3.1 and 3.1 of Part 1 of Schedule 5 of the Lease the requirement on the Management Company is to “give” an Interim Payment Certificate to the Tenant. In relation to 2014 and 2015 Mr [APPELLANT] denies receipt of any demands and further argues that as forfeiture of his Lease was being actively considered at that time, the Management Company would not have

8 issued any demands as to do so would be to waive the right to forfeiture. Mr [NAME] further invites the Tribunal to view with suspicion the copy demands served by the Management Company. There is a difference in style between the demands issued to Mr [NAME] and those issued to Mr [NAME] (contrast, for example AS 7 and AS 83). That difference can only be attributable, in his submission, to the documents having been produced at different times. Mr [NAME] also points out with some force that the copy of Summary of Rights and Obligations (AS 8) said to have been issued with the demand dated 3rd January 2013 refers to the FTT. That cannot possibly be correct as the FTT did not replace the LVT until 1st July 2013. In relation to the July 2016 Demand Mr [NAME] in his oral evidence to the Tribunal said that he had searched diligently but could find no email to him in July 2016. He relies on the concession at paragraph 11 of the undated Submissions on behalf of Management Company received on 31st October 2019 that:

“Due to the passage of time, the Applicant [Management Company] is unable to locate the covering email under which service charge demands for the period 1st July to 31st December 2016 were served on Mr [NAME]”.

That something went wrong at that time is evidenced by an email of 7th September 2016 sent to Mr [NAME] (AS 114). Mr [NAME] submits that this shows that the July 2016 demand was not served on Mr [NAME] either and that he (Mr [NAME]) had to take steps to request a copy.

20. The Management Company’s document retention policy is such that it cannot rely on the usual deemed service provisions which have been reproduced at clause 8.2 of the Lease. Instead Miss [NAME] relies on the fact that the disputed invoices were clearly raised as evidenced by the copies contained within Submissions of 31st October (see for example Apartment 117 – January 2014 (AS55), July 2014 (AS59), January 2015 (AS65), July 2015 (AS69) and July 2016 (AS74)). Miss [NAME] also relies on the concession made by Mr [NAME] in his oral evidence to the Tribunal that he did not raise the issue of none receipt until after the issue of these proceedings. Miss [NAME] invites the Tribunal to view that conduct with suspicion in view of the assiduity with which Mr [NAME] has conducted all other aspects of his dealings with the Management Company.

21. The Tribunal has considered the Witness Statement of [NAME] made on behalf of the Management Company, containing a signed statement of truth, dated 18th February 2020. Mr [NAME] joined [NAME] in early 2015. He cannot therefore give direct evidence in relation to the service of the disputed 2014 demands. However, the procedures he describes would have been adopted in previous years. It would appear that the demand is printed with Summary of Rights and Obligations on the reverse. The demands are sent out en masse with a covering “[NAME]” letter. All 179 letters are “printed at the touch of a button”. Letters and accompanying demands are then sent either by first class post or by email. Mr [NAME] confirms that Mr [NAME]

9 details are recorded on the [NAME] system and letters to him would have been amongst those system generated letters. From 2016 Mr [NAME] details were toggled to be sent by email and he would have received a “send to all” email. Mr [NAME] specifically confirms that no block was put on Mr [NAME] account. Mr [NAME] also confirms that he attended at the April 2015 Tribunal proceedings. It appears that [NAME] also raised “none receipt” as an issue before the 2015 Tribunal. [NAME]’s evidence is that on 7th April 2015 he generated copies of all demands to date and that on the following day, 8th April 2015 counsel for the Management Company personally served upon Mr [NAME] copies of all demands up to the end of 2014. In his Reply dated 21st February 2020 Mr [NAME] indicates that he only recalls reissued demands for the period 2006-2012 being handed to him (see paragraph 10 of Reply). Mr [NAME] submits (paragraph 26): “I invite the Tribunal to conclude that the First Applicant [the Management Company] intended to seek forfeiture and it was advised by [NAME] [its advisors at the 2015 Tribunal] not to issue any further demands at that time”. We find that submission to be misconceived because the right of re-entry (forfeiture) under clause 7.2 of the Lease is reserved to the Landlord and not to the Management Company.

22. We find that the Statement of [NAME] is “sufficient to tip the balance of probabilities” (see CHG Residents Company [COMPANY] v Hyslop [2020] UKUT 21 (LC) and that the disputed demands for 2014, 2015 and July 2016, accompanied by Summary of Rights and Obligations, have been sufficiently served on the Respondents for the purposes of clause 3 of Part 1 of Schedule 5 of the Lease.

Certificates

23. Clause 1.1 of Part 1 of Schedule 5 to the Lease gives the following definitions:

“Certificate – The certificate specifying the Tenant’s Share of the Expenses for an Accounting Period.

Interim Payment Certificate – The certificate specifying the Interim Payment payable for an Accounting Period”

Clause 2.1 further provides:

“The Certificate and the Interim Payment Certificate are to be prepared by the Management Company or (at its discretion) on its behalf by its [NAME] agent, accountant or surveyor.”

24. The Management Company relies on Budgets for years ending December 2013 – 2017 (AS 307 -311), Section 21 year end certificates 2013 – 2017 (AS 312-316) and year end service charge accounts (AS 317-365). All Budgets, with the exception of 2013, are marked as approved by the Management Company and are signed and dated. All

10 section 21 certificates contain a signed “Report of the Auditors to the Members”. The service charge accounts for 2013 contain a “Report of the Manager” signed by a Director on behalf of the Board of the Management Company. We find that for the purposes of clause 3.5.1 of Part 1 of Schedule 5 to the Lease that the signed “Report of the Manager” for 2013 cures any defect (i.e. the unsigned Budget) in the Interim Payment Certificate for that year. Service charge accounts 2014-2017 contain Report of the Directors, signed on behalf of the Management Company. In short, the Management Company’s case is that the Budget is the “Interim Payment Certificate” and the section 21 certificate is the “Certificate” required in all years in accordance with Part 1 of Schedule 5 of the Lease.

25. Mr [NAME] submits that the Budget is not an Interim Payment Certificate because it does not specify the “Interim Payment” namely “The Management Company’s estimate of the Tenant’s Share of the Expenses for an Accounting Period specified in the Interim Payment Certificate”. Similarly, neither the section 21 certificate nor the service charge accounts contain “A Statement of the amount of the Tenant’s Share of the Expenses” as required by clause 3.4.2. Put simply neither the Budget, the section 21 certificate nor the service charge accounts set out the amount that the amount to be paid by the individual Tenant. Mr [APPELLANT] also disputes service of the budgets, service charge accounts and the section 21 certificates.

26. The Management Company at paragraphs 52 and 57 of its Submissions received 31st October 2019 indicates that Budgets were served prior to the January “on account” service charge demand. The section 21 certificates were served together with the year end service charge accounts. The evidence as to service contained in the Management Company’s Submissions is augmented by the Witness Statement of [NAME], who at paragraphs 25 -28 gives further evidence as to service of Budgets for 2014- 2015.

27. We find on the balance of probabilities that the Budgets, section 21 year end certificates and service charge accounts contained at pages 307 – 365 were given and received in accordance with Part 1 of Schedule 5 to the Lease. In [NAME] v [COMPANY] ([COMPANY] [2017] EWCA Civ 1159 the Court of Appeal held that a demand and estimate could be served separately. By analogy we find that the Budget, section 21 certificate and service charge accounts when read together with the January and July “on account” service charge demands satisfy the requirements of the Lease in relation to “Certificate” and “Interim Payment Certificate”. We find that there is no requirement, as claimed by Mr [NAME], for there to be a covering letter from the Management Company “stating that it was serving a certificate in accordance with the lease”.

28. To the extent that Mr [NAME] is to be taken as arguing that failure to provide Certificate and Interim Payment Certificate means that nothing is payable, that submission fails. Proper compliance with the certification provisions set out in the Lease is not always a condition precedent to a [NAME]’s obligation to pay service

11 charges. In [NAME] v [NAME]/42/2006 it was held that the absence of a certificate did not have the effect of rendering nothing at all payable as service charges for the disputed years. The present Tribunal has reached “the best informed decision it can upon the material available to it”. Indeed Mr [NAME], who had failed to pay any service charges since 2013, belatedly made payments in October and November 2019 in the sums of £6643.86 for Apartment 94 and £2693.54 for Apartment 117. On that basis it is not open to him to argue that nothing at all is payable because of the alleged failings of the Management Company to comply with the service charge machinery set out in Part 1 of Schedule 5 of the Lease.

[NAME] and car parking expenditure

29. The Lease does not make any provision for the apportionment of Expenses between [NAME] and car parking expenditure. Neither “Services”, “Expenses” or “Tenant’s Share of Expenses” under the Lease make any distinction between [NAME] and car park expenses. However, it is common ground between both parties that there should be an apportionment. In any event the Management Company has some discretion under the Lease in that clause 1.1.22 defines “Tenant’s Share of the Expenses – A fair proportion of the Expenses as determined from time to time by the Management Company”. The Management Company argues that valet operative wages should be apportioned 1/24 to the [NAME] and 23/24 to car parking expenditure. The rationale is provided in a letter to [NAME] from the Management Company of 3rd July 2014 at AS686. It would appear that concerns had been raised that valet operatives whilst employed for the benefit of the 80 apartments which have the benefit of parking “have also been undertaking some sundry tasks for the benefit of the development as a whole”:

“These duties primarily involve a daily walk around of the communal areas of the development in order to ensure that the corridors and stairwells are clear of obstructions, the fire doors closed properly and the smoke vents are closed. Once a week a fire call point test is carried out which lasts for approx. 30 mins.

Together with other sundry tasks of reading electrical meters, reporting maintenance items and providing access for routine and emergency purposes etc it has been assessed that a total of 7 hours of operatives time per week is a fair proportion ….”

We take into account that the proposed apportionment was approved by Directors of the Management Company following a General Meeting on 29th April 2014 (AS 687 – 692). However, that approval was give before the Management Company had the benefit of considering the findings of the 2015 Tribunal.

30. On inspection we found (see paragraph 12 above):

12 “Valet parking is staffed 24 hours [NAME] day, seven days [NAME] week, 365 days a year. There is no caretaker at the Property. Instead one of the valet parking operatives closes the valet parking office from 10:30 to 11:15 and walks around the Property taking meter readings and checking for obstructions in the communal areas. The valet parking office also monitors the [NAME] panels and acts as an unofficial help desk for residents.”

As set out in our findings under the heading of “Management Fees” below (paragraphs 47-50) we find that [NAME] has no employees. As a consequence, we find that the valet operatives also act as de facto caretakers, receiving post and other deliveries and are in effect the first port of call for [NAME].

We find the submissions of Mr [NAME] at paragraphs 269 – 316 of his Submissions of 22nd November 2019 to be persuasive. He identifies the myriad tasks undertaken by the valet operatives and points out with force the inconsistent and unexplained apportionments applied by the Management Company.

We prefer the apportionments determined by the 2015 Tribunal (paragraphs 100 – 103 of the 2015 Decision):

• Valet operative wages and social security – 75% car park and 25% [NAME] • Telephone charges – 12.5% car park and 87.5% [NAME] • Miscellaneous car park expenses – 50% car park and 50% [NAME] • Light and heat – 15% car park and 85% [NAME].

Tenant’s Share of the Expenses

31. The parties have agreed the following percentage figures set out at AS681 -4:

• Apartment 53 – 0.449400 • Apartment 58 – 0.520690 plus 1.25 car parking • Apartment 60 – 0.446540 • Apartment 65 – 0.541590 plus 1.25 car parking • Apartment 94 – 0.600530 plus 1.25 car parking • Apartment 117 – 0.493460

[NAME]

32. Paragraph 6 of Schedule 7 to the Lease contains a Landlord’s obligation to the Tenant: “To provide such of the services as are set out in Part 2 of Schedule 4”.

Part 2 of Schedule 4 provides:

13 “1. Keeping the Building insured in the joint names of the Landlord and the Management Company for the full reinstatement costs (including demolition, shoring-up and site clearance and professional fees) against the Insured Risks with such company and through such agency as the Landlord decides provided the Building is to be deemed to be insured for reinstatement cost although the policy contains an excess provision if the Landlord considers it is in the general interest of the tenants of the Dwellings.

2. If the Building is damaged by any of the Insured Risks applying the money received under the [NAME] policy (other than money received for loss of rent and property owner’s public and third party liability) towards reinstatement provided that if such money is insufficient to meet the cost of reinstatement then the deficiency is to be treated as a further item of expense under this part of this schedule recoverable from the tenants of the Dwellings.

3. Keeping the [NAME] insured against the property owner’s public and third party liability and such other risks with such company and through such agencies as the Landlord decides in such amounts as the Landlord considers necessary in the general interest of the interest of the owners of the Dwellings.”

Clause 1.1.14 defines “Insured Risks – Fire, lightening, storm, flood, explosion, and any other risks which the Landlord or the Management Company may reasonably specify”.

33. “Expenses” as defined at clause 1.1.13 of the Lease includes monies expended by the Landlord to provide the Services. Part 1 of Schedule 4 sets out the Services to be provided by the Management Company (pursuant to “The Management Company’s obligations to the Landlord and the Tenant” set out in Schedule 8). Paragraph 10 of Part 1 of Schedule 4 provides that:

“For the avoidance of doubt this includes payment to the Landlord of the premiums paid by the Landlord in respect of the Services set out in Part 2 of this Schedule”.

In simple terms, the Landlord retains the [NAME] function under the Lease. [NAME] premiums are recoverable by the Management Company as part of the Tenant’s Share of Expenses. The Management Company in turn reimburses the Landlord. The Respondents do not dispute that arrangement.

Quite separately from the [NAME], amounts are payable for lift [NAME] and for vehicle movement [NAME] (in relation to the valet car parking service – which accordingly has been allocated to car parking expenditure) both of which are

14 payable to and effected by the Management Company. Those amounts are not disputed by the Respondents.

34. The Landlord was represented by Mr [RESPONDENT] of [RESPONDENT] who attended at the hearing on the morning of 10th September 2020 only. The Tribunal has considered [NAME] Applicants Statement of Case dated 21st February 2019, the Respondents’ Reply dated 20th June 2019 and the [NAME] Applicant’s Skeleton Argument dated 6th September 2019.

35. The Landlords [NAME] year runs from 25th March to the following 24th March. This differs from the Management Company’s “Accounting Period” which is “The period of twelve months ending on the last day of December …” (paragraph 1.1 of Part 1 of Schedule 5 to the Lease). The Landlord is only able to charge to the service charge account [NAME] costs which it has paid or has become liable to pay on the presentation of an invoice during the Accounting Period. This is consistent with the definition of “Expenses” at clause 1.1.13 of the Lease which refers to “monies actually expended” (see [COMPANY] v [COMPANY] [2103] EWHC 224 (Ch.) where it was held that the words “actually paid or incurred” mean when the obligation to pay actually arose). However, service charge accounts have been, perfectly properly prepared, on the usual accountancy basis of accruals and prepayments. As a matter of case management and to avoid further delay in sending this matter back to the Management Company for recalculation the Tribunal has treated the [NAME] premium attributable to the period from 25th March in a given year as being the premium payable for the whole of that Accounting Period e.g. premium 25th March 2013 to 24th March 2014 has been treated as the premium for the 2013 service charge year. We have done so because we are not, as Mr [NAME] would wish, charged with rewriting the service charge accounts. Instead we have to determine the amount that is reasonable and payable by him. As the 2015 Tribunal has determined the amounts payable 2007 -2012 and we are to determine amounts payable for 2013-2017 any prepayments and accruals should not make an appreciable difference to any of the parties to the present dispute.

36. The 2015 Tribunal found that commissions payable in relation to [NAME] premiums should be [COMPANY] to 15%. On that basis Mr [NAME] and Mr [NAME] have agreed the following the following premiums (figures adjusted to reflect commission of 15%) as payable and reasonable in amount:

[NAME] 14/15 (service charge year 2014) - £43968.76 [NAME] 15/16 (service charge year 2015) - £45256.82 [NAME] 16/17 (service charge year 2016) - £56962. 58 [NAME] 17/18 (service charge year 2017) - £57746.56

The only outstanding dispute remains in relation to [NAME] for the period 25th March 2013 to 24th March 2014 (service charge year 2013).

15

37. Paragraph 3.1 of the Landlord’s Statement of Case dated 21st February 2019 sets out the premiums paid to [NAME]:

2013/14 - £66,011.08 2014/15 - £43968.76 2015/16 - £45256.82 2016/17 - £59450.39 2017/18 - £61274.64

The premiums for 16/17 and 17/18 were based on commission of 19.6% and 21.3% respectively (see paragraph 4.1). Those premiums have been reduced to £56962.58 and £57746.56 by agreement between Mr [NAME] and Mr [NAME] based on commission of 15%. It can readily be seen why the Respondents challenge the premium of £66,011.08 for 2013/14 (service charge year 2013 for the purposes of this Decision) as that premium appears “out of line” with subsequent years.

The Landlord, at paragraph 3.2, explains why there was a significant reduction in 2014/15 (service charge year 2014):

“As a result of the application in 2013 culminating in the Tribunal’s decision dated 21st October 2015 the [NAME] Applicant invited [NAME] to review the level of the buildings [NAME] premium which result in the premium being significantly reduced for the period of [NAME] 25.03.2014 to 24.03.2015. The terrorism [NAME] premium was reduced from £12,120.79 for the previous period to £2,366.37 because [NAME] assessed the building as being in a low risk location.”

This begs the question – why was the premium so egregiously high in 2013/14?

38. Concern over the level of premiums of 2013 was also shared by the Management Company. There is a note in the service charge accounts for year ended 31st December 2913 (AS 319) that “the premiums charged for the current year are still under discussion”. The 2013 accounts were presented to a General Meeting of the Management Company on 29th April 2014 where it was noted (AS 690):

“[NAME] confirmed that after successfully arguing on behalf of the Company that the buildings were over insured by the freeholder in 2012 credits had been received. It was also confirmed that the 2013 premiums were also being queried which resulted in the interim payment having been made to the freeholder for this period. [NAME] was also pleased to confirm that the [NAME] premiums had significantly dropped for 2014 resulting in a saving of approximately £26,500 from that budgeted within the service charge – this would again be credited back to members against their next service charge bill”

16

The evidence given by Mr [NAME], Director of the Management Company, at the hearing was one of general dissatisfaction with the [NAME] arrangements put in place by [NAME] when they acquired the freehold in 2011. A particularly glaring example is the recommendation of an increase in Declared Value to £42 million with effect from a mid term adjustment in October 2012. The Management Company objected on the basis that the square footage of the site had been incorrectly calculated and as a result that figure was revised downwards to £28.4 million. The original invoice for [NAME] premiums was an eyewatering £97,616.70 (see invoice at page 9 of [NAME] Applicant’s Statement of Case). Following the Management Company’s protest, a credit note was issued in September 2013, covering both 12/13 and 13/14 in the sum of £46,592.70 (at page 10 of [NAME] Applicant’s Statement of Case). Deducting the 13/14 credit of £31605.62 from £97616.70 gives the revised premium of £66,011.08.

39. [NAME] for service charge year 2012 is dealt with at paragraphs 161-170 of the 2015 Tribunal Decision. There appears to be a typographical error at paragraph 169 – [NAME] should be £55180.22 as appears in the table at paragraph 178 which together with lift [NAME] of £1176 totals £56356.64.

Accordingly, the 2015 Tribunal determined [NAME] for 2012 at £55180.22. On that basis the premium of £66,011.08 f0r 2013 is £10,830 more than the previous year (2012) and £22,043 more than the subsequent year (2014). That discrepancy calls for an answer from the Landlord.

40. The Landlord’s case is set out more fully in [NAME] Applicant’s Skeleton Argument dated 6th September 2019 [N.B. paragraph 2 is incorrect – the 2012 figure is £55, 180.22]. The Landlord argues that that the premium for 13/14 was “on all fours” with the 2015 Tribunal’s determination for 2012 save that the Declared Value increased from £24.5 million to £28.4 million. The biggest increase in 2013 related to terrorism [NAME] from which increased from £6867.20 to £12,120.79 based on [NAME]’ decision that the Property was in “a high risk zone”. However, whilst the Landlord may be able to claim that the 2013/14 premium is “on all fours” with the 2015 Tribunal’s determination for 2012 it does not explain why [NAME] was available £22,043 cheaper in 2014 and £20,755 cheaper in 2015.

41. In 2012 [NAME] assessed the Property as being in a high risk zone. However, with effect from 25th March 2014 [NAME] reassessed the Property as being in a low risk location (resulting in lower premiums for 2014). As can be seen from the table at paragraph 2 of the [NAME] Applicants’ Skeleton Argument the rate applied to determine buildings [NAME] reduced from 0.0018925 to 0.0014322 and the rate for terrorism [NAME] from 0.0004256 to 0.0000814. As a result, [NAME] fell by £22,0143. Mr [NAME] for [NAME], whilst accepting that the reassessment process resulted in lower premiums, argues that “there is no evidence that a lower premium would have been available” in 2013 (paragraph 14 of his Skeleton Argument). The Tribunal disagrees. The Landlord has wholly failed to show why its chosen [NAME]

17 misdescribed the Property as being in a high risk zone. No locational evidence has been produced to suggest that description was ever correct. Rather it appears to be one of a number of errors made by brokers and [NAME] the most egregious of which was the increase in the Declared Value to £42 million (subsequently revised to £28.4 million – see paragraph 6 of [NAME] Applicant’s Skeleton Argument).

42. We have regard to the guidance in [NAME] [COMPANY] v Nicholson [2017] UKUT 0382 (LC). At paragraph 46 HHJ Bridge quotes with approval a passage from [NAME] v Hounslow LBC [2017] EWCA Civ 45: “In my judgement, therefore, whether costs have been reasonably incurred is not simply a question of process: it is also a question of outcome”. Paragraph 48 of [NAME] makes it clear that: “it will not be necessary for the landlord to show that the [NAME] premium sought to be recovered from the tenant is the lowest that can be obtained in the market.” However, HHJ Bridge continued at paragraph 49:

“It is however necessary for the landlord to satisfy the Tribunal that invocation of a block policy has not resulted in a substantially higher premium that has been passed on to tenants of a particular building without any significant compensating advantages to them.”

Unlike HHJ Bridge we are not faced here with “a mystery” (see paragraph 67 of [NAME]) in considering the substantial contrast between the premium for 2013 as against the premia for 2012 and 2014. The Landlord receives a significant commission from its placing and arranging of [NAME] and has very considerable delegated authority from its [NAME] (see paragraph 4 of [NAME] Applicant’s Statement of Case). The egregious premium for 2013 can be readily explained by the Landlord failing to ensure that brokers and [NAME] were fully aware of the correct zoning of the Property and the rate to be applied to both buildings [NAME] and terrorism [NAME]. The Landlord failed to do so (as it also failed in relation to the £42 million Declared Value) and has therefore failed to satisfy the Tribunal that the amounts sought to be charged to the [NAME] were “reasonably incurred”.

43. The Respondent’s in their Reply of 20th June 2019 at paragraphs 13 and 21 invite the Tribunal to use the premium from the following year in determining the amount reasonably incurred for 2013. This result in a figure of £41,000 plus £2,300 for terrorism [NAME] making a total of £43,300. Whilst the Tribunal broadly agrees, there can be no justification for a reduction of £668.78. The Tribunal, therefore, determines that the reasonable amount payable for [NAME] for service charge year 2013 to be the same as that agreed between the parties for the following service charge year 2014 namely £43,968.76.

18 Excess

44. Items described as “Excess” appear in a number of years. Mr [NAME] ([NAME]) explained that when a [NAME] made a claim on the [NAME] for damage to their Apartment loss adjusters would appoint [NAME] to carry out the repairs. [NAME] would accordingly be paid by the [NAME] less any excess. As there was at all times, 2013- 2017, an excess on the policy [NAME], rather than recover the excess from the [NAME] who had made the claim, instead raised an invoice for the amount of the excess and put it through the service charge accounts under the heading of [NAME]. [NAME] for the Management Company argues that [NAME] excesses are chargeable as Services under paragraph 10 of Part 1 to Schedule 4 of the Lease. The Tribunal disagrees. Paragraph 10 covers taxes and like outgoings in relation to the Communal Areas. It does not cover [NAME] excesses.

45. The repairing obligations of the Management Company relate to repair Structural and External Parts of the Building only (see paragraph 1 of Part 1 of Schedule 4). Similarly, decoration relates to the exterior of the Building (paragraph 2 of Part 1 of Schedule 4) and not the interior of an Apartment. The position is, of course, different in relation to works to the exterior of the Building (as opposed to repairs to the interior of lessee’s Apartments) which are the responsibility of the Management Company.

46. However, clauses 1 and 2 of Part 2 of Schedule 4 (Landlord’s obligation to the Tenant under clause 6 of Schedule 7) provide:

“1. Keeping the Building insured in the joint names of the Landlord and the Management Company for the full reinstatement costs (including demolition, shoring-up and site clearance and professional fees) against the Insured Risks with such company and through such agency as the Landlord decides provided the Building is to be deemed to be insured for reinstatement cost although the policy contains an excess provision if the Landlord considers it is in the general interest of the tenants of the Dwellings.

“2. If the Building is damaged by any of the Insured Risks applying the money received under the [NAME] policy (other than money received for loss of rent and property owner’s public and third party liability) towards reinstatement provided that if such money is insufficient to meet the cost of reinstatement then the deficiency is to be treated as a further item of expense under this part of this schedule recoverable from the tenants of the Dwellings.”

Accordingly, the Landlord is permitted under the Lease to take out a policy which contains an excess provision. To do so is entirely standard practice and results in a lower premium payable by the Tenant and is, we find, in the general interest of the Tenants. Furthermore any “deficiency” i.e. an excess, is specifically stated as being recoverable from the Tenants as an Expense.

19

It is also suggested by the learned authors of Tanfield Chambers: Service Charges and Management (4th Edition at 6-11) that:

“It may be arguable that, as an excess is a usual aspect of [NAME] cover and as the insured self-insures for the excess, this is part of the “cost” of [NAME]” (see Lord Napier and [NAME] v [NAME] and v RF [COMPANY] [1993] AC 713).

Accordingly, we find that the reasonable costs of [NAME] in relation to “Excess” are recoverable.

Management Fees

47. [NAME] were appointed as manging agents in 2008. Mr [NAME] on behalf of the Management Company told the Tribunal that the fee charged by [NAME] was not based on a fee per apartment and that instead a global fee was agreed “in accordance with market norms”. [NAME] resigned as [NAME] agents at the end of July 2019. [NAME] were replaced by [NAME] who are RICS and ARMA regulated. [NAME]’s fee for 2019 is £180 plus VAT per apartment. Mr [NAME] told us that [NAME] were part of the Property Redress Scheme from 2015/16 and that he personally was an IRPM member for the past 18 months. Apart from those two matters [NAME] were wholly unregulated and did not belong to any trade body.

48. There was some considerable uncertainty on the part of the First Applicant as to Mr [APPELLANT] employment status. Mr [APPELLANT] corrected his original evidence and told the Tribunal that [NAME] paid his pension and holiday pay only. In relation to remuneration he submitted an invoice for the work he had done (this invoice was generated by [NAME] on his behalf). In addition to Mr [NAME] there were 3 or 4 others who carried out repairs who were drafted in from [NAME] and were not [NAME] employees. Administration and accounts was carried out by [NAME] at its offices in Aylesbury.

49. [NAME], it would appear therefore, has no employees. It is unregulated. The [NAME] function is dealt with by the Landlord. The valet operatives act as de facto caretakers, carrying out fire tests, receiving post and other deliveries and are in effect the first port of call for complaints. The development is relatively new and little by way of major works is yet to be required. Mr [NAME] makes no complaints about failures to look after the Property by [NAME]. However, he vigorously complains about the way in which service charge accounts have been kept and failures to comply with RICS Code.

50. Clearly, some work in relation to management has been done by [NAME]. However, we agree with Mr [NAME] that the standard of management by [NAME] has fallen below that of regulated [NAME] agents. We find that the sum of £100 plus VAT per apartment (total £21480) is reasonable.

20

Fire Risk Assessment

51. In its replies to the Scott Schedule the Management Company submits that “matters of health and safety are paramount”. The Tribunal entirely agrees. The Management Company further submits that Mr [NAME] “is more than adequately placed to conduct the FRA”. We were told by Miss [NAME] that Mr [NAME] prepared the Fire Risk Assessment (“FRA”) himself and that his qualifications are “school of life”. The Tribunal was told that a specialist company prepared the FRA until 2010. In that year the Fire Brigade described the FRA as “too tick box” and “too generic”. From 2011 onwards, Mr [NAME] decided to carry out the FRA himself. However, after the Grenfell Tower tragedy he had a “wake up call” and decided that he did not want the responsibility of preparing the FRA any longer.

52. There is an evacuation rather than a stay put policy at the Property. An FRA is carried out annually. There are fire drills twice a year. Advice is taken from the Fire Service as necessary. The valet operatives liaise with the Fire Service if there is an activation of the [NAME]. The Property contains 179 Apartments over five separate blocks. The blocks are between four and eight storeys high. Fire safety is of paramount importance and FRA’s must be carried out by specialist contractors. The use of those trained in the “school of life” is wholly unacceptable. The Tribunal disagrees that Mr [NAME] “is more than adequately placed to conduct the FRA” and disallows this head of claim by [NAME] in its entirety.

Accountancy

53. Accounts have been prepared by [COMPANY] who are Chartered Certified Accountants. The Management Company is not profit making and has no liability for UK corporation tax. Mr [NAME] relies on an alternative quotation in the sum of £260. We find that to be wholly unrealistic for the preparation of accounts for a Property consisting of 179 Apartments.

54. In 2013 [NAME] fees (inclusive of VAT) were £2800 (page 913), in 2014 - £2760 (page 1331), in 2015 - £2000 (page 1678 – but accounts show only £1500), in 2016 - £2100 (page 1994 – but accounts only show £1800) and in 2017 - £2160 (page 2289 – but accounts only show £2000). This variation is unexplainable as plainly, it would appear, the same amount of work has been carried out in [NAME] year. We allow £2000 (inclusive of VAT) for all years.

QLTA

55. It is conceded by the Management Company that it entered into a three year QLTA with [NAME] for the supply of energy. No consultation has been carried out. Accordingly, in some years the relevant contribution required under the terms of the Lease for [NAME]

21 Apartment is [COMPANY] to £100. We have allowed credits against Tenant’s Share of the Expenses in those years where the contribution in relation to an Apartment would otherwise exceed £100.

Reserve Fund

56. Expenses as defined at 1.1.13 includes any “Reserve in respect of the Services”. Reserve is defined at 1.1.18 as “Anticipated future expenditure which the Management Company decides it would be prudent to collect on account of its obligations in this Lease”. At the hearing Mr [NAME] confirmed that he had “no problem in principle” with the concept of a Reserve Fund.

57. The service charge accounts distinguish between “The Reserve Fund” which is for capital maintenance and “The [NAME]” which is for general day to day running costs. The Business Review included in the service charge accounts for the year ended 31st December 2013 (AS 319) gives further details:

“The Reserve Fund is intended to accumulate the funds required for long term capital maintenance items such as roof repairs, carpets and building decorations. The funds are not used for day to day maintenance or running expenses. The [NAME] year includes an expense item for this fund so that [NAME] can see that funds are being accumulated for these long term maintenance projects.”

The [NAME] is the cumulative surpluses arising since the formation of the company from the service charges received less the expenditure incurred during the same period.”

In 2013 the reserve fund was split into Reserve Fund for capital maintenance (£34,777) and the balance on the [NAME] of £98,077 as at 31st December 2012. The Directors decided to transfer the net expenditure for 2013 (i.e. the shortfall of income over expenditure) of £84,551 to the [NAME] leaving a balance of £13,526 as at 31st December 2013. Clause 3.5. of Part 1 of Schedule 5 to the Lease makes provision for circumstances in which the amount paid “on account” (under an “Interim Payment Certificate”) exceeds the amount actually payable once final service charge accounts (the “Certificate”) have been prepared:

“3.5 Immediately the Tenant receives the Certificate:

22

We find that in accumulating cumulative service charge excesses in the [NAME] pending the transfer of net expenditure as happened in 2013 is permitted by clause 3.5.2.2. In acting as they did in 2013 the Directors of the Management Company have properly given effect to the requirement of crediting excesses to the Tenant’s next service charge payment. Put concisely had the shortfall not been paid from the “[NAME]” the Management Company would have had to “demand a levy from [NAME] …. which levy would have had to be paid by the [NAME] before 31st December 2013” (see AS 319). Either the Directors sanctioned payment from the [NAME] or demanded a further payment. The net effect as far as the Respondents are concerned is exactly the same. What the Lease does not require is for any excess to be returned to [NAME]; merely a credit given against future payments.

Accordingly, the Tribunal approves the policy of the Management Company of allocating any surplus service charge contributions to the [NAME] to be applied against a shortfall in future years in accordance with Part 1 of Schedule 5 to the Lease.

58. In relation to the Reserve Fund Mr [NAME] told the Tribunal that the Management Company does not have a formal reserves policy but puts aside monies for anticipated major works – single ply roof membrane (30 year life expectancy), 5 lifts, external decoration to timber windows, listed building façade with terracotta detailing, water pump in underground car park, communal areas carpeting and communal areas decoration.

59. The development was completed in 2006 and we find that the sums transferred to reserve fund in all service charge years in dispute to be entirely reasonable in anticipation of future major expenditure.

Legal and Professional Fees

60. In 2014/15 the Management Company was involved in substantial litigation with Mr [NAME] and other [NAME]. The Management Company commenced proceedings in the County Court to recover arrears of service charges. Those proceedings were transferred to the Tribunal. Mr [NAME] and others had in the meantime applied to the Tribunal for Appointment of Manager under section 24 of the Landlord and Tenant Act 1987. Both proceedings were heard together over 7 days (3-5th December 2014 and

23 7th-10th April 2015). The Management Company was represented by [NAME].

61. Mr [COUNSEL] told the Tribunal that the Management Company had incurred costs of approximately £37,000. Mr [NAME] and 13 others were granted an Order under section 20C of the 1985 limiting Landlord’s costs to £10,000 including VAT in relation to the service charge proceedings. The Appointment of Manager application was refused and no section 20C Order was made in respect of that application. Mr [NAME] told the Tribunal told the Tribunal that the Management Company had decided in early 2016, on the advice of counsel, to deal with costs as follows:

a) £10,000 costs in relation to service charge proceedings to be divided between and charged as contractual costs to Mr [NAME] and the other 13 Respondents. This sum not to be charged to the service charge account but as an administration charge payable personally by the Respondents to the service charge proceedings. b) £13,000 costs in relation to the Appointment of Manager to be divided between Mr [NAME] and the other Applicants. This sum not to be charged to the service charge account but as an administration charge payable personally by the Applicants in the appointment of manager proceedings. c) The balance of £14,000 to be charged to the service charge account. However, Mr [NAME] confirmed to the Tribunal (and Miss [NAME] took specific instructions from him on this point) that these service charge costs were not to be charged to Mr [NAME] through his service charge payments. (The Management Company it would appear is content to recover against Mr [NAME] by way of contractual costs). However, in relation to Mr [NAME] that concession does not apply as he does not have the benefit of a section 20C Order and he is, therefore liable to pay his share of the £14,000.

62. The position in relation to the service charge costs is set out slightly differently in the service charge accounts:

2014 (AS328) – “The Company has incurred legal fees of £15,412 to date in respect of the First-tier Tribunal case brought against the company by Mr [NAME] and others. The costs have been expensed against service charges received pending a determination by the Court of the allocation of these costs”

2015 (AS337) – “The Company incurred legal fees of £15,743 during the year in respect of the First Tier Tribunal case brought against the company by Mr [NAME] and others. The costs have been expensed against service charges received. [ADDRESS] has determined that £10,000 in total of the legal expenses can be recovered from the ‘Respondents’ in the service charges section of the Hearing. The legal costs in respect of the manager application will be fully recovered from the applicants.”

24

2016 (AS350) – “The company also recovered legal fees for the amount of £10,000 during the year in respect of the First Tier Tribunal case brought against the company by Mr [NAME] and others …”

63. The costs of the 2015 Tribunal were paid by the Management Company to its then solicitors PDC over three service charge years 2014-2016. PDC invoices totalled £12853.08 in service charge year 2014, £13756.94 in 2015 and £8172.50 in 2016. Details of those invoices are set out in the Scott Schedule. The total of those invoices is £34782.52 (inclusive of VAT) which is slightly less than Mr [NAME] approximate figure of £37,000. The Tribunal also notes the discrepancy between the invoices in the Bundle (£34782) and the legal fees recorded in the accounts set out in paragraph 62 above which total £31,155.

64. Clearly there is some inconsistency in the Management Company’s approach. However, we prefer the oral evidence given by Mr [NAME]. On the basis of his evidence £10,000 in relation to service charge proceedings and £13,000 in relation to the AOM proceedings were dealt with as contractual costs and should not appear within the service charge accounts. Mr [NAME] is rightly concerned that he has the benefit of a section 20C Order in relation to the balance that has been put through the service charge accounts. However, the effect of Mr [NAME] evidence is that the balance is not payable by Mr [NAME] an any event. As far as Mr [NAME] is concerned he does not have the benefit of either a section 20C Order from the 2015 Tribunal or the Management Company’s arrangement. We find that in relation to Mr [NAME] the balance is reasonable and payable.

65. For simplicity we have “stripped out” £10,000 in 2014 as attributable to paragraph 61a) above being the contractual costs charged as administration charges against Mr [NAME] and the other Respondents in the service charge proceedings. The balance of £2853.08 has been charged to the service charge account in accordance with paragraph 61c) above but, following the Management Company’s decision on costs, does not form part of the service charge payments due from Mr [NAME]. For this reason, the amounts payable by Mr [NAME] and Mr [NAME] differ.

66. In service charge year 2015 we have “stripped out” £13000 as attributable to the AOM proceedings and which has been charged as an administration charge against Mr [NAME] and the other applicants in accordance with paragraph 61b) above. The balance of £756.94 has been charged to the service charge account but not to Mr [NAME] in accordance with paragraph 61c). Again, for that reason the sums payable by Mr [NAME] and Mr [NAME] differ.

67. In service charge year 2016 PDC invoices total £8172.50. As we have already given effect to paragraphs 61 a) and b) no further sums fall to be stripped out. The whole of that sum falls to the service charge but is not payable by Mr [NAME] under paragraph

25 61c). Accordingly, Mr [NAME] (but not Mr [NAME]) is entitled to a credit of his share of £8172.50 which on the basis of the Management Company’s decision in relation to the 2015 Tribunal costs is not payable by him. Again, the sums payable by Mr [NAME] and Mr [NAME] differ.

Applications under Paragraph 5A, Section 20C and Rule 13

68. This is a dispiriting case. The 2015 Tribunal heard evidence and submissions over 7 days. On 21st October 2015 the Tribunal issued its determination in relation to service charge years 2007-2012. The written Decision was impeccably reasoned and ran to 81 pages. It was not appealed. It would appear either that neither party has read that Decision or having done so has chosen to ignore many of its findings.

69. Although we have not expressed ourselves in such trenchant terms as the 2015 Tribunal we have reached substantially the same conclusions. Much of the work undertaken by [NAME] was either not reasonably incurred or of a greater amount than is reasonable. The Landlord has conceded that it has continued to receive [NAME] commissions in excess of the 15% determined by the 2015 Tribunal.

70. The Tribunal understands why Mr [NAME] has challenged the [NAME] charges and [NAME] commission. However, at paragraph 122 the 2015 Tribunal observed:

“The Tribunal simply does not have the time or the resources to conduct the forensic investigation Mr [NAME] requests. In any case, as the Tribunal repeatedly emphasised to Mr [NAME] during the Hearing, the Tribunal has no jurisdiction to conduct an account between the parties”

Further at paragraph 184 the 2015 Tribunal said:

“The Tribunal considers that Mr [NAME] approach to financial accounting has been over zealous, particularly with regard to the electricity accounts, but also in general, and that this approach lengthened the Hearing to an unnecessary extent.”

71. We entirely agree. It would appear that Mr [NAME] too has failed to read and learn the lessons of the October 2015 Decision. As a result of his “over zealous” approach and the complete failure by the Management Company to act on the criticisms of [NAME] made by the 2015 Tribunal, the present Tribunal has spent 4 days considering this further application. The Management Company has incurred costs of £34,296 with anticipated future costs of £7,650 totalling £41,946 inclusive of VAT. Mr [NAME] in his Rule 13 Schedule claims to have spent over 650 hours on this case. Neither party appears to have considered that the costs and time spent far exceed any financial benefit to either of them. Had both parties read and acted upon the Decision of the

26 2015 Tribunal time spent and costs incurred would have been very significantly reduced.

72. However, the decisive factor here is that Mr [NAME] has not paid any service charges since 2013. On inspection we found the communal areas and the exterior of the buildings were in good condition and well maintained. Although vigorously disputing their level of charging Mr [NAME] makes no complaints about failures by [NAME] to properly maintain the Property. Under those circumstances Mr [NAME] failure to pay any service charges since 2013 (other than payments belatedly made in October and November 2019 in the sums of £6643.86 for Apartment 94 and £2693.54 for Apartment 117) must weigh heavily against him. Faced with arrears going back to 2013 the Management Company had no option but to commence proceedings.

73. We express our concern at the level of costs incurred by the Management Company which are projected to reach nearly £42,000 (inclusive of VAT). Those costs are far in excess of the estimate of “likely to exceed £25,000” given at paragraph 71.6 of the Applicant’s Submissions received on 31st October 2019. The costs of the present proceedings are substantially higher than the £34,782.52 (inclusive of VAT) incurred by previous solicitors and counsel for what was a 7 day (rather than 4 day) hearing with the added complication of a disputed Appointment of Manager application. Of course, as Miss [NAME] rightly reminds us, the Management Company seeks its costs under a contractual indemnity. Nevertheless, having regard to [NAME]’s own estimate and benchmarking against costs before the 2015 Tribunal we find that costs in relation to the present proceedings, even allowing for the additional 4th day requested by Mr [NAME], should not have exceeded £25,000 inclusive of VAT.

74. We deal first of all with the application by the Respondents for an Order under section 20C of the 1985 Act. At page AS580 Miss [NAME] sets out the budgeted and balancing payments 2013-2017 which were outstanding at the date of commencement of these proceedings. The total outstanding for Apartments 94 and 117 owed by Mr [NAME] was £19313.24. It is accepted by the Management Company that Mr [NAME] has not been in arrears and in any event, he applied to join rather than proceedings being commenced against him. The total amount that we have determined to be payable in relation to Apartments 94 and 117 is £14229. Based on Miss [NAME] own estimate and benchmarking against costs incurred in 2015 we find that the Management Company’s legal costs should not exceed £25,000 inclusive of VAT. The Management company has recovered approximately 75% of the sums claimed. We therefore find that it is just and equitable to make a section 20C Order limiting costs recoverable through the service charge to £18750 (being 75% of £25000). That sum is inclusive of VAT

75. The Respondents also apply for an Order under Paragraph 5A of Schedule 11 to the 2002 Act. However, there is a difficulty here very similar to that encountered in

27 [NAME]. Paragraph 5A is concerned with litigation costs which are defined at paragraph 5A(3)(a):

“Litigation costs” means costs incurred, or to be incurred, by the landlord in connection with proceedings… [Tribunal emphasis]

Section 30 of the 1985 Act defines “landlord” as including any person who has a right to enforce payment of a service charge. That assists in relation to the Section 20C application under the 1985 Act. However, that wider definition has not been adopted by the 2002 Act, save in relation to a statutory tenant (paragraph 6(3) of Schedule 11 of the 2002 Act and section 37(a) of the 1985 Act). Under those circumstances we do not have any jurisdiction to make a Paragraph 5A Order against the Management Company.

[The Respondents are not, however, precluded from applying to the Tribunal for a determination as to the reasonableness of administration charges under section 1 of Schedule 11 of the 2002 should they dispute any demand for legal costs made by the Management Company as those provisions apply to amounts payable “directly or indirectly”]

76. The Landlord in [NAME] Applicant’s Reply dated 4th December 2019 indicates that it seeks to recover costs in relation attendance at the hearing on 10th September 2019 in the sum of £1650 plus VAT. The Landlord relies on breach by the Respondents of their obligations to pay service charges to the Management Company. There is no direct covenant to pay service charges between the Landlord and the Respondents. Our findings are that notwithstanding the 2015 Tribunal’s decision the Landlord has continued to receive [NAME] commissions in excess of 15%. In addition, the Landlord has been unsuccessful in persuading the Tribunal to find that the egregious 2013 [NAME] premium was reasonable. Under those circumstances it is just and equitable that litigation costs incurred or to be incurred by the Landlord be extinguished.

77. Mr [RESPONDENT] seeks an Order under Rule 13 of the Tribunal Procedure (First-tier Tribunal) ([NAME]) Rules 2103. His claim is for 650.7 hours totalling £78,084 together with a further £2,880 to be incurred. These proceedings were commenced because Mr [NAME] has paid absolutely nothing towards service charges 2013-2017. The Management Company had no choice but to apply to the Tribunal. It has acted perfectly reasonably in doing so. Mr [NAME] has been to use the words of the 2015 Tribunal “over zealous”. He has taken every point, good or bad. Whilst he has some very strong arguments in relation to [NAME] and the level of [NAME] premiums he has taken up an inordinate amount of time in arguments over items of expenditure which, even in successful, would have made, at most, a difference of few pounds either way. The Management Company and the Landlord have acted perfectly reasonably in their conduct of these proceedings. As Mr [NAME] has taken every possible point the

28 Applicants have had to provide a response to every point raised incurring significant costs in the process and taking up a disproportionate amount of Tribunal time. The application under Rule 13 is refused.

Decision

78. The amount of service charges payable by the Respondents to the First Applicant Management Company in respect of [NAME] of the Apartments owned by them for service charge year ended 31st December 2013 is:

Apartment 94 (Mr [NAME]) - £1455 Apartment 117 (Mr [NAME]) - £561 Apartment 53 (Mr [NAME]) - £511 Apartment 58 ([NAME]) - £1365 Apartment 60 ([NAME]) - £507 Apartment 65 ([NAME]) -£1388

79. The amount of service charges payable by the Respondents to the First Applicant Management Company in respect of [NAME] of the Apartments owned by them for service charge year ended 31st December 2014 is:

Apartment 94 (Mr [NAME]) - £ 1917 Apartment 117 (Mr [NAME]) - £842 Apartment 53 (Mr [NAME]) - £780 Apartment 58 (Mr [NAME]) - £1796 Apartment 60 (Mr [NAME]) - £775 Apartment 65 (Mr [NAME]) -£1832

80. The amount of service charges payable by the Respondents to the First Applicant Management Company in respect of [NAME] of the Apartments owned by them for service charge year ended 31st December 2015 is:

Apartment 94 (Mr [NAME]) - £1985 Apartment 117 (Mr [NAME]) - £905 Apartment 53 (Mr [NAME]) - £828 Apartment 58 (Mr [NAME]) - £1854 Apartment 60 (Mr [NAME]) - £822 Apartment 65 ([NAME]) -£1890

81. The amount of service charges payable by the Respondents to the First Applicant Management Company in respect of [NAME] of the Apartments owned by them for service charge year ended 31st December 2016 is:

Apartment 94 (Mr [NAME]) - £2112

29 Apartment 117 (Mr [NAME]) - £1023 Apartment 53 (Mr [NAME]) - £968 Apartment 58 (Mr [NAME]) - £ 2001 Apartment 60 ([NAME]) - £962 Apartment 65 ([NAME]) -£2043

82. The amount of service charges payable by the Respondents to the First Applicant Management Company in respect of [NAME] of the Apartments owned by them for service charge year ended 31st December 2017 is:

Apartment 94 (Mr [NAME]) - £2291 Apartment 117 (Mr [NAME]) - £1138 Apartment 53 (Mr [NAME]) - £1036 Apartment 58 (Mr [NAME]) - £2111 Apartment 60 (Mr [NAME]) - £1030 Apartment 65 (Mr [NAME]) -£2159

83. Costs incurred, or to be incurred, by the First Applicant Management Company and the [NAME] in connection with these proceedings before the First- tier Tribunal in aggregate and in excess of £18750 (inclusive of VAT) are not be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the First and [NAME] Respondents.

84. The liability of both the First and the [NAME] Respondents to pay an administration charge in respect of the [NAME]’s litigation costs incurred, or to be incurred, in connection with these proceedings before the First-tier Tribunal is extinguished.

D Jackson Judge of the First-tier Tribunal

A party may appeal this Order to the Upper Tribunal (Lands Chamber) but must first apply to the First-tier Tribunal for permission. Any application for permission must be in writing, stating grounds relied upon, and be received by the First-tier Tribunal no later than 28 days after the Tribunal sends its written reasons for the Decision to the party seeking permission.

Scott Schedule Disputed service charges year ended 31 December 2013 Case reference BIR/OOFN/LIS/2018/0071 [NAME], Leicester [POSTCODE]

Item Cost Applicant's Comments Respondent Respondent's Comments Applicant’s Comments Leave Blank for the Tribunal General comments abbreviations - [NAME] = the 1st applicant, [NAME] = [APPELLANT] references are to the new bundle of documents unless otherwise stated [NAME] has failed to comply with the lease [NAME] has failed to charge reasonable sums [NAME] has produced bogus documents, its credibility is questioned The service charge accounts produced by [NAME] are inadequate, as a minimum requirement they should identify the charges payable by the different groups of [NAME], they are drawn up in a manner which is inconsistent from year to year and inconsistent with the budgets, the cost headings are inappropriate. Changes in accounting policies have not been disclosed nor explained. The accounts do not enable comparison of expenditure from one year to another or with the budget. no auditors or accountants report has been supplied despite the budget providing for the cost of an audit

The information supplied by [NAME] is unreliable.

No actual nominal ledger accounting records have been produced by [NAME], just some working papers and a selection of invoices, which may have been cancelled or amended. Credit notes have been omitted, accruals have not been reversed, prepayments have not been included. It appears that [NAME] has been highly selective when presenting information, meaningless documents have been produced whilst meaningful documents have been omitted

Bank statements have not been produced, there is little evidence of actual payments

There are a large number of errors all of which fall in [NAME]'s favour, statistically the likelihood of that occuring by chance is negligible. With the [COMPANY] information available, it is highly likely that we are looking at the tip of an iceberg and there are many more errors which we have been unable to identify. There appears to be a lack of authorisation of service charge expenditure and a failure to reconcile suppliers accounts. The respondents ask [NAME] to correct the errors so that the parties do not need to take up the time of the Tribunal. [NAME] is not entitled to recover more than it has expended nor amounts exceeding a reasonable sum. [NAME] has disregarded the previous Tribunal decision, the Tribunal went to great length over a period of 7 days to explain the areas of overcharging to [NAME] which has ignored those comments and has continued to overcharge [NAME] refused to allow inspection of documents on several occasions which would have enabled the parties to narrow down the issues for the Tribunal to consider [NAME] has failed to be transparent, it has failed to disclose transactions with [COMPANY] and associated contractors and persons [NAME] has failed to disclose all costs incurred relating to the previous Tribunal case General comments regarding this year only

[NAME] charged [NAME] separately contrary to the terms of the lease, it was incorrect because it had already charged [NAME] within the service charge accounts, the [NAME] spanned 3 separate service charge years. [NAME] has failed to account properly for the charge.

[NAME] charged some of the respondents part of the costs for this year on 18 July 2018 which falls foul of the 18 month rule see p135 and p252 old bundle

[NAME] did not apply the correct percentages when charging the budget in 2013

[NAME] starts the statements of account with a debt brought forward which it has not explained and which is not possible following the previous Tribunal decision. The only balance brought forward should be all the payments made resulting in a substantial credit balance. [NAME] has failed to reverse all the administration charges in accordance with the previous Tribunal decision.

[NAME] has credited £200.00 on 1 June 2013 on the statement page 80 old bundle but it has failed to supply a credit note. It must relate to the balance brought forward and it has been incorrectly allocated.

The service charge accounts for 2013 were not produced to some [NAME] at the time and they were not produced to the previous Tribunal despite the fact that they restated figures which were relevant to the hearing.

Mr [NAME] was the sole director of [NAME] throughout 2013. At the time, he was an officer of [COMPANY]. He was appointed by the developer [COMPANY], which was also part of the [COMPANY]. [NAME] is part of the same Group. He has never been appointed by the [NAME] of [NAME]. He has never disclosed the conflicts of interest.

[NAME] has failed to disclose details of the actual car park expenditure although it must possess that information otherwise it would be unable to disclose a deficit of £720 for the year on page 542. It is impossible for the respondents to reconstruct that figure from the [COMPANY] information produced by [NAME]. We have used our best endeavours to allocate the costs despite it not being our responsibility. Other income 900 900 [NAME] has failed to produce any details. These do not fall within the Tribunal’s jurisdiction under section 27A of the Landlord and Tenant Act 1985 (“the 1985 Act”). The Tribunal’s jurisdiction is [COMPANY] to making a determination under section 27A of the 1985 Act as to liability to pay a service charge. Service Charge means amounts payable by a tenant in accordance with section 18(1). Under the terms of the Lease the service charge is “Tenant’s Share of Expenses”. Income received or receivable by the Management Company is neither a Service Charge item nor an Expense and therefore falls outside the jurisdiction of the Tribunal. Deposit account interest 6

450 [NAME] has failed to produce any details, the inadequate interest indicates that monies are not being held correctly, we have estimated 1% based on the average reserve fund balance. These do not fall within the Tribunal’s jurisdiction under section 27A of the Landlord and Tenant Act 1985 (“the 1985 Act”). See above sub total 906 1350 £906 Expenditure

Rates and water 778 320 The charge is unreasonable, [NAME] charged 15 months expenditure in the year. [NAME] has failed to charge on a consistent basis or in accordance with Tech 03/11. We have estimated a reasonable amount based on the actual charge in 2017. Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8. Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8.

Pursuant to paragraph 1 to Schedule 8, the applicant is obliged to provide the services set out in part 1 of Schedule 4. Paragraph 10 to Schedule 4 requires the applicant to pay all taxes, charges and outgoings payable in respect of the building communal areas or [NAME] communal areas or expenses which are not the responsibility of the [NAME].

Accordingly, such costs are recoverable pursuant to paragraph 10 to part 1 of Schedule 4 of the lease.

Further and/or alternatively, paragraph 3 to part 1 to Schedule 4 requires the management company to keep the building communal areas and [NAME] communal areas clean and reasonably lit.

The management company accounts for invoices in the year in which those invoices are received. This is the basis of the accounting method adopted by the management company. The management company does not apportion invoices for rates and water across service charge years, even if the services span other service charge years.

The charges relate to usage for the common parts, and the supply is used by a number of individuals and suppliers, including site staff, gardeners, cleaners, contractors etc.

The costs include standing charge and sewerage charges.

Such costs are not unreasonable in the circumstances. The supply is the supply. £628 Supply of water to common parts by [NAME] is reasonable in amount (pages 573-576). Prepayment of £150 marked as “written off” at page 573 is disallowed.

[NAME] 81015

30000 [NAME] charged [NAME] separately for [NAME], which is contrary to the terms of the lease and inconsistent with previous and subsequent years, the documents demonstrate that it double charged. The working papers produced by [NAME] make no sense, they indicate that the [NAME] charged [NAME] to [NAME]. Vehicle and lift [NAME] should not be included under the cost heading "[NAME]". We are unable to calculate the actual expenditure from the inadequate information supplied by [NAME], the premium for 2013/14 is unreasonable, the charge for the year is clearly unreasonable. We have estimated £30,000 for the year, which includes an overprovision for the previous year, vehicle [NAME] £683 (page 598) is transferred to car parking costs below. A charge by RGP has been included under this cost heading as well as legal and professional costs, documents 591 and 926 appear to be identical save for a different reference. Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8.

Pursuant to paragraph 1 to Schedule 8, the applicant is obliged to provide the services set out in part 1 of Schedule 4.

Paragraph 10 to Schedule 4 requires the applicant to pay all taxes, charges and outgoings payable in respect of the building communal areas or [NAME] communal areas, which includes payment to the [NAME] applicant (as landlord) of the premiums paid by the [NAME] applicant in respect of the services set out in part 2 of the Schedule. Part 2 of the Schedule relates to buildings [NAME], together with [NAME] of the [NAME] communal areas.

It is accepted by the management company that vehicle and lift [NAME] is placed by them, rather than being placed by the landlord ([NAME] applicant). The costs associated with the vehicle and lift [NAME] are split between the car park and [NAME] schedules. £46596 [NAME] £43968.76. [NAME] £1015.27 (page 597) (agreed) Excess (pages 602-609) allowed - £1612 [Valet parking [NAME] charged under car parking expenditure] Light and heat 17574 12136 The charge is unreasonable, [NAME] has overcharged by £3296. It included estimated charges for 3 months £2073 at p569 in the old bundle (not transferred to the new bundle) which was unnecessary. Some of the charges have been based on business rather than residential tariffs and as a result [NAME] has charged for climate change levy and VAT has been applied at 20% rather than 5%. The amount overcharged is £1223, see documents 625, 627, 629, 639, 647, 649, 657, 659, 667, 669, 671, 673, 681, 684. The amended total is £14278. [NAME] has failed to identify car park expenditure, 15% of the amended total has been transferred below. Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8.

Paragraph 10 to Schedule 4 requires the applicant to pay all taxes, charges and outgoings payable in respect of the building communal areas or [NAME] communal areas or expenses which are not the responsibility of the [NAME]. Accordingly, such costs are recoverable pursuant to paragraph 10 to part 1 of Schedule 4 of the lease.

The management company accepts that in 2013 the tariff was a business rather than residential tariff. However, the management company sought a refund which was received in later service charge years. The refund will therefore show in later accounts.

The management company attaches page 693a to insert into the bundle which shows the [NAME] credit reports for 2013. £12567 Actual payments made in 2013 as shown at page 693a total £16008. Some of the [NAME] invoices include VAT at 20%.

Accordingly, some [NAME] charges are incorrectly made on the basis of business rather than residential supply. We therefore deduct the overcharge as calculated by Mr [NAME] in the sum of £1223. Total - £14785 [NAME] (85%) = £12567 Car Parking (15%) = £2218

Wages 81532 15305 The total should be £61,218 according to p697 of which 25% is charged to the [NAME] fund to be consistent with previous years, 75% is transferred to car park expenditure below. Further and/or alternatively, paragraph 3 to part 1 to Schedule 4 requires the management company to keep the building communal areas and [NAME] communal areas clean and reasonably lit. Pursuant to clause 5 of the lease, the management company has covenanted to observe and perform the obligations specified in Schedule 8.

Paragraph 7 to part 1 to Schedule 4 requires the applicant to employ one or more car parking attendants (either directly or by entering into a contract with a [NAME]) to park one private motor car for the owners of [NAME] flat which has the benefit of the parking facility.

Further and/or alternatively, paragraph 9 to part 1 to Schedule 4 requires the applicant to provide such staff as it considers necessary in connection with the provision of other services.

The management company accepts that the page 697 submitted in the bundle is incorrect. Attached to this Scott Schedule is the correct page 697. This shows the wages being £81,532.29 and social security as £7,000.48, which is the amount on the 2013 accounts. £20383 Valet parking is provided 24/7, 365 days per week. There are 4 employees who work on rotational shifts. National minimum wage in 2013 was £6.31 which would result in wages of approximately £55,000. £10 per hour produces a figure of approximately £87,000. It would appear that the hourly rate of the valet parking operatives was a little over £9. We find that rate to be reasonable. The figure of £81532 is supported by the revised page 697 produced at the hearing Total - £81532 [NAME] (25%) = £20383 Car Parking (75%) = £ 61149

Social security 7000 1321 The total should be £5,283 according to p697 of which 25% is charged to the [NAME] fund to be consistent with previous year, 75% is transferred to car park expenditure below As above. £1750 See revised page 697 Total - £7000 [NAME] (25%) = £1750 Car Parking (75%) = £5250

Telephone 2731

2213 [NAME] has failed to identify car parking charges, 12.5% should be transferred to be consistent with previous years, there is no document to support the charge of £202.05 on 01/01/13, the charges for January 2013 are included at p700, the amended total is £2529 and £316 has been transferred to car parking charges below, the [NAME] total is £2213 Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8.

Further and/or alternatively, paragraph 6 to part 1 to Schedule 4 requires the applicant to provide, operate, maintain and renew any appliances or systems which it considers necessary for the safety and security of the occupiers of [NAME].

Further and/or alternatively, paragraph 14 to part 1 to Schedule 4 requires the applicant to generally manage, administer and protect the amenities of the building communal areas and the [NAME] communal areas.

£2213 We disallow £202.25 for which there is no documentary evidence (nominal ledger entry only at page 698). Total - £2529 [NAME] (87.5%) = £2213 Car Parking (12.5%) = £316

The costs associated with the telephone are split between the car park and [NAME] schedules. Post and stationery 534 74 The charges by [NAME] are unreasonable. VAT should not be applied to postage. No receipts from the post office have been produced. Document 795 does not relate to this year, it is exactly the same as document 1583 save for the reference number. See above.

The post and stationery costs are incurred by [NAME], and then re-charged to the management company. Given that [NAME] are VAT registered, the re-charge is subject to VAT.

Document attached to insert into bundle - page 795a. £534 Additional documents (both 795a) show postage charges of £60 and £400 without the addition of VAT. The Management Company has to send out service charge demands, Budgets, AGM minutes and other correspondence to 179 apartments. Whilst increasingly electronic communication will be used by many we find the sum of £460 to be reasonable. We allow [NAME] costs of £74.40 (page 794) as these are not challenged Management fees 30087 4475 The management is woefully inadequate, [NAME] failed to disclose its connection with the [COMPANY], it has not complied with the RICS code of practice despite the lengthy explanations by the previous Tribunal, the system of charging is incorrect, [NAME] was charged separately, it has failed to issue valid invoices, multiple versions of invoices have been produced, [NAME] has been unable to explain adequately the expenditure included within the service charge accounts, it has not been transparent, it failed to allow inspection of the supporting documents, it has failed to produce valid year end certificates to [NAME]. It failed to follow the consultation procedure, unreasonable administration charges have been applied. [NAME] has failed to disclose details of all income and benefits it has received arising from the management. [NAME] breached the data protection act by disclosing (incorrect) personal information in the accounts p532. [NAME] has no authority for charging fees in advance, it has failed to repay the monies which the previous Tribunal found it had overcharged. The charge is unreasonable, a nominal sum of £25 per unit is Pursuant to clause 5 of the lease, the management company has covenanted to observe and perform the obligations specified in Schedule 8.

Paragraph 14 to part 1 to Schedule 4 requires the applicant to generally manage, administer and protect the amenities of the building communal areas and [NAME] communal areas and, for that purpose, employ [NAME] agents.

The criticisms raised by the respondent are denied. It is denied that the management on the part of [NAME] has been inadequate. Any connection, or otherwise, with the [COMPANY] is irrelevant: the management company is a lessee owned and controlled management company and has chosen to employ the services of [NAME] as it’s [NAME] agent. The directors of the management company are lessees and, as a board of directors, have resolved to appoint [NAME] as their agent.

£21480

proposed. [NAME] has now resigned, not before time, the members/[NAME] of [NAME] voted to remove it in 2014. It is disputed that the system of charging has been incorrect. Whilst there have been occasions in which [NAME] is shown as a separate charge, this practice is not uncommon within the industry.

It is disputed that there has been a failure to allow inspection of supporting documents. The respondent has sought to exercise his rights under sections 21 and 22 of the 1985 Act. Most recently, the respondent failed to attend his appointment with [RESPONDENT].

It is accepted that the accounts in this year disclosed a list of debtors. However, there has been no intervention on the part of the [NAME] in relation to this.

It is accepted that [NAME] issue an invoice in advance of their services which is then paid monthly in arrears.

It is also accepted that [NAME] have no reside as [NAME] agent. [NAME], [NAME] Manager, retires at the end of July 2019. Given Mr [NAME] involvement and experience with the building, coupled with his impending retirement, [NAME] has given notice to the management company of their intention to resign. Repairs and renewals 21570

5687 The schedule does not agree with the accounts, charges by [NAME] are unreasonable, we have requested details of hourly rates and labour/materials per invoice but no details have been forthcoming therefore we have had to estimate amounts to reduce the following charges to a reasonable level in accordance with the previous Tribunal decision pages 803, 822, 823, 825, 827, 834, 836, 842. We are unable to accept charges for Work on flats £2250, [NAME] £843.50, document 811 which is illegible Pursuant to clause 5 of the lease, the applicant has covenanted to observe the obligations specified in Schedule 8.

Paragraph 1 to part 1 to Schedule 4 requires the applicant to keep the structural and external parts of the building, the building communal areas and the communal service media serving the building or [NAME] in good and substantial repair and condition, renewing wherever necessary.

Further and/or alternatively paragraph 2 to part 1 to Schedule 4 requires the applicant to (whenever reasonably necessary) paint, decorate or otherwise treat:

1. the outside of the building; 2. the building communal areas; 3. the [NAME] communal areas.

Further and/or alternatively, paragraph 3 to part 1 to Schedule 4 requires the applicant to keep the building communal areas and [NAME] communal areas clean and reasonably lit.

The management company has no record of any request made by the respondent for details of hourly rates and labour/materials per invoice.

Document 811 is reproduced and attached hereto to insert into the bundle.

£11893 As a starting point we have used expenditure of £18660.78 which appears at page 801 rather than the figure which appears in the accounts. No explanation was given by the Applicant in relation to that discrepancy. Mr [APPELLANT] does not dispute the invoices of [NAME]. Mr [NAME] does not dispute that repairs were carried out by [NAME] but disputes the hourly rate applied for labour. At the hearing Mr [NAME] told us that he would prepare a job list and that 2/3 [NAME] employees would attend to carry out the maintenance work. [NAME] charged labour at £250 per day. We reduce labour carried out by [NAME] to £150 per day having regard to labour rates for general maintenance in the East Midlands. This is consistent with the determination of the 2015 Tribunal which capped daily rate at £150 per day (see paragraph 91 of 2015 Decision). As we do not have a labour/materials split for all [NAME] invoices we have reduced invoices 13/89,91,106,107,108,109,111 (pages 800 and 801) by 30% (reduce by £3674) A further copy of page 811 has been produced. Whilst still difficult to read we accept the amount paid by the Management Company to an independent contractor [NAME] We disallow £2250 “work on flats”. The only supporting evidence is a bank statement at page 818 which indicates “TFR ON ACCOUNT”.

The management company make every effort to make a claim against the buildings [NAME] for any internal repairs due to leaks etc., however, if the repair cost is lower than the [NAME] then the repairs are undertaken at the expense of the service charge. We disallow £843.50 paid to [NAME] which appears to be in the form of till receipts from Wickes. There are no primary accounting records in the Bundle to support this item of expenditure.

Lift maintenance 16705 16705

£16705 Household and cleaning 20536

8397 Following complaints made by [NAME] regarding the standard and cost of cleaning, [NAME] changed the cleaning contractor and the monthly charge of £1,400 pm was reduced to £652 pm in 2014. The monthly charges are unreasonable and we have reduced the charges to that level, the charge by [NAME] page 874 is unreasonable and we have reduced it in accordance with the previous Tribunal decision. Pursuant to clause 5 of the lease, the applicant has covenanted to observe and perform the obligations specified in Schedule 8. Pursuant to paragraph 1 to Schedule 8, the applicant is obliged to provide the services specified in part 1 of Schedule 4.

Pursuant to paragraph 3 to part 1 to Schedule 4, the applicant is obliged to keep the building communal areas and [NAME] communal areas clean and reasonably lit.

Further and/or alternatively, pursuant to paragraph 4 to part 1 to Schedule 4, the applicant is obliged to keep the external surfaces of the windows for [NAME] apartment, together with the external and internal services of the windows in the communal areas clean.

Further and/or alternatively, pursuant to paragraph 9, the applicant is obliged to provide such staff as it considers necessary in connection with the provision of services in this schedule.

Further and/or alternatively, pursuant to paragraph 14 to part 1 to Schedule 4, the applicant is obliged to generally manage, administer and protect the amenities of the building communal areas and [NAME] communal areas.

The management company has no records of any complaints being made against the standard and cost of cleaning. The management company conducted a poll in 2014 to assess whether the [NAME] were happy with the level of service £11124 [NAME] charged £1400 per month to clean 4 of the blocks twice per month and Wimbledon once per month. In addition, the valet office was cleaned 4 times per month and the courtyard swept twice per week. In 2014 [NAME] was replaced by [NAME] Contractors who charged £652 per month for exactly the same service. We therefore reduce amount claimed to £652 per month. The invoice at page 874 relates to sweeping the underground car park. We were old that this takes place twice [NAME] year and takes two days. Originally this was carried out by two men but was then reduced to one man. We find the sum of £300 per visit (£600 per annum) to be reasonable. The sums paid to Map Waste (page 865) and Moore Window Cleaning (page 878) are accepted by Mr [NAME].

and whilst the feedback was good, the management company decided to change contractors.

The costs associated with household and cleaning are within market norms. [NAME] 667 667

£667 Door entry system 250 0 no details supplied £248 Invoice dated 9/12/13 in sum of £248.40 produced at hearing Pump station 1159 1159

£1159 [NAME] 11177 10172 [NAME] has replaced document 707 in the old bundle which agreed with the accounts and inserted document 887 in the new bundle which no longer agrees. The fire risk assessment should be excluded, it is shown separately. Document 896 relates partly to 2014 and [NAME] should include a prepayment to reduce the charges to a reasonable level, comply with Tech 03/11 and be consistent with the previous year. £1005 has been deducted from the accounting balance. Pursuant to clause 5 of the lease, the applicant has covenanted to observe and perform the obligations specified in Schedule 8. Pursuant to paragraph 1 to Schedule 8, the applicant is obliged to provide the services set out in part 1 to Schedule 4. Pursuant to paragraph 1 to part 1 to Schedule 4, the applicant is required to keep the communal service media serving the building or [NAME] in good and substantial repair and condition and renewed when necessary.

Further and/or alternatively, paragraph 6 to part 1 to Schedule 4 requires the applicant to provide, operate, maintain and renew any appliances or systems which it considers necessary for the safety of the occupiers of the building.

Further and/or alternatively, paragraph 14 to part 1 to Schedule 4 requires the applicant to generally manage, administer and protect the amenities of the building communal areas and the [NAME] communal areas. £10203 Deduct £999.60 for fire risk assessment (at page 908) which is a separate cost heading from £11202.88 shown at page 887. Lighting maintenance and bulbs 310

310

£310 Sundry expenses 475

0 no details supplied Document attached to insert into bundle - page 901a Disallowed Copy nominal ledger at page 901a does not show any/sufficient information to support this expenditure Dry riser maintenance 1062 1062

£1062 Emergency lighting inspection 2150 2150

£2150

Fire risk assessment 1180

0 This was not necessary, an assessment was carried out the previous year. It is unclear who actually undertook the service, in the previous year it was [NAME]'s own employees whose salaries are being charged elsewhere. The charge by [NAME] is unreasonable. The training costs appear to be for the benefit of [NAME] to charge [NAME]. Pursuant to clause 5 of the lease, the applicant has covenanted to observe and perform the obligations specified in Schedule 8. Pursuant to paragraph 1 to Schedule 8, the applicant is obliged to provide the services set out in part 1 to Schedule 4. Pursuant to paragraph 1 to part 1 to Schedule 4, the applicant is required to keep the communal service media serving the building or [NAME] in good and substantial repair and condition and renewed when necessary.

The management company considered it appropriate and reasonable to undertake a fire risk assessment (FRA) in 2013, notwithstanding that an FRA has been undertaken in 2012. Matters of health and safety are paramount.

The costs associated with the FRA is not unreasonable and is within market norms.

The FRA was undertaken by [NAME], [NAME] Manager. Mr [NAME] career has been in building and maintenance, and Mr [NAME] has worked at [NAME] for the duration. He is therefore more than adequately placed to conduct the FRA. £180 Training costs allowed. Fire Risk Assessment disallowed. Accountancy 2800 260 The service provided by the accountant and the cost remain unreasonable despite the comments made by the previous Tribunal, the service charge accounts are inadequate as described above, changes of accounting policies have not been disclosed, the accounts do not comply with Tech 03/11 . No auditors or accountants report has been issued to [NAME]. We propose £260 based on the charges of another accountant's charges to a management company for providing a full service at a similar size block of apartments. Pursuant to clause 5 of the lease, the applicants have covenanted to observe and perform the obligations specified in Schedule 8.

Pursuant to paragraph 1 to Schedule 8, the applicant is obliged to provide the services set out in part 1 to Schedule 4.

Pursuant to paragraph 14 to part 1 to Schedule 4, the applicant is required to generally manage and administer the [NAME], and for that purpose employ solicitors, accountants, auditors and/or other [NAME].

Further and/or alternatively, paragraph 16 to part 1 to Schedule 4 requires the applicant to comply with all statutory obligations relating to the management company.

Pursuant to the terms of the lease, the management company is required to undertake an audit.

The audit fees are within market norms. £2000 Fall restraint system inspection 486 486

£486

Pest Control 496 496

£496 Legal and professional fees 2280 -425 [NAME] has supplied working papers totalling £2655 which exceeds the amount included in the accounts, the information is therefore unreliable. [NAME] has failed to explain who is charging these amounts and no supporting documents have been produced. It was irresponsible of [NAME] if it were taking legal action against [NAME] at a time when a Tribunal found it to be overcharging and its demands were invalid, it should have put its house in order first. In correspondence [NAME] has stated that the cost of legal action is not charged as service charge expenditure. The charge by RGP appears to have been claimed under [NAME] and documents 591 and 926 appear to be identical save for a different reference number. In the absence of adequate information, the charges cannot be accepted as reasonable. Pursuant to clause 5 of the lease, the applicants have covenanted to observe and perform the obligations specified in Schedule 8.

£2055 No invoices have been produced to support pages 924- 925. The Management Company relies on the nominal ledger (page 924a). PDC are a property debt collection company. The fees claimed are for letters before action for arrears recovery and/or late payment charges. These sums are therefore administration charges payable by the defaulting [NAME] under paragraph 21.1 of Schedule 6 Part 1 to the Lease. It would appear that the Management Company charges these fees to the service charge under para. 14 of Part 1 to Schedule 4 and then gives credit if recovery from the [NAME] is successful. We therefore allow the sum claimed as set out at page 924a (which includes credits) The invoice from RGP at page 926 gives no indication as to what work has been carried out. The note at page 927 suggests that the work may relate to floor plans but no further details have been given despite this item being specifically disputed by Mr [NAME]. In the absence of explanation as to what work has been carried out this item of expenditure is disallowed Bank charges 241 0 The charges are unreasonable Pursuant to clause 5 of the lease, the applicant has covenanted to observe and perform the obligations specified in Schedule 8.

Paragraph 13 to Schedule 4 entitles the applicant to borrow money to enable it to meet its obligations under that schedule.

The management company operate two accounts: general maintenance fund and reserve account (also referred to as [NAME]).

The bank charges relate to those accounts and are based on general usage. This is standard practice.

Document attached to insert into bundle - page 924a £241 The Management Company has two accounts – general service charge fund and reserve fund. Monies are held separately and the Tribunal finds that bank charges will inevitably be incurred. Finance costs 224 -626 [NAME] has supplied a working paper which does not agree with the accounts, the information is therefore unreliable. Charges by Mr [NAME], an officer of [NAME] and [COMPANY], were found to be unreasonable by the previous Tribunal. [NAME] is being devious by claiming the expenditure under a different cost heading, the respondents have deducted £850 from the balance in the accounts. Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8.

Paragraph 10 to Schedule 4 requires the applicant to pay all taxes, charges and outgoings payable in respect of the building communal areas or [NAME] communal areas, which includes payment to the [NAME] applicant (as landlord) of the premiums paid by the [NAME] applicant in respect of the services set out in part 2 of the Schedule. Part 2 of the Schedule relates to Disallowed At the hearing Miss [NAME] conceded that she “could shed no light” on what this expenditure relates to.

buildings [NAME], together with [NAME] of the [NAME] communal areas.

The management company are unclear as to the issues raised by the respondent, and simply put do not understand the point the respondent is making here or the respondent’s challenge. Transfer to reserve fund 20600 0 [NAME] is not operating the reserve fund correctly, it has failed to make adjustments in accordance with the previous Tribunal decision, it is therefore carrying forward the incorrect balance, it has failed to supply details of a separate bank account, it has failed to disclose details of expenditure which has been deducted from the reserve fund, it has failed to justify the contributions as requested, the respondents are unable to accept the charge until the fund is operated correctly. Pursuant to clause 3.1.2, [NAME] has covenanted to observe and perform the tenant’s obligations specified in parts 1 and 2 of Schedule 6.

Paragraph 2 to part 1 to Schedule 6 requires [NAME] to pay their share of the expenses to the applicant calculated and payable as specified in part 1 of Schedule 5. Part 2 to Schedule 5 entitled the applicant to invest such payments on deposit.

Further and/or alternatively, paragraph 2 to part 2 to Schedule 5 entitles the applicant, at its discretion, to place or invest such sums as a reserve. Reserve is defined in the recitals (at clause 1.1.18) as being anticipated future expenditure which the applicant decides it would be prudent to collect on account of its obligations in the lease.

The respondent does not appear to be challenging the management company’s ability to collect a reserve fund, nor does the respondent appear to be challenging the reasonableness of the funds collected. These are the only two matters within the Tribunal’s jurisdiction under section 27A and 19 of the 1985 Act. £20600 Transfer from [NAME] -84551

-86746 This account is not permitted by the lease, the restated balance as at 01/01/13 is repayable to the [NAME] in accordance with the lease. The allocation to the [NAME] fund and the car park fund has been made in accordance with the disclosure on p543. As above. -£73220 The Management Company is to credit the excess to the Tenant’s next payment of the Tenant’s Share of Expenses (paragraph 3.5.2.2 of Schedule 5 Part 1). We adopt figure in the accounts of £84551 but have followed Mr [NAME] apportionment to car parking of £11331 leaving a balance of £73220 to the [NAME]. sub total 241068 25598 £114510 net [NAME] expenditure 240162 24248 £113604 Apartment 53 - £511 Apartment 58 - £592 Apartment 60 - £507 Apartment 65 -£615 Apartment 94 - £682 Apartment 117 - £561 car park expenditure

[NAME] has failed to disclose car park expenditure for the year and is therefore in breach of the terms of the lease. It obviously possesses the information otherwise it would be unable to disclose a deficit of £720 for the year on page 542. It is not for the respondents to calculate amounts on behalf of [NAME] but we have used our best endeavours to do so

Electricity 2142 transferred from above £2218 Staff Wages

45914 transferred from above, [NAME]'s charge of £3,413 to [NAME] on 18/07/18 has not been explained and is not understood, it falls foul of the 18 month rule

£61149 Social security 3962 transferred from above, [NAME]'s charge of £3413 to [NAME] on 18/07/18 has not been explained and is not understood, it falls foul of the 18 month rule £5250 [NAME]

683 Transferred from [NAME] (page 598)

£4277 Vehicle movement [NAME] is renewed in November of [NAME] year and dealt with in the accounts by prepayments and reversal. The account item is 8204. The prepayment reversed for 2013 is £3593.71 (page 577) to which we add £682.96 (page 598) making a total of £4277. Telephone 316 transferred from above £316 Transfer from [NAME] -11331 see above -£11331 sub total 41685 £61879 1.25% payable by Apartments 58, 65 and 94 =£773 Total 240162 65933 Tenant’s Share of the Expenses:

Apartment 53 - £511 Apartment 58 - £1365 Apartment 60 - £507 Apartment 65 -£1388 Apartment 94 - £1455 Apartment 117 - £561

Scott Schedule Disputed service charges year ended 31 December 2014

Case reference BIR/OOFN/LIS/2018/0071 [NAME], Leicester [POSTCODE]

Item Cost Applicant's Comments Respondent Respondent's Comments Applicant's Comments Leave Blank for the Tribunal General comments abbreviations - [NAME] = the 1st applicant, [NAME] = [APPELLANT] references are to the new bundle of documents unless otherwise stated [NAME] has failed to comply with the lease [NAME] has failed to charge reasonable sums [NAME] has produced bogus documents, its credibility is questionned The service charge accounts produced by [NAME] are inadequate, as a minimum requirement they should identify the charges payable by the different groups of [NAME], they are drawn up in a manner which is inconsistent from year to year and inconsistent with the budgets, the cost headings are inappropriate. Changes in accounting policies have not been disclosed nor explained. The accounts do not enable comparison of expenditure from one year to another or with the budget.

no auditors or accountants report has been supplied despite the budget providing for the cost of an audit

The information supplied by [NAME] is unreliable. No nominal ledger accounting records have been produced by [NAME], just some working papers and a selection of invoices, which may have been cancelled or amended. Credit notes have been omitted, accruals have not been reversed, prepayments have not been included. It appears that [NAME] has been highly selective when presenting information, meaningless documents have been produced whilst meaningful documents have been omitted Bank statements have not been produced, there is little evidence of actual payments

There are a large number of errors all of which fall in [NAME]'s favour, statistically the likelihood of that occuring by chance is negligible. With the [COMPANY] information available, it is highly likely that we are looking at the tip of an iceberg and there are many more errors which we have been unable to identify. There appears to be a lack of authorisation of service charge expenditure and a failure to reconcile suppliers accounts. The respondents ask [NAME] to correct the errors so that the parties do not need to take up the time of the Tribunal. [NAME] is not entitled to recover more than it has expended nor amounts exceeding a reasonable sum. [NAME] has disregarded the previous Tribunal decision, the Tribunal went to great length over a period of 7 days to explain the areas of overcharging to [NAME] which has ignored those comments and has continued to overcharge [NAME] refused to allow inspection of documents on several occasions which would have enabled the parties to narrow down the issues for the Tribunal to consider [NAME] has failed to be transparent, it has failed to disclose transactions with [COMPANY] and associated contractors and persons

[NAME] has failed to disclose all costs incurred relating to the previous Tribunal case

General comments regarding this year only [NAME] did not supply a copy of the accounts or the budget to some [NAME] The budget for the year p520 is illegible [NAME] has used incorrect percentages when charging the budget, its charges for [NAME] instalment are different when they should be equal The statement on page 96 old bundle includes credits of £208.75 and £1142.18 on 1 August 2014 but [NAME] has failed to supply credit notes. They must relate to the balance brought forward therefore they have been allocated incorrectly. The statement on page 110 old bundle includes credits of £58.75 and £75.00 on 1 August 2014 but [NAME] has failed to supply credit notes. They must relate to the balance brought forward.

Mr [NAME] was the sole director of [NAME] from 1 January 2014 to 7 April 2014 p537. At the time, he was an officer of [COMPANY]. He was appointed by the developer [COMPANY], which was part of the [COMPANY]. [NAME] is also part of the same Group. He has never been appointed by the [NAME] of [NAME]. Other directors are stated to have been appointed during 2014 however Mr [NAME] had no authority to appoint directors because the members voted to remove him as a director in February 2014. The directors have failed to declare their conflicts of interest. [NAME] has failed to disclose details of the actual car park expenditure although it must possess that information otherwise it would be unable to disclose a deficit of £63 for the year on page 543. It is impossible for the respondents to reconstruct that figure from the [COMPANY] information produced by [NAME]. We have used our best endeavours to allocate the costs despite it not being our responsibility. Other income -209 900 no details have been supplied by [NAME], therefore we are unable to accept the charge, we have estimated income of £900 in accordance with the accounts for 2013. [NAME] is stated to be a non profit making company therefore all income must be accounted for within the service charge accounts, which is consistent with previous years. These do not fall within the Tribunal’s jurisdiction under section 27A of the Landlord and Tenant Act 1985 (“the 1985 Act”). The Tribunal’s jurisdiction is [COMPANY] to making a determination under section 27A of the 1985 Act as to liability to pay a service charge. Service Charge means amounts payable by a tenant in accordance with section 18(1). Under the terms of the Lease the service charge is “Tenant’s Share of Expenses”. Income received or receivable by the Management Company is neither a Service Charge item nor an Expense and therefore falls outside the jurisdiction of the Tribunal. Deposit account interest -1117 650 [NAME] has failed to produce any details, deposit account interest cannot be negative, the inadequate interest indicates that monies are not being held correctly, we have estimated 1% based on the average reserve fund balance These do not fall within the Tribunal’s jurisdiction under section 27A of the Landlord and Tenant Act 1985 (“the 1985 Act”). See above sub total -1326 1550 -1326 Expenditure

Rates and water 647 320 The charge is unreasonable, we have estimated an amount based on the actual charge in 2017. Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8. Pursuant to paragraph 1 to Schedule 8, the applicant is obliged to provide the services set out in part 1 of Schedule 4. Paragraph 10 to Schedule 4 requires the applicant to pay all taxes, charges and outgoings payable in respect of the building communal areas or [NAME] communal areas or expenses which are not the responsibility of the [NAME].

The costs include standing charge and sewerage charges.

Such costs are not unreasonable in the circumstances. The supply is the supply. £647 Supported by [NAME] invoices at page 931. [NAME] 53143 40000 The cost heading is a misnomer, [NAME] for the car parking is included. Car parking charges £3468, + £4275 = £7743 are transferred below. [NAME] has failed to include prepayments in the working papers and has failed to disclose details when requested. The premium is unreasonable, there is no independent evidence of the [NAME] premium from the 2nd applicant. We have estimated £40,000 as a reasonable charge Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8.

Pursuant to paragraph 1 to Schedule 8, the applicant is obliged to provide the services set out in part 1 of Schedule 4. Paragraph 10 to Schedule 4 requires the applicant to pay all taxes, charges and outgoings payable in respect of the building communal areas or [NAME] communal areas, which includes payment to the [NAME] applicant (as landlord) of the premiums paid by the [NAME] applicant in respect of the services set out in part 2 of the Schedule. Part 2 of the Schedule relates to buildings [NAME], £45400 [NAME] £43968.76 (agreed) [NAME] £1431.05 (agreed) (page 935) [NAME] of £4275.48 (agreed) (page 936) has been allocated to car park expenditure.

together with [NAME] of the [NAME] communal areas.

It is accepted by the management company that vehicle [NAME] is placed by them, rather than being placed by the landlord ([NAME] applicant). The costs associated with the vehicle is split between the car park and [NAME] schedules.

Light and heat 13777

7279 [NAME] entered into a QLTA in February 2014 and failed to follow the consultation procedure. [NAME] has overcharged by £5214. A credit note of £3510.91 has been omitted by [NAME], being the difference between the opening balance on p1061 and the closing balance on p1050. Again charges have been made at the business rate instead of the residential rate, see documents 952, 954, 965, 967, 976, 978, 986, 994, 1005, 1007, 1016, 1018, 1028, 1030, 1051, 1053. Errors have been charged, documents 1021, 1032, 1035, 1040, 1043 should all be nil. The charge has been amended to £8563 and 15% of that figure £1284 has been transferred to car parking charges leaving £7279 as [NAME] charges. Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8.

The management company attaches page 1082a to insert into the bundle which shows the [NAME] credit reports for 2014. £8832 It is clear that lighting and heating is supplied to the communal areas, lifts and car parking. The energy supplier is [NAME]. Actual payments made during 2014 as shown at page 1082a total £15660. However, page 1082a only shows payments January to October (10 months). We have therefore started from an adjusted figure for 12 months of £18792. We deduct credits (pages 942-944) totalling £6697.55 In addition, the Tribunal notes that supply is still, in some instances being charged at business rate of 20% VAT. We deduct £1703.09 to adjust to residential rate (being the balance of overcharge of £5241 less credit note of £3510.91) It is conceded by the Management Company that it entered into a three year QLTA with [NAME] from 20/2/14 to 19/2/17. No consultation has been carried. However, the contribution of the Respondents is less than £100 per Apartment and are therefore not capped. Total - £10391 [NAME] (85%) = £8832 Car Parking (15%) = £1559 Wages 81694 18966 Even though there are only 3 or 4 employees per month the charge does not agree with the wages records, we have taken the lower of the two and accept £75862. [NAME] has failed to allocate between car parking and [NAME] charges, therefore 75% of the adjusted total £56896 has been transferred to car parking charges leaving £18966 [NAME] costs. Pursuant to clause 5 of the lease, the management company has covenanted to observe and perform the obligations specified in Schedule 8. Pursuant to paragraph 1 to Schedule 8, the applicant is obliged to provide the services set out in part 1 of Schedule 4.

Further and/or alternatively, paragraph 9 to part 1 to Schedule 4 requires the applicant to provide such £20035 The Tribunal uses the figure at updated pages 1090 -1093 (£80138.70 at updated page 1093) Total - £80139 [NAME] (25%) = £20035 Car Parking (75%) = £60104

staff as it considers necessary in connection with the provision of other services.

Pages 1090 to 1093 are reproduced and attached. Gross salaries for the year are £80,139, in addition to under provision for PAYE accrual in November 2018 totalling £602 and PAYE paid to HMRC during 2014 in excess of amount required and corrected at March 2015 year end totalling £953. This totals £81,694. Social security 6706 1595 Even though there are only 3 or 4 employees per month the charge does not agree with the wages records, we have taken the lower of the two and accept £6381. [NAME] has failed to allocate between car parking and [NAME] charges, therefore 75% of the adjusted total £4786 has been transferred to car parking charges leaving £1595 [NAME] costs. As above. £1676 See amended page 1093 – Employers NI (net of rebate). Total - £6705 [NAME] (25%) = £1676 Car Parking (75%) = £5029

Telephone 3309 2813 [NAME] has failed to allocate between parking and [NAME] charges, 12.5% = £496 has been transferred to car parking charges, leaving £2813 [NAME] charges Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8.

The costs associated with the telephone are split between the car park and [NAME] schedules. £2895 Total - £3309 [NAME] (87.5%) = £2895 Car Parking (12.5%) = £414 [Mr [NAME] figures are based on 85/15% split not 87.5/12.5% as stated] Post and stationery 1045

70 The charges by [NAME] are unreasonable. VAT should not be applied to postage. No receipts from the post office have been produced. As above.

The post and stationery costs are incurred by [NAME], and then re-charged to the management company. £324 Total of invoices at pages 1206, 1208 and 1209 (no VAT has in fact been charged for postage). No other invoices have been produced by the Applicant.

Given that [NAME] are VAT registered, the re-charge is subject to VAT. Management fees 30087 4475 The management is woefully inadequate, [NAME] failed to disclose its connection with the [COMPANY], it has not complied with the RICS code of practice despite the lengthy explanations by the previous Tribunal, the system of charging is incorrect, [NAME] was charged separately, it has failed to issue valid invoices, multiple versions of invoices have been produced, [NAME] has been unable to explain adequately the expenditure included within the service charge accounts, it has not been transparent, it failed to allow inspection of the supporting documents, it has failed to produce valid year end certificates to [NAME]. It failed to follow the consultation procedure, unreasonable administration charges have been applied. [NAME] has failed to disclose details of all income and benefits it has received arising from the management. [NAME] breached the data protection act by disclosing (incorrect) personal information in the accounts p532. [NAME] has no authority for charging fees in advance, it has failed to repay the monies which the previous Tribunal found it had overcharged. The charge is unreasonable, a nominal sum of £25 per unit is proposed. [NAME] has now resigned, not before time, the members/[NAME] of [NAME] voted to remove it in 2014. Pursuant to clause 5 of the lease, the management company has covenanted to observe and perform the obligations specified in Schedule 8.

Pursuant to clause 5 of the lease, the management company has covenanted to observe and perform the obligations specified in Schedule 8.

It is disputed that the system of charging has been incorrect. Whilst there have been occasions in which [NAME] is shown as a separate charge, this practice is not uncommon within the industry.

It is disputed that there has been a failure to allow inspection of supporting documents. The respondent has sought to exercise his rights under sections 21 and 22 of the 1985 Act. Most recently, £21480

the respondent failed to attend his appointment with [NAME].

It is disputed that the 2014 accounts disclosed a list of debtors. Document 532 which the Respondent refers to is in relation to 2013.

It is also accepted that [NAME] have no reside as [NAME] agent. [NAME], [NAME] Manager, retires at the end of July 2019. Given Mr [NAME] involvement and experience with the building, coupled with his impending retirement, [NAME] has given notice to the management company of their intention to resign.

Repairs and renewals 14489 8529 The schedule does not agree with the accounts, work to the interior of flats is not valid service charge expenditure, charges by [NAME] are unreasonable, we have requested details of hourly rates and labour/materials per invoice but no details have been forthcoming therefore we have had to estimate amounts to reduce the charges to a reasonable level in accordance with the previous Tribunal decision. We cannot accept documents 1243, 1261, 1262, 1264, 1265 we have reduced documents 1240, 1259, 1260 Pursuant to clause 5 of the lease, the applicant has covenanted to observe the obligations specified in Schedule 8.

Further and/or alternatively paragraph 2 to part 1 to Schedule 4 requires the applicant to (whenever reasonably necessary) paint, decorate or otherwise treat: 1. the outside of the building; 2. the building communal areas; 3. the [NAME] communal areas.

The management company are unclear as to the issues raised by the respondent with documents 1243, 1261, 1262, 1264, 1265, 1240, 1259, 1260 and simply put do not understand the point the respondent is making here or the respondent’s challenge. £11502 Mr [RESPONDENT] accepts that work was done and done to a reasonable standard. He does not dispute the invoices of [NAME]. Our starting point is the nominal ledger at pages 1224-1226 which shows total expenditure of £14161.09. As in previous year the Tribunal reduces [NAME] labour rate to £150 per day. As we do not have a labour/materials split for all invoices we have reduced 14/29, 30, 40 and 41 by 30% (reduce by £2240) [NAME] to [NAME] at 1261, 1262, 1264 and 1265 (marked “incorrectly invoiced”) are disallowed (deduct £418.47)

Lift maintenance 17560 11793 The charge is unreasonable, the decision to appoint [NAME] in March and April was unreasonable, we have been double charged for those months, the [NAME] charges are for a full 12 months. The [NAME] charges £5767 have been deducted. Pursuant to clause 5 of the lease, the applicant has covenanted to observe the obligations specified in Schedule 8.

Further and/or alternatively, paragraph 6 to part 1 to Schedule 4 requires the applicant to provide, operate, maintain and renew any appliances or systems which the applicant considers necessary for the safety and security of the occupiers.

The costs associated with the maintenance of the lift is not unreasonable and is within market norms.

The management company are unclear as to the issues raised by the respondent, and simply put do not understand the point the respondent is making here or the respondent’s challenge. £11793 [NAME] were main contractors for all lifts. In February 2014 [NAME] terminated the [NAME] contract as it was felt that the service provided was “questionable”. [NAME] then began a handover process which involved modifying the lift systems to remove the [NAME] system. This work was necessary as the REM system prevents any company other than [NAME] from carrying out work to the lifts. Mr [NAME] told the Tribunal that [NAME] did not do any work to the lifts other than to start to remove the REM system. At this point the Management Company became aware that the [NAME] contract contained a 5 year notice clause. The upshot of this was that the Management Company decided not to use [NAME] after all and stayed with [NAME]. The work done by [NAME] was completely unnecessary. As Mr [NAME] told the Tribunal any work required to be done to the lifts would have been covered by [NAME] under their existing contracts. [NAME] did not do any work. We disallow entirely [NAME] invoices pages 1271-80 in the sum of £5767. Household and cleaning 16285 14184 Following complaints made by [NAME] regarding the standard and cost of cleaning, [NAME] changed the cleaning contractor and the monthly charge of £1,400 pm was reduced to £652 pm this year. The monthly charges are unreasonable and we have reduced the charges to that level, the charges by [NAME] pages 1297 and 1307 are unreasonable and we have reduced them in accordance with the previous Tribunal decision. Pursuant to clause 5 of the lease, the applicant has covenanted to observe and perform the obligations specified in Schedule 8.

Pursuant to paragraph 1 to Schedule 8, the applicant is obliged to provide the services specified in part 1 of Schedule 4.

Pursuant to paragraph 3 to part 1 to Schedule 4, the applicant is obliged to keep the building communal £14389 [NAME] took over during the course of 2014. We reduce the two [NAME] invoices from £1400 [NAME] (pages 1287 and 1290) to £652 [NAME]. We have reduced the costs of car parking sweep carried out by [NAME] (pages 1297 and 1307) to £600 in total

areas and [NAME] communal areas clean and reasonably lit.

The management company has no records of any complaints being made against the standard and cost of cleaning. The management company conducted a poll in 2014 to assess whether the [NAME] were happy with the level of service and whilst the feedback was good, the management company decided to change contractors.

£667 Pump station 584 0 no supporting document has been produced, the working paper does not provide any meaningful information other than a charge was raised on the last day of the year Pursuant to clause 5 of the lease, the applicant has covenanted to observe and perform the obligations specified in Schedule 8.

Pursuant to paragraph 1 to part 1 to Schedule 4, the applicant is required to keep the communal service media serving the building or [NAME] in good and substantial repair and condition, and renewed when necessary.

Further and/or alternatively, paragraph 6 to part 1 to Schedule 4 requires the applicant to provide, operate, maintain and renew any appliances or systems which it considers necessary for the safety of the occupiers of the building. £584 See invoice at 1312a and 1312b and nominal ledger at 1312c

Document attached to insert into bundle – page 1312a – 1312c. [NAME] 8421 7421 The fire risk assessment has been included under this cost heading which is inconsistent with other years, the charge was unnecessary and the amount is unreasonable Pursuant to clause 5 of the lease, the applicant has covenanted to observe and perform the obligations specified in Schedule 8.

Pursuant to paragraph 1 to part 1 to Schedule 4, the applicant is required to keep the communal service media serving the building or [NAME] in good and substantial repair and condition and renewed when necessary.

The management company considered it appropriate and reasonable to undertake a fire risk assessment (FRA) in 2014, notwithstanding that an FRA has been undertaken in previous years. Matters of health and safety are paramount.

The FRA was undertaken by [NAME], [NAME] Manager. Mr [NAME] career has been in building and maintenance, and Mr [NAME] has worked at [NAME] for the duration. He is therefore more than adequately placed to conduct the FRA. £7421 Disallow FRA of £1000 (pages 1314 and 1319). Sundry expenses 213

213

£213

Dry riser maintenance 768

768

£768 Emergency lighting inspection 1240 1240

£1240 Fire risk assessment included under [NAME] above As above. Disallowed under [NAME] above. Accountancy 2760 260 The service provided by the accountant and the cost remain unreasonable despite the comments made by the previous Tribunal, the service charge accounts are inadequate as described above, changes of accounting policies have not been disclosed, the accounts do not comply with Tech 03/11 . No auditors or accountants report has been issued to [NAME]. We propose £260 based on the charges of another accountant's charges to a management company for providing a full service at a similar size block of apartments. Pursuant to clause 5 of the lease, the applicants have covenanted to observe and perform the obligations specified in Schedule 8.

The audit fees are within market norms. £2000 Legal and professional fees 15412 7325 [NAME] has supplied working papers which do not agree with the accounts, the information is therefore unreliable. We have asked [NAME] to supply details of the costs relating to the previous Tribunal but we have not received a reply. According to the note in the accounts p537, £15412 had been incurred and we have deducted £5412 which is in excess of the amount allowed by the Tribunal. It was irresponsible of [NAME] if it were taking legal action against [NAME] at a time when it was found to be overcharging and its demands were invalid, it should have put its house in order first. [NAME] informed [NAME] that the cost of legal action taken against [NAME] would not be included in service charge expenditure. Advice given to individuals has been excluded. Pursuant to clause 5 of the lease, the applicants have covenanted to observe and perform the obligations specified in Schedule 8.

Documents are attached at page 1341a – 1341b. £4405 The total of the invoices at pages 1334 -1341 is £14405. Invoices at pages 1334 to 1336 are from [NAME] to Mr [NAME] and Mr [NAME] who are Directors of the Management Company. We find those sums are payable by the Management Company as Expenses under paragraph 16 of Part 1 of Schedule 4 of the Lease as they relate to Articles of Association, meetings of the Management Company and appointment/removal of Directors. Invoices at 1337 to 1339 relate to debt collection and are payable for the reasons given in 2013. Invoice at 1340 ([NAME] - £7453.08) relates to “pursuing a claim against Mr [NAME] … for outstanding service charge arrears at the County Court and the First Tier Tribunal…”. Invoice at 1340 (fees of Mr [COUNSEL] of counsel - £5400) relates to the previous Tribunal hearing on 3- 5th December 2014. At the hearing Mr [NAME] (having spoken with Miss [COUNSEL]) told the Tribunal that, on the advice of counsel, fees in relation to the 2014/2015 hearings would be dealt with in a specific manner.

Accordingly, we deduct £10,000 which we were told

was charged as contractual costs against Mr [NAME] and the other Respondents and not charged to the service charge account. The balance of those two invoices (£2853) is payable by the service charge but not, on the evidence of Mr [NAME], by Mr [NAME]. Accordingly, we credit Mr [NAME] with £17 (Apartment 94) and £14 (Apartment 117).

Bad debts recoverable -4135 -6478 no details of £2343 bad debts written off have been supplied and we require further details, the credit has been accepted This issue was raised in the FtT in 2014. 4 flats had been transferred to RBS on administration of [COMPANY]. Service charges of £4,135.03 were not paid and written off. [NAME] accepted the charge of £4,135.03 and would forego the balance of £2,342.73. -£4135 The Tribunal accepts the explanation given by the Management Company. This is not a service charge item but is monies receivable by the Management Company.

Accordingly, this matter is outside the jurisdiction of the Tribunal Bank charges 218 0 The charges are unreasonable Pursuant to clause 5 of the lease, the applicant has covenanted to observe and perform the obligations specified in Schedule 8.

Pursuant to paragraph 1 to Schedule 8, the applicant is obliged to provide the services set out in part 1 to Schedule 4. Paragraph 13 to Schedule 4 entitles the applicant to borrow money to enable it to meet its obligations under that schedule.

The bank charges relate to those accounts and are based on general usage. This is standard practice. £218 See reasons given in previous year Transfer to reserve fund 20600 0 [NAME] is not operating the reserve fund correctly, it has failed to make adjustments in accordance with the previous Tribunal decision, it is therefore carrying forward the incorrect balance, it has failed to supply details of a separate bank account, it has failed to disclose details of expenditure which has been deducted from the reserve fund, it has failed to justify the contributions as requested, the respondents are unable to accept the charge until the fund is operated correctly. Pursuant to clause 3.1.2, [NAME] has covenanted to observe and perform the tenant’s obligations specified in parts 1 and 2 of Schedule 6.

Further and/or alternatively, paragraph 2 to part 2 £20600

to Schedule 5 entitles the applicant, at its discretion, to place or invest such sums as a reserve. Reserve is defined in the recitals (at clause 1.1.18) as being anticipated future expenditure which the applicant decides it would be prudent to collect on account of its obligations in the lease.

The respondent does not appear to be challenging the management company’s ability to collect a reserve fund, nor does the respondent appear to be challenging the reasonableness of the funds collected. These are the only two matters within the Tribunal’s jurisdiction under section 27A and 19 of the 1985 Act. Transfer to [NAME] -746 0 not permitted by the lease As above. -£746 The Management Company is to credit the excess to the Tenant’s next payment of the Tenant’s Share of Expenses (paragraph 3.5.2.2 of Schedule 5 Part 1). sub total 285744 121440 £172208 net [NAME] expenditure 287070 119890 £173534 Apartment 53 - £780 Apartment 58 - £904 Apartment 60 - £775 Apartment 65 -£940 Apartment 94 - £ 1042-£17= £1025 Apartment 117 - £856 -£14 = £842 car park expenditure [NAME] has failed to disclose car park expenditure for the year and is therefore in breach of the terms of the lease. It obviously possesses the information otherwise it would be unable to disclose a deficit of £683 for the year on page 543. It is not for the respondents to calculate amounts on behalf of [NAME] but we have used our best endeavours to do so Electricity 1284 transferred from above £1559 Staff Wages 56896 transferred from above £60104 Social security 4786 transferred from above £5029 [NAME] 4041 7743 transferred from above, [NAME] has failed to include a prepayment £3702 within the accounts (£4275 x 314/365) therefore it has charged 23 months for the year which is unreasonable £4275 [NAME] (agreed) (page 936) Telephone 496 transferred from above £414 sub total

67503

£71381 1.25% payable by Apartments 58, 65 and 94 = £892

Total 287070 187393 Tenant’s Share of the Expenses:

Apartment 53 - £780 Apartment 58 - £1796 Apartment 60 - £775 Apartment 65 - £1832 Apartment 94 - £1917 Apartment 117 - £842

Scott Schedule Disputed service charges year ended 31 December 2015

Item Cost Applicant's Comments Respondent Respondent's Comments Applicant's Comment's Leave Blank for the Tribunal General comments abbreviations - [NAME] = the 1st applicant, [NAME] = [APPELLANT] references are to the new bundle of documents unless otherwise stated [NAME] has failed to comply with the lease [NAME] has failed to charge reasonable sums [NAME] has produced bogus documents, its credibility is questionned The service charge accounts produced by [NAME] are inadequate, as a minimum requirement they should identify the charges payable by the different groups of [NAME], they are drawn up in a manner which is inconsistent from year to year and inconsistent with the budgets, the cost headings are inappropriate. Changes in accounting policies have not been disclosed nor explained. The accounts do not enable comparison of expenditure from one year to another or with the budget.

There are a large number of errors all of which fall in [NAME]'s favour, statistically the likelihood of that occuring by chance is negligible. With the [COMPANY] information available, it is highly likely that we are looking at the tip of an iceberg and there are many more errors which we have been unable to identify. There appears to be a lack of authorisation of service charge expenditure and a failure to reconcile suppliers accounts. The respondents ask [NAME] to correct the errors so that the parties do not need to take up the time of the Tribunal. [NAME] is not entitled to recover more than it has expended nor amounts exceeding a reasonable sum. [NAME] has disregarded the previous Tribunal decision, the Tribunal went to great length over a period of 7 days to explain the areas of overcharging to [NAME] which has ignored those comments and has continued to overcharge [NAME] refused to allow inspection of documents on several occasions which would have enabled the parties to narrow down the issues for the Tribunal to consider

[NAME] has failed to be transparent, it has failed to disclose transactions with [COMPANY] and associated contractors and persons

General comments regarding this year only

[NAME] did not supply a copy of the accounts or the budget to some [NAME]

The budget for the year p521 is illegible Mr [NAME] was a director of [NAME] during the year. At the time, he was an officer of [COMPANY]. He was appointed by the developer [COMPANY], which was part of the [COMPANY]. [NAME] is also part of the same Group. Other directors are stated to have been appointed in April 2014 however Mr [NAME] had no authority to appoint directors because the members voted to remove him as a director in February 2014. None of the directors have declared their conflicts of interest to the [NAME], who have not elected them.

[NAME] has failed to disclose details of the actual car park expenditure although it must possess that information otherwise it would be unable to disclose a deficit of £683 for the year on page 543. It is impossible for the respondents to reconstruct that figure from the [COMPANY] information produced by [NAME]. We have used our best endeavours to allocate the costs despite it not being our responsibility. Companies House issued a notice to strike off [NAME] on 19 May 2015. Other income 0 900 no details have been supplied by [NAME], therefore we are unable to accept the charge, we have estimated income of £900 in accordance with the accounts for 2013. [NAME] is stated to be a non profit making company therefore all income must be accounted for within the service charge accounts, which is consistent with previous years. These do not fall within the Tribunal’s jurisdiction under section 27A of the Landlord and Tenant Act 1985 (“the 1985 Act”). The Tribunal’s jurisdiction is [COMPANY] to making a determination under section 27A of the 1985 Act as to liability to pay a service charge. Service Charge means amounts payable by a tenant in accordance with section 18(1). Under the terms of the Lease the service charge is “Tenant’s Share of Expenses”. Income received or receivable by the Management Company is neither a Service Charge item nor an Expense and therefore falls outside the jurisdiction of the Tribunal. Deposit account interest 0 870 [NAME] has failed to produce any details, the lack of income indicates that monies are not being held correctly, we have estimated 1% based on the average reserve fund balance These do not fall within the Tribunal’s jurisdiction under section 27A of the Landlord and Tenant Act 1985 (“the 1985 Act”). See above. sub total 0 1770 0 Expenditure

Rates and water 868 320 The charge is unreasonable [NAME] has failed to correct the £633 charge which was cancelled p1350, we have estimated an amount based on the actual charge in 2017. Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8.

The costs include standing charge and sewerage charges.

Such costs are not unreasonable in the circumstances. The supply is the supply.

The management company are unclear as to the issues raised by the respondent. £320 There is a cancellation of £633.49 at page 1350 which has not been corrected In addition service charge accounts for 2016 show rates and water in credit in the sum of £410 (page 562). Clearly there was a supply made during both 2015 and 2016. We therefore adopt Mr [NAME] estimate.

[NAME] 53165 46803 the working paper does not agree with the accounts, it appears that the charge of £1546 has been duplicated in the accounts, the prepayments make no sense, a prepayment should reduce the expenditure not increase it, the information supplied is therefore unreliable. No details have been supplied regarding the charges of £400 and £12,313. Car parking costs should not appear under the cost heading [NAME], £4417 has been transferred below. Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8.

Pursuant to paragraph 1 to Schedule 8, the applicant is obliged to provide the services set out in part 1 of Schedule 4. Paragraph 10 to Schedule 4 requires the applicant to pay all taxes, charges and outgoings payable in respect of the building communal areas or [NAME] communal areas, which includes payment to the [NAME] applicant (as landlord) of the premiums paid by the [NAME] applicant in respect of the services set out in part 2 of the Schedule. Part 2 of the Schedule relates to buildings [NAME], together with [NAME] of the [NAME] communal areas.

It is accepted by the management company that vehicle and lift [NAME] is placed by them, rather than being placed by the landlord ([NAME] applicant). The costs associated with the vehicle and lift [NAME] are split between the car park and [NAME] schedules.

£46803 [NAME] £45256.82 (agreed) [NAME] £1546 (agreed) (page 1346) [[NAME] £4416.66 (agreed) (page 1355) has been transferred to car park expenditure.]

Light and heat 16374 11076 [NAME] entered into a QLTA in February 2014 without following the consultation procedure. Although charges have been made now at the residential rate, no credit notes have been produced in respect of the previous overcharging. There is no document to support the charge of £343.73. The charge has been amended to £13030 and 15% of that figure £1954 has been transferred to car parking charges leaving £11076 as [NAME] charges. Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8.

The management company have requested the missing invoice from [NAME] but have not been provided with a copy. The invoice number is H114 BEEEFFC dated 05 April 2015. This is for [NAME]. Page 1412 shows the start of a new invoice for this supply and a balance brought forward of £15.84 on page 1413. £13626 £343.73 disallowed. Correct residential rate has been applied for this year. Credits have been allowed by the Tribunal in years of overcharging namely 2013 and 2014. Total - £16030 [NAME] (85%) = £13626 Car Parking (15%) = £2404

QLTA as noted in 2014 – Respondent’s contribution capped at £100. Credit £12 – Apartment 94, £4 - Apartment 65 and £1 – Apartment 58.

Wages and social security 87351 21567 Even though there are only 3 or 4 employees per month the charge does not agree with the wages records, we have taken the lower of the two and accept £86297. No details of the £1053.95 charge by [NAME] has been supplied therefore that is not accepted. [NAME] has failed to allocate between car parking and [NAME] charges, therefore 75% of the adjusted total £86297 has been transferred to car parking charges leaving £21567 [NAME] costs. Pursuant to clause 5 of the lease, the management company has covenanted to observe and perform the obligations specified in Schedule 8.

£21516 Page 1510 shows wages £80469.53 and [NAME] £6647.70. Both sums are shown for this year as a combined sum rather than separately in accounts for previous years. Disallow £1053.95 as Management Company unable to explain who or what is “[NAME]” (page 1504). Total - £86063 [NAME] (25%) = £21516 Car Parking (75%) = £64547

Telephone 2648 2317 [NAME] has failed to allocate between parking and [NAME] charges, 12.5% = £331 has been transferred to car parking, leaving £2317 [NAME] charges Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8.

The costs associated with the telephone are split between the car park and [NAME] schedules. £2317 Total - £2648 [NAME] (87.5%) = £2317 Car Parking (12.5%) = £331

Post and stationery 418 18 The charges by [NAME] are unreasonable. VAT should not be applied to postage. No receipts from the post office have been produced. See above.

The original invoice included at £400 was corrected on the same day, which can be shown on the ledger attached – page 1583a £351 See nominal ledger at page 1583a. Total of pages 1581 and 1582 = £418. Page 1583 suggests 340 stamps – approximately 2 per [NAME] which the Tribunal finds reasonable despite greater use of electronic communication. VAT of £66.67 disallowed. Travelling 1029 212 No details of £876.14 have been supplied. We have requested details of the costs of the previous Tribunal hearing but [NAME] has failed to respond. Documents attached to insert into bundle – pages 1585a – 1585 c. £212 Pages 1585a to 1585c are company credit cards used by Mr [NAME] and Mr [NAME] for accommodation, meals and other items. These are all matters of account between [NAME] and Mr [NAME]/Mr [NAME] in relation to the performance of their duties but are clearly not service charge items. We allow £212 (agreed) for the costs of hiring a venue for Management Company AGM (see page 1666a)

Management fees 30085 4475 The management is woefully inadequate, [NAME] failed to disclose its connection with the [COMPANY], it has not complied with the RICS code of practice despite the lengthy explanations by the previous Tribunal, the system of charging is incorrect, [NAME] was charged separately, it has failed to issue valid invoices, multiple versions of invoices have been produced, [NAME] has been unable to explain adequately the expenditure included within the service charge accounts, it has not been transparent, it failed to allow inspection of the supporting documents, it has failed to produce valid year end certificates to [NAME]. It failed to follow the consultation procedure, unreasonable administration charges have been applied. [NAME] has failed to disclose details of all income and benefits it has received arising from the management. [NAME] breached the data protection act by disclosing (incorrect) personal information in the accounts p532. [NAME] has no authority for charging in advance, it has failed to repay the monies which the previous Tribunal found it had overcharged. The charge is unreasonable, a nominal sum of £25 per unit is proposed. [NAME] has now resigned, not before time, the members/[NAME] of [NAME] voted to remove it in 2014. Pursuant to clause 5 of the lease, the management company has covenanted to observe and perform the obligations specified in Schedule 8. Pursuant to paragraph 1 to Schedule 8, the applicant is obliged to provide the services set out in part 1 of Schedule 4. Paragraph 14 to part 1 to Schedule 4 requires the applicant to generally manage, administer and protect the amenities of the building communal areas and [NAME] communal areas and, for that purpose, employ [NAME] agents. The criticisms raised by the respondent are denied. It is denied that the management on the part of [NAME] has been inadequate. Any connection, or otherwise, with the [COMPANY] is irrelevant: the management company is a lessee owned and controlled management company and has chosen to employ the services of [NAME] as its [NAME] agent. The directors of the management company are lessees and, as a board of directors, have resolved to appoint [NAME] as their agent. It is disputed that the system of charging has been incorrect. Whilst there have been occasions in which [NAME] is shown as a separate charge, this practice is not uncommon within the industry. It is disputed that there has been a failure to allow inspection of supporting documents. The respondent has sought to exercise his rights under sections 21 and 22 of the 1985 Act. Most recently, the respondent failed to attend his appointment with [NAME]. It is disputed that the 2015 accounts disclosed a list of debtors. Document 532 which the Respondent refers to is in relation to 2013. It is accepted that [NAME] issue an invoice in advance of their services which is then paid monthly in arrears. It is also accepted that [NAME] have no reside as [NAME] agent. [NAME], [NAME] Manager, retires at the end of July 2019. Given Mr [NAME] involvement and experience with the building, coupled with his impending retirement, [NAME] has given notice to the management company of their intention to resign. £21480

Repairs and renewals 14518 7745 Monies received have not been accounted for, works to flats is not service charge expenditure p1598, p1605, p1616, charges by [NAME] are unreasonable p1608, p1621, p1622, p1623 Pursuant to clause 5 of the lease, the applicant has covenanted to observe the obligations specified in Schedule 8.

The management company are unclear as to the issues raised by the respondent, and simply put do not understand the point the respondent is making here or the respondent’s challenge.

The costs incurred at page 1608, 1621 and 1623 are within market norms.

The management company make every effort to make a claim against the buildings [NAME] for any internal repairs due to leaks etc., however, if the repair cost is lower than the [NAME] then the repairs are undertaken at the expense of the service charge. £12205 Pages 1598 (leak), 1605 (water damage) and 1616/7 ([NAME] claim and excess) allowed – See under “Excess” in Decision. Pages 1608 (labour £3500), 1621 (labour £750) 1622 (labour £320) and 1623 (labour £250) – labour rate reduced from £250 to £150 per day. Disallow £1928 plus VAT = £2313. Lift maintenance 13244 13244

£13244

Household and cleaning 12913 12307 the working paper does not agree with accounts, the information supplied by [NAME] is therefore unreliable, the charges by [NAME] are unreasonable and they have been reduced in accordance with the last Tribunal decision Pursuant to clause 5 of the lease, the applicant has covenanted to observe and perform the obligations specified in Schedule 8.

The costs associated with household and cleaning are within market norms. £12513 Reduce car park sweeping at pages 1649 and 1650 from £1000 to £600. [NAME] 784 784

£784 Pump station 403 403

£403 [NAME] 7561 7561

£7561 Lighting maintenance and bulbs included under repairs and renewals As above.

No separate heading in accounts Sundry expenses 388 0 no details supplied Document attached to insert into bundle at page 1666a Disallowed Hotel expenses for hire of venue for AGM of £212 allowed under travelling above. No details of “amounts re-classified as per client” at page 1666a have been provided and is therefore disallowed Dry riser maintenance 768 768

£768 Emergency lighting inspection 600 600

£600

Fire risk assessment 2920 1920 It is unnecessary to arrange a fire risk assessment [NAME] year and the charge by [NAME] is unreasonable As above.

The management company considered it appropriate and reasonable to undertake a fire risk assessment (FRA) in 2015, notwithstanding that an FRA has been undertaken in previous years.

Matters of health and safety are paramount.

The costs associated with the FRA is not unreasonable and is within market norms. £1920 FRA disallowed (pages 1673 and 1674). Accountancy 1500 260 The service provided by the accountant and the cost remain unreasonable despite the comments made by the previous Tribunal, the service charge accounts are inadequate as described above, changes of accounting policies have not been disclosed, the accounts do not comply with Tech 03/11 . No auditors or accountants report has been issued to [NAME]. We propose £260 based on the charges of another accountant's charges to a management company for providing a full service at a similar size block of apartments. Pursuant to clause 5 of the lease, the applicants have covenanted to observe and perform the obligations specified in Schedule 8.

The audit fees are within market norms. £2000 (invoice from [NAME] at page 1678 if for £2000 not £1500)

Legal and professional fees 15748 -1902 We have asked [NAME] to supply details of the costs relating to the previous Tribunal but we have not received a reply. It was irresponsible of [NAME] if it were taking legal action against [NAME] at a time when it was found to be overcharging and its demands were invalid, it should have put its house in order first. [NAME] informed [NAME] that it would not charge legal fees as service charge expenditure. Advice given to individuals and charges where no details have been supplied cannot be accepted. Pursuant to clause 5 of the lease, the applicants have covenanted to observe and perform the obligations specified in Schedule 8.

Further and/or alternatively, paragraph 16 to part 1 to Schedule 4 requires the applicant to comply with all statutory obligations relating to the management company. £2748 Invoices at pages 1682- 1687 (total £13756.94) contain narratives that relate variously to service charge arrears claimed against Mr [NAME] in the County Court and First Tier Tribunal, fees of counsel (Mr [COUNSEL]), s20B advice, payability, dispensation and counsel’s fees for the hearing 7th to 10th April 2015. We know from the evidence of Mr [NAME] that the Tribunal hearings in December 2014 and April 2015 related to both service charge proceedings and appointment of manager. We also know that the Management Company took advice from counsel as to how to deal with the costs of those proceedings. Miss [NAME] submits with some force that the narratives on the bills from [NAME] are infelicitous in that they should also have referred to the AOM proceedings. The Tribunal accepts that submission and finds that the invoices totalling £13756.94 relate both to service charge and AOM proceedings. In 2014 we stripped out £10,000 which we were told by Mr [NAME] was charged to Mr [NAME] and the other respondents as contractual costs in relation to the 2014/15 service charge proceedings. In 2015 we strip out £13,000 as relating to the AOM proceedings. Mr [NAME] evidence was that sum was to be an administration charge against Mr [NAME] and the other AOM applicants and not to be charged to the service charge account. The balance of those two invoices (£756.94) is payable by the service charge but not, on the evidence of Mr [NAME], by Mr [NAME].

Accordingly, we credit Mr [NAME] with £5 (Apartment 94) and £4 (Apartment 117).

[COMPANY] invoice in the sum of £312 (page 1688) is an Expense properly chargeable to the service charge account in relation to Management Company AGM and resolution paperwork.

Bank charges 199 0 The charges are unreasonable Pursuant to clause 5 of the lease, the applicant has covenanted to observe and perform the obligations specified in Schedule 8.

The bank charges relate to those accounts and are based on general usage. This is standard practice. The charges are within market norm. £199 See previous years Transfer to reserve fund 21700 0 [NAME] is not operating the reserve fund correctly, it has failed to make adjustments in accordance with the previous Tribunal decision, it is therefore carrying forward the incorrect balance, it has failed to supply details of a separate bank account, it has failed to disclose details of expenditure which has been deducted from the reserve fund, it has failed to justify the contributions as requested, the respondents are unable to accept the charge until the fund is operated correctly. Pursuant to clause 3.1.2, [NAME] has covenanted to observe and perform the tenant’s obligations specified in parts 1 and 2 of Schedule 6.

Paragraph 2 to part 1 to Schedule 6 requires [NAME] to pay their share of the expenses to the applicant calculated and payable as specified in part 1 of Schedule 5.

Part 2 to Schedule 5 entitled the applicant to invest such payments on deposit.

The respondent does not appear to be challenging the management company’s ability to collect a reserve fund, nor does the respondent appear to be challenging the reasonableness of the funds collected. These are the only two matters within the Tribunal’s jurisdiction under section 27A and 19 of the 1985 Act. £21700

Transfer to [NAME] 914

0 not permitted by the lease As above. £914 The Management Company is to credit the excess to the Tenant’s next payment of the Tenant’s Share of Expenses (paragraph 3.5.2.2 of Schedule 5 Part 1). sub total 286098 130478

[NAME] £184184 Apartment 53 - £828 Apartment 58 - £959 -£1= £958 Apartment 60 - £822 Apartment 65 - £998-£4 =£994 Apartment 94 - £1106 -£12 -£5 = £1089 Apartment 117 - £909-£4 = £905

CAR PARK EXPENDITURE Electricity - £2404 Staff Wages - £64547 Social Security - [included within wages] [NAME] - £4417 Telephone - £331

Total £71699 1.25% payable by Apartments 58, 65 and 94 = £896

TENANT’S SHARE OF THE EXPENSES

Apartment 53 - £828 Apartment 58 - £1854 Apartment 60 - £822 Apartment 65 - £1890 Apartment 94 - £1985 Apartment 117 - £905

Scott Schedule Disputed service charges year ended 31 December 2016

Item Cost Applicant's Comments Respondent Respondent's Comments Applicant's Comments Leave Blank for the Tribunal General comments abbreviations - [NAME] = the 1st applicant, [NAME] = [APPELLANT] references are to the new bundle of documents unless otherwise stated [NAME] has failed to comply with the lease [NAME] has failed to charge reasonable sums [NAME] has produced bogus documents, its credibility is questionned The service charge accounts produced by [NAME] are inadequate, as a minimum requirement they should identify the charges payable by the different groups of [NAME], they are drawn up in a manner which is inconsistent from year to year and inconsistent with the budgets, the cost headings are inappropriate. Changes in accounting policies have not been disclosed nor explained. The accounts do not enable comparison of expenditure from one year to another or with the budget. no auditors or accountants report has been supplied despite the budget providing for the cost of an audit The information supplied by [NAME] is unreliable. No nominal ledger accounting records have been produced by [NAME], just some working papers and a selection of invoices, which may have been cancelled or amended. Credit notes have been omitted, accruals have not been reversed, prepayments have not been included. It appears that [NAME] has been highly selective when presenting information, meaningless documents have been produced whilst meaningful documents have been omitted

[NAME] has failed to disclose all costs incurred relating to the previous Tribunal case General comments regarding this year only [NAME] did not supply a copy of the accounts or the budget to some [NAME] The budget for the year p522 is illegible [NAME] has issued credit notes of £502.00 [NAME] on pages 100 and 129 old bundle. Those credits do not appear on the statements of account. [NAME] is asked to explain where the corresponding charges appear within the service charge accounts.

Invoices at pages 97 and 98 old bundle are dated 23 February 2016 and appear on the statement of account on page 80 with that date, however they include charges up to 14 November 2016.

Incorrect service charges have been applied to some [NAME] during the year in respect of legal fees. [NAME] has no authority to charge [NAME] who were involved in the previous Tribunal case and attempt to penalise them. [NAME] was responsible for overcharging all [NAME]. The charges are unreasonable, contrary to the lease and contrary to the Tribunal decision. Mr [NAME] S [NAME] was a director of [NAME] during the year. At the time, he was an officer of [COMPANY]. He was appointed by the developer [COMPANY], which was part of the [COMPANY]. [NAME] is also part of the same Group. Other directors are stated to have been appointed in April 2014 however Mr [NAME] had no authority to appoint directors because the members voted to remove him as a director in February 2014. None of the directors have declared their conflicts of interests to the [NAME], who have not elected them. [NAME] has failed to disclose details of the actual car park expenditure although it must possess that information otherwise it would be unable to disclose a deficit of £683 for the year on page 543. It is impossible for the respondents to reconstruct that figure from the [COMPANY] information produced by [NAME]. We have used our best endeavours to allocate the costs despite it not being our responsibility. [NAME] made some adjustments during the year relating to the previous Tribunal decision, [NAME] is asked to explain where the corresponding charges appear in the service charge accounts Companies House issued a notice to strike off [NAME] on 19 April 2016. Other income 0 900 no details have been supplied by [NAME], which has applied interest and administration charges during the year, we have estimated income of £900 in accordance with the accounts for 2013. [NAME] is stated to be a non profit making company therefore all income must be accounted for within the service charge accounts. These do not fall within the Tribunal’s jurisdiction under section 27A of the Landlord and Tenant Act 1985 (“the 1985 Act”). The Tribunal’s jurisdiction is [COMPANY] to making a determination under section 27A of the 1985 Act as to liability to pay a service charge. Service Charge means amounts payable by a tenant in accordance with section 18(1). Under the terms of the Lease the service charge is “Tenant’s Share of Expenses”. Income received or receivable by the Management Company is neither a Service Charge item nor an Expense and therefore falls outside the jurisdiction of the Tribunal.

Deposit account interest 0

1080 [NAME] has failed to produce any details, the inadequate interest indicates that monies are not being held correctly, we have estimated 1% based on the average reserve fund balance These do not fall within the Tribunal’s jurisdiction under section 27A of the Landlord and Tenant Act 1985 (“the 1985 Act”). See above sub total 0 1980 0 Expenditure Rates and water -410 -410

£320 Clearly there was a supply made during 2016. The same issue arose in 2015 where we adopted Mr [NAME] estimate based on actual usage in 2017. We do the same again for 2016. [NAME] 52586 43257 The [NAME] amounts require adjustment following the admission regarding the rate of commission, we have estimated a credit of £2500, vehicle [NAME] should not be included under [NAME], £4615 has been transferred to car park expenditure, charges by ADT and [NAME] should not be included under [NAME], they relate to flats and are not service charge expenditure, the charges by [NAME] are unreasonable in any event, Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8.

The management company are unclear as to the issues raised by the respondent, and simply put do not understand the point the respondent is making here or the respondent’s challenge. £60042 [NAME] £56962.58 (agreed) [NAME] £1608.96 (agreed) (page 1718) [[NAME] £4615 (agreed) (page 1719) – transferred to car park expenditure] ADT £114 disallowed – invoice 16/13 not produced. [NAME] 16/14-18 total £2,100. No breakdown between labour and materials. Labour to be reduced £250 to £150 per day. Disallow 30%. Total allowed as “Excess” = £1470.

Light and heat 17700 14868 In 2014, [NAME] entered into a QLTA for 3 years without following the consultation procedure. There are minor errors p1731, p1751 and p1779 which is further evidence of the information supplied by [NAME] being unreliable. No document has been supplied in respect of the charge of £171.07 on 01/12/16 and no invoices appear to be missing. The adjusted total is £17492 and 15% is transferred to car parking expenditure £2624 leaving £14868 [NAME] costs Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8.

The Respondent refers to errors at pages 1731, 1751 and 1779. The management company does not accept that these are errors. The Respondent has failed to clarify the errors. £14868 Disallow missing invoice £171.07 (16/48 - page 1729). Deduct £37 for adjustments pages 1731, 1751 and 1779. Total - £17492 [NAME] (85%) = £14686 Car Parking (15%) = £2624

QLTA as noted in 2014 – Respondent’s contribution capped at £100. Credit £22 – Apartment 94, £13 - Apartment 65 and £10 – Apartment 58.

Wages and social security 84657 20851 Even though there are only 3 or 4 employees per month the charge does not agree with the wages records, we have taken the lower of the two. No details of the £1254 charge by [NAME] has been supplied therefore that is not accepted. [NAME] has failed to allocate between car parking and [NAME] charges, therefore 75% of the adjusted total £83,403 has been transferred to car parking charges leaving £20,851 [NAME] costs. Pursuant to clause 5 of the lease, the management company has covenanted to observe and perform the obligations specified in Schedule 8.

Further and/or alternatively, paragraph 9 to part 1 to Schedule 4 requires the applicant to provide such staff as it considers necessary in connection with the provision of other services. £21164 The amount in the accounts is less than the schedule at page 1808 (£80961.44 + £6695.44). At hearing Mr [NAME] concedes “roughly in the ball park”. Tribunal adopts figure in accounts. Total - £84657 [NAME] (25%) = £21164 Car Parking (75%) = £63493

Telephone 3336 2919 [NAME] has failed to allocate between parking and [NAME] charges, 12.5% = £417 has been transferred to car parking, leaving £2919 [NAME] charges Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8.

Accordingly, such costs are recoverable pursuant to paragraph 10 to part 1 of Schedule 4 of mthe lease.

The costs associated with the telephone are split between the car park and [NAME] schedules. £2919 Total - £3336 [NAME] (87.5%) = £2919 Car Parking (12.5%) = £417

Post and stationery 669

-31 The charges by [NAME] are unreasonable. VAT should not be applied to postage. No receipts from the post office have been produced. See above.

The post and stationery costs are incurred by [NAME], and then re- charged to the management company. Given that [NAME] are VAT registered, the re-charge is subject to VAT.

The management company disputes the respondent’s comments– all receipts have been provided at pages 1884 – 1886. £552 Mr [NAME] accepts invoice at page 1886 = £268.89 Postage allowed net of VAT (page 1884 - £333.33 and page 185 £250). [NAME] credit of £299.86 at page 1883. Travelling 175 175

£175

Management fees 29000 4475 The management is woefully inadequate, [NAME] failed to disclose its connection with the [COMPANY], it has not complied with the RICS code of practice despite the lengthy explanations by the previous Tribunal, the system of charging is incorrect, [NAME] was charged separately, it has failed to issue valid invoices, multiple versions of invoices have been produced, [NAME] has been unable to explain adequately the expenditure included within the service charge accounts, it has not been transparent, it failed to allow inspection of the supporting documents, it has failed to produce valid year end certificates to [NAME]. It failed to follow the consultation procedure, unreasonable administration charges have been applied. [NAME] has failed to disclose details of all income and benefits it has received arising from the management. [NAME] breached the data protection act by disclosing (incorrect) personal information in the accounts p532. [NAME] has no authority for charging in advance, it has failed to repay the monies which the previous Tribunal found it had overcharged. The charge is unreasonable, a nominal sum of £25 per unit is proposed. [NAME] has now resigned, not before time, the members/[NAME] of [NAME] voted to remove it in 2014. Pursuant to clause 5 of the lease, the management company has covenanted to observe and perform the obligations specified in Schedule 8.

Pursuant to paragraph 1 to Schedule 8, the applicant is obliged to provide the services set out in part 1 of Schedule 4. Paragraph 14 to part 1 to Schedule 4 requires the applicant to generally manage, administer and protect the amenities of the building communal areas and [NAME] communal areas and, for that purpose, employ [NAME] agents.

The criticisms raised by the respondent are denied. It is denied that the management on the part of [NAME] has been inadequate. Any connection, or otherwise, with the [COMPANY] is irrelevant: the management company is a lessee owned and controlled management company and has chosen to employ the services of [NAME] as its [NAME] agent. The directors of the management company are lessees and, as a board of directors, have resolved to appoint [NAME] as their agent.

It is disputed that the 2016 accounts disclosed a list of debtors. Document 532 which the Respondent refers to is in relation to 2013.

It is also accepted that [NAME] have no reside as [NAME] agent. [NAME], [NAME] Manager, retires at the end of July 2019. Given Mr [NAME] involvement and experience with the building, coupled with his impending retirement, [NAME] has given notice to the management company of their intention to resign. £21480

Repairs and renewals 13582 11374 the charge is unreasonable, [NAME] has not supplied details of the charge of £1,885.78 on 01/01/16, the prepayment should be deducted not added Pursuant to clause 5 of the lease, the applicant has covenanted to observe the obligations specified in Schedule 8.

The costs associated with the Repairs and Renewals is not unreasonable, and is within market norms.

The Respondent refers to a charge of £1,885.78 on 01/01/16, however, there is no such charge within Repairs and Renewals. £12581 No invoice for £1885.78 appears at pages 1904-1906.(This appears to be an error by Mr [NAME] and is in fact a matter relating to lift maintenance where this item appears). Allow 1916, 1917, 1925, 1936 which cover such matters as “washing machine leak from flat above” under “Excess”. Prepayment of £1001 is disallowed fore this year as it is an Expense relating to the following year.

Lift maintenance 21108 15142 the charge is unreasonable, [NAME] has not supplied details of the charge of £1,885.78 on 01/01/16, the prepayment should be deducted not added Pursuant to clause 5 of the lease, the applicant has covenanted to observe the obligations specified in Schedule 8.

The costs associated with the Lift Maintenance is not unreasonable, and is within market norms.

The management company attaches page 1943a to insert into the bundle. There was a balance carried forward from 2014 of £1,885.78 which was written off in 2016. £18420 [NAME] £4119.09 X3 (pages 1938-40) + £4201.47 (page 1941) + £1982.70 (page 1942). Deduct credit £4201.47 (page 1943). Add prepayment made in 2014 but in respect of 2015 costs of £4080 (page 1943A).

Household and cleaning 13408 12802 the charges by [NAME] are unreasonable, p1957 and p1960 Pursuant to clause 5 of the lease, the applicant has covenanted to observe and perform the obligations specified in Schedule 8.

The costs associated with household and cleaning are within market norms. £13008 Reduce 1957 and 1960 from £1000 to £600. [NAME] 951 951

£951 Pump station 861 861

£861 [NAME] 8965

8965

£8965 Lighting maintenance and bulbs 3561 3561

£3561 Dry riser maintenance 960 960

£960 Emergency lighting inspection 2266 2266

£2266

Fire risk assessment 1606 606 It is unnecessary to arrange a fire risk assessment [NAME] year and the charge by [NAME] is unreasonable Pursuant to clause 5 of the lease, the applicant has covenanted to observe and perform the obligations specified in Schedule 8.

The management company considered it appropriate and reasonable to undertake a fire risk assessment (FRA) in 2016, notwithstanding that an FRA has been undertaken in previous years. Matters of health and safety are paramount.

The costs associated with the FRA is not unreasonable, and is within market norms £606 Disallow FRA (page 1991) Accountancy 1800 260 The service provided by the accountant and the cost remain unreasonable despite the comments made by the previous Tribunal, the service charge accounts are inadequate as described above, changes of accounting policies have not been disclosed, the accounts do not comply with Tech 03/11 . No auditors or accountants report has been issued to [NAME]. We propose £260 based on the charges of another accountant's charges to a management company for providing a full service at a similar size block of apartments. Pursuant to clause 5 of the lease, the applicants have covenanted to observe and perform the obligations specified in Schedule 8. Pursuant to paragraph 1 to Schedule 8, the applicant is obliged to provide the services set out in part 1 to Schedule 4.

The audit fees are within market norms. £2000 Invoice from [NAME] at 1994 of £2100 reduced to £2000. Pest control 135 135 £135

Legal and professional fees -3973 -43123 We have asked [NAME] to supply details of the costs relating to the previous Tribunal but we have not received a reply. It was irresponsible of [NAME] if it were taking legal action against [NAME] at a time when it was found to be overcharging and its demands were invalid, it should have put its house in order first. [NAME] informed [NAME] that it would not charge legal fees to the service charge accounts. No details have been supplied regarding charges of £210, £13,139, £5,269, £10,000, £1,979 and £100 and they are not accepted. Pursuant to clause 5 of the lease, the applicants have covenanted to observe and perform the obligations specified in Schedule 8.

The invoice dated 07/12/16 for £13,343 was a journal entry which was reversed the same day. This had no effect on the balance.

The invoice dated 31/12/16 for £10,000 was the costs awarded against Mr [NAME].

The two invoices dated 31/12/16 for £5,269 and £1,979 were journal entries to correct a coding error. -£3973 We accept Management Company explanation in relation to £13343, £10,000, £5268 and £1979.

Invoices at page 2017 (£7345.20), page 2014 (£810) and page 2013 (£17.30) totalling £8172.50 relate to the 2015 Tribunal and the AOM and service charge applications. In accordance with what we were told at the hearing these costs are not to be charged to Mr [NAME] through the service charge account. Accordingly, Mr [NAME] is entitled to credits of £49 (Apartment 94) and £40 (Apartment 117).

Bank charges 305 0 the charges are unreasonable, [NAME] has supplied no details of the £100 charge Pursuant to clause 5 of the lease, the applicant has covenanted to observe and perform the obligations specified in Schedule 8.

The bank charges relate to those accounts and are based on general usage. This is standard practice. £305 See reasons given in previous years

Transfer to reserve fund 21500 0 [NAME] is not operating the reserve fund correctly, it has failed to make adjustments in accordance with the previous Tribunal decision, it is therefore carrying forward the incorrect balance, it has failed to supply details of a separate bank account, it has failed to disclose details of expenditure which has been deducted from the reserve fund, it has failed to justify the contributions as requested, the respondents are unable to accept the charge until the fund is operated correctly. Pursuant to clause 3.1.2, [NAME] has covenanted to observe and perform the tenant’s obligations specified in parts 1 and 2 of Schedule 6.

The respondent does not appear to be challenging the management company’s ability to collect a reserve fund, nor does the respondent appear to be challenging the reasonableness of the funds collected. These are the only two matters within the Tribunal’s jurisdiction under section 27A and 19 of the 1985 Act. £21500 Transfer to [NAME] 11815 0 not permitted by the lease As above. £11815 The Management Company is to credit the excess to the Tenant’s next payment of the Tenant’s Share of Expenses (paragraph 3.5.2.2 of Schedule 5 Part 1). sub total 286563 100864 £215481

net [NAME] expenditure 286563 98884 [NAME] £215481 Apartment 53 - £968 Apartment 58 - £1122 -£10= £1112 Apartment 60 - £962 Apartment 65 - £1167-£13 =£1154 Apartment 94 - £1294 -£49 -£22 = £1223 Apartment 117 - £1063 -£40 = £1023 car park expenditure [NAME] has failed to disclose car park expenditure for the year and is therefore in breach of the terms of the lease. It obviously possesses the information otherwise it would be unable to disclose a surplus of £492 for the year on page 561. It is not for the respondents to calculate amounts on behalf of [NAME] but we have used our best endeavours to do so. Electricity

2624 transferred from above

£2624

Wages and social security

62552 transferred from above

£63493 [NAME] 4615 transferred from above £4615 Telephone 417 transferred from above £417 sub total 70208 Total £71149 1.25% payable by Apartments 58, 65 and 94 = £889 Total 286563 169092 TENANT’S SHARE OF THE EXPENSES

Apartment 53 - £968 Apartment 58 - £2001 Apartment 60 - £962 Apartment 65 - £2043 Apartment 94 - £2112 Apartment 117 - £1023

Scott Schedule Disputed service charges year ended 31 December 2017

Item Cost Applicant's Comments Respondent Respondent's Comments Applicant's Comments Leave Blank for the Tribunal General comments abbreviations - [NAME] = the 1st applicant, [NAME] = [APPELLANT] references are to the new bundle of documents unless otherwise stated [NAME] has failed to comply with the lease [NAME] has failed to charge reasonable sums [NAME] has produced bogus documents, its credibility is questionned The service charge accounts produced by [NAME] are inadequate, as a minimum requirement they should identify the charges payable by the different groups of [NAME], they are drawn up in a manner which is inconsistent from year to year and inconsistent with the budgets, the cost headings are inappropriate. Changes in accounting policies have not been disclosed nor explained. The accounts do not enable comparison of expenditure from one year to another or with the budget. The information supplied by [NAME] is unreliable. No nominal ledger accounting records have been produced by [NAME], just some working papers and a selection of invoices, which may have been cancelled or amended. Credit notes have been omitted, accruals have not been reversed, prepayments have not been included. It appears that [NAME] has been highly selective when presenting information, meaningless documents have been produced whilst meaningful documents have been omitted Bank statements have not been produced, there is little evidence of actual payments

General comments regarding this year only [NAME] did not supply a copy of the accounts or the budget to some [NAME] The budget for the year p523 is illegible Mr [NAME] was a director of [NAME] during the year. He was appointed by the developer [COMPANY], which was part of the [COMPANY]. [NAME] is also part of the same Group. Other directors are stated to have been appointed in April 2014 however Mr [NAME] had no authority to appoint directors because the members voted to remove him as a director in February 2014. None of the directors have declared their conflicts of interest to the [NAME], who have not elected them.

[NAME] has failed to disclose details of the actual car park expenditure although it must possess that information otherwise it would be unable to disclose a deficit of £683 for the year on page 543. It is impossible for the respondents to reconstruct that figure from the [COMPANY] information produced by [NAME]. We have used our best endeavours to allocate the costs despite it not being our responsibility. [NAME] made some adjustments during the year relating to the previous Tribunal decision, [NAME] is asked to explain where in the accounts the corresponding charges appear because it has not explained Incorrect charges have been applied to some [NAME] during the year in respect legal fees Companies House issued a notice to strike off [NAME] on 18 April 2017. Other income 0 900 no details have been supplied by [NAME], which has applied interest and administration charges during the year, we have estimated income of £900 in accordance with the accounts for 2013. [NAME] is stated to be a non profit making company therefore all income must be accounted for within the service charge accounts. These do not fall within the Tribunal’s jurisdiction under section 27A of the Landlord and Tenant Act 1985 (“the 1985 Act”). The Tribunal’s jurisdiction is [COMPANY] to making a determination under section 27A of the 1985 Act as to liability to pay a service charge. Service Charge means amounts payable by a tenant in accordance with section 18(1). Under the terms of the Lease the service charge is “Tenant’s Share of Expenses”. Income received or receivable by the Management Company is neither a Service Charge item nor an Expense and therefore falls outside the jurisdiction of the Tribunal. Deposit account interest 6 1170 [NAME] has failed to produce any details, the inadequate interest indicates that monies are not being held correctly, we have estimated 1% based on the average reserve fund balance These do not fall within the Tribunal’s jurisdiction under section 27A of the Landlord and Tenant Act 1985 (“the 1985 Act”). See above sub total 6 2070 £6 Expenditure Rates and water 324 324

£324

[NAME] 63321 57124 The working paper does not agree with the accounts. The [NAME] amounts require adjustment following the agreement to amend the commission, we have estimated a credit of £3500, charges by DJH and [NAME] should not be included under [NAME], they relate to flats and are not service charge expenditure, the charges by [NAME] are unreasonable in any event Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8.

Paragraph 10 to Schedule 4 requires the applicant to pay all taxes, charges and outgoings payable in respect of the building communal areas or [NAME] communal areas, which includes payment to the [NAME] applicant (as landlord) of the premiums paid by the [NAME] applicant in respect of the services set out in part 2 of the Schedule.

Part 2 of the Schedule relates to buildings [NAME], together with [NAME] of the [NAME] communal areas. £61145 [NAME] - £57746.56 (agreed). [NAME] - £1758.70 (agreed) (page 2059) “Excess” – allow [COMPANY] - £940. [NAME] by 30% in respect of labour charges to £700.

[[NAME] (pages 2057 and 2058) £5591.89 plus £63 (agreed)= £5655 - transferred to car parking.]

Light and heat 14562 12742 The working paper does not agree with the accounts. In 2014, [NAME] entered into a QLTA for 3 years without following the consultation procedure. [NAME] has not allocated the costs in a consistent manner with the previous Tribunal decision. Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8.

The Respondent challenges the accounts and the documents supplied. The Applicant refers to page 571 showing Light and Heat at £14,990 and page 2060 – 2063 showing the expenditure as £14,990.43. £12742 The Tribunal adopts the figure in the Accounts which is consistent with working papers at pages 2060 - 2063 (£14990)

Total - £14990 [NAME] (85%) = £12742 Car Parking (15%) = £2249

QLTA as noted in 2014 – Respondent’s contribution capped at £100. Applies to Apartment 94 only - credit £4.

Valet operative additional duties 3571 0 [NAME] has not supplied a working paper. The allocation of the cost is inconsistent with the previous Tribunal decision. £21197 Wages and Social Security – not disputed in Scott Schedule Total - £84788 [NAME] (25%) = £21197 Car Parking (75%) = £63591

£447 Employers pension Contribution – not disputed in Scott Schedule

£2273 Telephone – not disputed in Scott Schedule Total - £2598 [NAME] (87.5%) = £2273 Car Parking (12.5%) = £325

Post and stationery 392

0 The charges by [NAME] are unreasonable. VAT should not be applied to postage. No receipts from the post office have been produced. Pursuant to clause 5 of the lease, the management company have covenanted to observe and perform the obligations specified in Schedule 8.

The management company disputes the respondent’s comments – all receipts have been provided at pages 2155 – 2158. £188 [NAME] invoice at page 2158 suggests purchase of stamps on 9/11/17 in the sum of £203.88. In fact, Mr [NAME] document 2392 shows that this was in fact the purchase of euros at [NAME]. Mr [NAME] confirmed this was a personal purchase at the hearing. Invoice 17/65 disallowed. Hotel/travel 150 150

£150

Management fees 30500 4475 The management is woefully inadequate, [NAME] failed to disclose its connection with the [COMPANY], it has not complied with the RICS code of practice despite the lengthy explanations by the previous Tribunal, the system of charging is incorrect, [NAME] was charged separately, it has failed to issue valid invoices, multiple versions of invoices have been produced, [NAME] has been unable to explain adequately the expenditure included within the service charge accounts, it has not been transparent, it failed to allow inspection of the supporting documents, it has failed to produce valid year end certificates to [NAME]. It failed to follow the consultation procedure, unreasonable administration charges have been applied. [NAME] has failed to disclose details of all income and benefits it has received arising from the management. [NAME] breached the data protection act by disclosing (incorrect) personal information in the accounts p532. [NAME] has no authority for charging in advance, it has failed to repay the monies which the previous Tribunal found it had overcharged. The charge is unreasonable, a nominal sum of £25 per unit is proposed. [NAME] has now resigned, not before time, the members/[NAME] of [NAME] voted to remove it in 2014. Pursuant to clause 5 of the lease, the management company has covenanted to observe and perform the obligations specified in Schedule 8.

It is disputed that the 2017 accounts disclosed a list of debtors. Document 532 which the Respondent refers to is in relation to 2013.

It is also accepted that [NAME] have no reside as [NAME] agent. [NAME], [NAME] Manager, retires at the end of July 2019. Given Mr [NAME] involvement and experience with the building, £21480

Repairs and renewals 22322 17370 The working paper does not agree with the accounts, works to flats is not service charge expenditure Pursuant to clause 5 of the lease, the applicant has covenanted to observe the obligations specified in Schedule 8.

The management company make every effort to make a claim against the buildings [NAME] for any internal repairs due to leaks etc., however, is the repair cost is lower than the [NAME] then the repairs are undertaken at the expense of the service charge.

The difference represents an audit cost reallocation. £23466 Pages 2175 - 2178 onwards shows £22188.35. Add gate maintenance at page 2179 (£1278) = £23466 which is the figure that appears in the Accounts. Work to apartments in relation to [NAME] allowed for reasons given previously. Lift maintenance 13822 13822

£13822 [NAME] 1758 1758

Included in [NAME] above (not a separate heading in accounts) Lift telephone lines 2375

2375

Included in Telephone above (not a separate heading in accounts) Cleaning 14567 14567

£14567 [NAME] 984 984

£984 [NAME] and fire risk assessment 10933 8220 per the working paper The Respondent is not clear in its comments. The management company has supplied all documents. £10933 ADT £8219 (page 2261), FRA £1405.32 ([NAME] – page 2279) and smoke vent -£1308 (page 2280) This appear to be aggregate of two accounts headings – [NAME] and Fire Risk assessment)

£564 Lighting maintenance and bulbs and sundry expense headings in accounts – not challenged in Scott Schedule Dry riser maintenance 960

960

£960

Emergency lighting maintenance 1908

1908

£1908

Fire Risk Assessment included within heading of [NAME] above Accountancy 2000 260 The service provided by the accountant and the cost remain unreasonable despite the comments made by the previous Tribunal, the service charge accounts are inadequate as described above, changes of accounting policies have not been disclosed, the accounts do not comply with Tech 03/11 . No auditors or accountants report has been issued to [NAME]. We propose £260 based on the charges of another accountant's charges to a management company for providing a full service at a similar size block of apartments. Pursuant to clause 5 of the lease, the applicants have covenanted to observe and perform the obligations specified in Schedule 8.

The audit fees are within market norms. £2000 Invoice from [NAME] £2160 at page 2289. Fall restraint system inspection 486 486 This does not appear as a heading in the Accounts

£79 Pest Control heading in Accounts – not challenged in Scott Schedule Legal and professional fees 10713

10700 The working paper does not agree with the accounts There is an error in the Applicant’s Scott Schedule. The heading Legal and Professional fees should be nil, in accordance with the accounts at page 751.

There should be a row headed Building Survey which is shown at pages 2292 – 2294. £10700 See page 2292 which shows £10699.75 Building survey (2292-2294) – not disputed by Mr [NAME] at hearing [Confusingly Accounts show two headings “Building Survey - £10700” and “Legal and Professional Fees – 0” ] Bank charges 305 0 the charges are unreasonable, [NAME] has supplied no details of the £100 charge Pursuant to clause 5 of the lease, the applicant has covenanted to observe and perform the obligations specified in Schedule 8.

£274 As per pages 2295 – 2296. Reasonably incurred and supported by [NAME] documentation.

The Respondent challenges the £100 charge, however, there is no charge of £100 in the Bank Charges 2017 accounts. All documents have been supplied.

The Bank Charges fees are within market norms.

The respondent does not appear to be challenging the management company’s ability to collect a reserve fund, nor does the respondent appear to be challenging the reasonableness of the funds collected. These are the only two matters within the Tribunal’s jurisdiction under section 27A and 19 of the 1985 Act. £24000 As shown in Accounts for year ended 31st December 2017 Transfer to [NAME] 11815 0 not permitted by the lease As above. £6490 Figure taken from Accounts for year ended 31st December 2017 The Management Company is to credit the excess to the Tenant’s next payment of the Tenant’s Share of Expenses (paragraph 3.5.2.2 of Schedule 5 Part 1). sub total 229268 148225 £230693 net [NAME] expenditure 229262 146155 £230687 [NAME] £230687 Apartment 53 - £1036 Apartment 58 - £1201 Apartment 60 - £1030 Apartment 65 - £1249 Apartment 94 - £1385 -£4 = £1381 Apartment 117 - £1138

car park expenditure [NAME] has failed to disclose car park expenditure for the year and is therefore in breach of the terms of the lease. It obviously possesses the information otherwise it would be unable to disclose a surplus of £492 for the year on page 561. It is not for the respondents to calculate amounts on behalf of [NAME] but we have used our best endeavours to do so. Electricity 1785 1785

£2249 Wages and social security 81664 0 The working papers do not agree either with the accounts or with the wages records, the allocation of costs is unreasonable, charges by [NAME] are not supported and are not accepted £63591 [NAME] 4899 4899

£5655 Cleaning 952 952

£952 Miscellaneous 639 0 [NAME] has not supplied a working paper 0 £325 - telephone sub total 89939 7636 Total £72772 1.25% payable by Apartments 58, 65 and 94 = £910 Total 319201 153791 TENANT’S SHARE OF THE EXPENSES

Apartment 53 - £1036 Apartment 58 - £2111 Apartment 60 - £1030 Apartment 65 - £2159 Apartment 94 - £2291 Apartment 117 - £1138