First-tier Tribunal rules on service charges and breaches of covenant

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : LON/00BE/LSC/2018/0458 Property : [ADDRESS] [POSTCODE] Applicant : [redacted] : [NAME] [COUNSEL], Counsel Respondent : [redacted] : Not represented and not present Interested Party : [NAME] [NAME] was the owner of 50% of the equity, represented at hearing by [NAME] [NAME] [NAME], caseworker at [NAME] of Application : Application for determinations as to reasonableness and payability of service charge and as to breaches of covenant in the lease Tribunal Members : Judge P [NAME] [NAME] C [NAME] and venue of Hearing : 25th February 2019 at 10 [ADDRESS] [POSTCODE] Date of Decision : 26th February 2019

DECISION

2 Decisions of the Tribunal (1) The estimated service charges of £1,227.65 for the year 2018/19 are payable in full. (2) By virtue of his having underlet the Property without first delivering to the landlord the requisite deed of covenant the Respondent has committed breaches of the covenant contained in clause 2.10.2 of the Lease. (3) Through the behaviour of occupiers of the Property and their guests at a party on 8th September 2018 the Respondent has committed breaches of covenants contained in clause 3.3.1 of the Lease and contained in clause 3.4 combined with paragraphs 2.1 and 2.2 of the Seventh Schedule to the Lease. (4) No cost order is made. The application 1. The Applicant seeks a determination pursuant to section 27A of the Landlord and Tenant Act 1985 as to the reasonableness and payability of certain service charges.

2. The Applicant also seeks a determination pursuant to section 168(4) of the Commonhold and Leasehold Reform Act 2002 that one or more breaches of covenant has/have occurred under the lease of the Property (“the Lease”).

3. The Applicant is the current freehold owner of the Property and the Respondent is the current (and original) leasehold owner. The Lease is dated 2nd September 2005 and was originally made between [NAME] (SE1) [RESPONDENT] (1) and the Respondent (2).

4. In its service charge application the Applicant seeks a determination that the estimated service charges for the year 2018/19 totalling £1,227.65 are payable.

5. In its breach of covenant application the Applicant alleges that the Respondent is in breach of covenants contained in clauses 2.10.2, 3.3.1 and 3.4 of the Lease and contained in paragraphs 2.1, 2.2 and 2.4 of the Seventh Schedule to the Lease. The wording of the relevant part of each of those covenants is set out below:- Clause 2.10.2: “Not to … underlet the whole or any part of the Demised Premises without first obtaining and delivering to the Landlord from the intended …

3 underlessee a duly executed direct covenant in favour of the Landlord to perform and observe the covenants and obligations on the part of the Tenant herein contained”. Clause 3.3.1: “Not to use or permit the use of the Demised Premises or any part thereof for any dangerous offensive noxious noisome illegal or immoral activity or in any manner that may be or become a nuisance or annoyance to the Landlord or to the tenant or occupier of any other part of the Block or any other neighbouring property”. Clause 3.4: “To observe and comply with and to ensure that all persons for the time being occupying all or any part of the Demised Premises observe and comply with the regulations set out in the Seventh Schedule hereto …”. Paragraph 2 of the Seventh Schedule:

“2. In using the Common Parts and the Internal Common Parts neither the Tenant nor any member of its household shall 2.1 make any unnecessary noise 2.2 leave any litter other than in a receptacle provided for that purpose 2.4 leave or cause to be left unattended any furniture packages bicycles toys or any other thing”. Preliminary points 6. On 8th February 2019 the [NAME] wrote to the Tribunal applying for the Respondent to be barred from taking any further part in these proceedings on the basis of his non-compliance with the Tribunal’s directions. That application was refused.

7. On 22nd February 2019 the [NAME] wrote to the Tribunal attaching a witness statement from [COUNSEL], a solicitor at the [NAME] [COUNSEL]. That statement referred to his having had a message from [NAME] [NAME] [NAME], followed by a conversation with [NAME] [NAME] colleague, [NAME]. [NAME] [NAME] told him that a [NAME] was the owner of 50% of the equity in the Property and that it was acknowledged that the

4 outstanding service charge was payable. [NAME] [NAME] also said that it was acknowledged that there had been a breach of the covenant against nuisance. 8. [NAME] [NAME] attended the hearing and said that he (and his [NAME]) represented [NAME] [RESPONDENT] but not the Respondent. At the start of the hearing he applied for an adjournment to enable him to provide more information but that request was refused on the basis that he had not offered a proper rationale as to why the proceedings should be adjourned at this late stage. 9. [NAME] [NAME] also said that [NAME] [NAME] had himself already paid the outstanding service charge. The Tribunal raised the question as to whether there was still a dispute in relation to the service charge and therefore whether the Tribunal had jurisdiction to make a determination. A short break was then taken to enable the Applicant to establish what had been paid by whom and on what basis, but the Applicant was unable to obtain sufficient clarity on this point in the time available and the Tribunal concluded that a determination was therefore still needed.

10. In relation to the Seventh Schedule to the Lease, at the hearing the Applicant did not pursue the alternative argument as to whether there had been a breach of paragraph 1.4. Applicant’s case on service charge 11. [NAME] [APPELLANT] has recorded in his evidence that [NAME] [NAME] of [NAME] admitted in conversation that this sum was due and owing.

12. At the hearing [NAME] [APPELLANT] for the Applicant took the Tribunal through the service charge provisions in the Lease and a brief analysis of these provisions was also included in the Applicant’s skeleton argument.

13. On 24th June 2018 the Applicant made a demand for quarterly interim payments, following which the Respondent paid a proportion leaving the sum of £504.17 outstanding. On 29th September 2018 the Applicant made a demand for the next quarter’s interim payments (£723.48) which meant that the total outstanding was £1,227.65. This is the amount in respect of which the Applicant now seeks a determination.

14. The Applicant submits that the above sum is due, is payable under the Lease and is reasonable.

5 [NAME] [COUNSEL] representative’s comments on service charge 15. [NAME] [COUNSEL] said that [NAME] [NAME] accepted that the abovementioned service charge sum of £1,227.65 was payable and that he had paid it. Applicant’s case on other alleged breaches 16. As regards clause 2.10.2 of the Lease, the Applicant submits that there has been a clear breach of a covenant contained in this clause as the Respondent has underlet the Property without first delivering to the landlord the requisite deed of covenant. The Applicant relies on the evidence of [NAME] [APPELLANT], referred to below. It also refers to the placing of a notice on the front door of the Property reading “[NAME]” which it submits suggests strongly that the Property is not occupied by [NAME] [NAME] himself.

17. As regards clauses 3.3.1 and 3.4 of the Lease and paragraphs 2.1, 2.2 and 2.4 of the Seventh Schedule to the Lease, the Applicant refers the Tribunal to evidence relating to a party at the Property which spilled into the common parts. [NAME] [NAME] evidence 18. [NAME] [NAME] is a property manager at [APPELLANT], the Applicant’s [NAME]. In his witness statement he states that the Respondent does not reside at the Property and that in September 2008 the Respondent gave the [NAME] a correspondence address of 36 [ADDRESS] [POSTCODE] and has at no stage thereafter notified them of a further change of address.

19. In September 2018 the [NAME] were notified by [NAME] [NAME], the lessee of Flat 11, that a placard had been installed on the front door of the Property referring to “[NAME]” and she emailed through a photograph of the placard. [NAME] [NAME] has concluded that [NAME] is a residential letting company that is subletting flats on short lets. [NAME] [NAME] also notes that there is a restriction on the registered title to the Property in favour of [NAME] [APPELLANT]. He adds that the Applicant has confirmed to him that the Respondent has never delivered a deed of covenant following any subletting.

20. In relation to the nuisance allegations, Ms [NAME] also informed the [NAME] (at the same time) that the occupants of the Property had caused considerable disturbance and nuisance to the other residents of the building. In particular, Ms [NAME] states that on 8th September 2018 there was a very loud party at the Property and certain guests were smoking marijuana, drinking and vomiting in the corridors. Vomit was left in the corridors, and police were called after

6 an altercation between two of the party guests. The police were in attendance for over 4 hours before the party was closed down, and [NAME] has provided photographs. 21. [NAME] [NAME] was cross-examined by the Tribunal on his evidence.

22. In relation to the service charge, [NAME] [NAME] said that only the amount of £1,227.65 was being claimed, rather than the larger amount set out in the Statement of Account, as there had been a further credit since the Statement of Account was printed off. Ms [NAME] evidence 23. Ms [NAME] has also provided a witness statement but did not attend the hearing to be cross-examined on that evidence. Counsel for the Applicant understands that she is currently abroad.

24. Ms [NAME] witness statement covers the information which [NAME] [NAME] states in his own witness statement came from Ms [COUNSEL]. [NAME] [COUNSEL] representative’s comments on other alleged breaches 25. [NAME] [NAME] said at the hearing that there had been many underlettings and that [NAME] [APPELLANT] had notified the Applicant’s [NAME] on many occasions that he proposed to underlet the Property. He accepted, though, on behalf of [NAME] [NAME] that there had been breaches of covenant in that the Respondent had underlet the Property without first delivering to the landlord the requisite deed of covenant. 26. [NAME] [RESPONDENT] said that he was unable to comment regarding the alleged breach of covenant relating to nuisance. [NAME] [COUNSEL] evidence 27. [COUNSEL] is another solicitor at [COUNSEL] and he has given a witness statement as to service of documents. He states that he carried out a search of the search directory 192.com and searched for the Respondent. The search result shows his address to be 36 [ADDRESS] [POSTCODE] and that he has not been living at the address recorded at the Land Registry (Flat 99 Devon Mansion) since 2005.

Accordingly, correspondence and documentation were sent to the Respondent at [ADDRESS].

28. At the hearing [NAME] [RESPONDENT] admitted that correspondence had been returned undelivered after having been sent to the [ADDRESS] address. He also said, in response to a question, that he did not have an email address for the Respondent.

7 Tribunal’s analysis Preliminary point 29. The Respondent has not engaged at all with these proceedings and there is at least a question as to whether he has received a copy of the application or of the directions or any other papers. However, based on the information available we are satisfied that the Applicant and the Tribunal have sent documentation to the Respondent’s last known address. Furthermore, [NAME] [RESPONDENT] was clearly aware of these proceedings as he instructed his solicitors to represent him at the hearing, and it was clear from the hearing that [NAME] [NAME] (for [NAME] [NAME]) had knowledge of the case and of the issues.

30. In our view, by far the most likely explanation for [NAME] [NAME] and [NAME] [RESPONDENT] knowledge of the position is that the Respondent will have shared with [NAME] [RESPONDENT] information received by him. Even if the information somehow reached [NAME] [NAME] direct, there is no plausible reason to conclude that he did not, or would not have had the opportunity to, share the information with the Respondent.

31. Our factual conclusion on this point, therefore, is that the Respondent will have received the relevant paperwork. Service charge 32. The Applicant has provided information as to what it states is owed by way of service charge. It has pointed to the relevant Lease provisions and submits that the amounts are reasonable. The Respondent has made no written or oral submissions. [NAME] [RESPONDENT] on behalf of [NAME] [NAME] accepts that the service charge is payable and states that [NAME] [NAME] has already paid.

33. In the light of the above, we consider it to be self-evident in the absence of any challenge whatsoever that the service charge sum of £1,227.65 is payable in full. Underletting 34. [NAME] [NAME] evidence that there have been underlettings is not strong. There is a notice on the door and there have been complaints of nuisance caused by occupiers of the Property, but these are not in our view sufficient evidence by themselves to demonstrate that the Respondent has in fact underlet the Property.

35. However, [NAME] [NAME] confirmed at the hearing on behalf of [NAME] [NAME] that the Property has been underlet several times. Furthermore, he did

8 not claim that a deed of covenant had been delivered prior to the grant of any of these underlettings and he impliedly accepted on behalf of [NAME] [NAME] that it had not been. We do not consider it credible that that [NAME] [NAME] would admit this breach if it had not in fact occurred and therefore we are satisfied that the Respondent has underlet the Property without first delivering to the landlord the requisite deed of covenant. Nuisance 36. Whilst Ms [NAME] was not available to be cross-examined on her evidence it is still appropriate to attach some weight to that evidence. [NAME] [NAME] was available to be cross-examined, and therefore to the extent that his evidence does not merely repeat that of Ms [RESPONDENT] his evidence is also of value.

37. The Respondent has offered no evidence on this issue and [NAME] [RESPONDENT] through [NAME] [NAME] has not commented on it. We are satisfied on the basis of the evidence before us that the party referred to by [NAME] took place and that the antisocial behaviour referred to by her also took place.

38. We consider the abovementioned behaviour to have constituted a breach of clause 3.3.1 of the Lease as it involved activity which was dangerous offensive noxious noisome illegal and immoral. It also constituted a breach of clause 3.4 coupled with paragraphs 2.1 and 2.2 of the Seventh Schedule to the Lease as it involved the making of unnecessary noise and the leaving of litter other than in a receptacle provided for that purpose. Costs 39. No cost applications were made.

Name: Judge P [NAME]: 26th February 2019

9 RIGHTS OF APPEAL

A. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber) a written application for permission must be made to the First-tier Tribunal at the regional office dealing with the case.

B. The application for permission to appeal must arrive at the regional office within 28 days after the Tribunal sends written reasons for the decision to the person making the application.

C. If the application is not made within the 28 day time limit, such application must include a request for extension of time and the reason for not complying with the 28 day time limit; the Tribunal will then look at such reason and decide whether to allow the application for permission to appeal to proceed despite not being within the time limit.

D. The application for permission to appeal must identify the decision of the Tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal, and state the result the party making the application is seeking.

10 APPENDIX

Appendix of relevant legislation

Landlord and Tenant Act 1985 (as amended) Section 18 (1) In the following provisions of this Act "service charge" means an amount payable by a tenant of a dwelling as part of or in addition to the rent - (a) which is payable, directly or indirectly, for services, repairs, maintenance, improvements or insurance or the landlord's costs of management, and (b) the whole or part of which varies or may vary according to the relevant costs. (2) The relevant costs are the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a superior landlord, in connection with the matters for which the service charge is payable. (3) For this purpose - (a) "costs" includes overheads, and (b) costs are relevant costs in relation to a service charge whether they are incurred, or to be incurred, in the period for which the service charge is payable or in an earlier or later period. Section 19 (1) Relevant costs shall be taken into account in determining the amount of a service charge payable for a period - (a) only to the extent that they are reasonably incurred, and (b) where they are incurred on the provisions of services or the carrying out of works, only if the services or works are of a reasonable standard; and the amount payable shall be limited accordingly. (2) Where a service charge is payable before the relevant costs are incurred, no greater amount than is reasonable is so payable, and after the relevant costs have been incurred any necessary adjustment shall be made by repayment, reduction or subsequent charges or otherwise. Section 27A (1) An application may be made to the appropriate tribunal for a determination whether a service charge is payable and, if it is, as to - (a) the person by whom it is payable,

11 (b) the person to whom it is payable, (c) the amount which is payable, (d) the date at or by which it is payable, and (e) the manner in which it is payable. (2) Subsection (1) applies whether or not any payment has been made. (3) An application may also be made to the appropriate tribunal for a determination whether, if costs were incurred for services, repairs, maintenance, improvements, insurance or management of any specified description, a service charge would be payable for the costs and, if it would, as to - (a) the person by whom it would be payable, (b) the person to whom it would be payable, (c) the amount which would be payable, (d) the date at or by which it would be payable, and (e) the manner in which it would be payable. (4) No application under subsection (1) or (3) may be made in respect of a matter which - (a) has been agreed or admitted by the tenant, (b) has been, or is to be, referred to arbitration pursuant to a post-dispute arbitration agreement to which the tenant is a party, (c) has been the subject of determination by a court, or (d) has been the subject of determination by an arbitral tribunal pursuant to a post-dispute arbitration agreement. (5) But the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment.

Commonhold and Leasehold Reform Act 2002

Section 168

(1) A landlord under a long lease of a dwelling may not serve a notice under section 146(1) of the Law of Property Act 1925 in respect of a breach by a tenant of a covenant or condition in the lease unless subsection (2) is satisfied.

(2) This subsection is satisfied if – (a) it has been finally determined on an application under subsection (4) that the breach has occurred, (b) the tenant has admitted the breach, or (c) a court in any proceedings, or an arbitral tribunal in proceedings pursuant to a post-dispute arbitration agreement, has finally determined that the breach has occurred.

12 (4) A landlord under a long lease of a dwelling may make an application to a leasehold valuation tribunal for a determination that a breach of a covenant or condition in the lease has occurred.

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : LON/00BE/LSC/2018/0458 Property :

[ADDRESS] [POSTCODE] Applicant : [redacted] : [NAME] [COUNSEL], Counsel Respondent : [redacted] : Not represented at hearing Interested Party :

[NAME] [NAME], the owner of 50% of the equity, represented at hearing by a [NAME] [NAME] [NAME] of Application : Correction certificate Tribunal Members :

Judge P [NAME] [NAME] C [NAME] and venue of Hearing : 10 [ADDRESS] [POSTCODE] Date of original Decision : 26th February 2019 Date of Correction Certificate : 17th December 2019

DECISION

2 As Chairman of the Tribunal which decided the above-mentioned case, I hereby correct the errors and clarify the decision dated 26th February 2019 as follows:1

1. In the original decision it was stated that [NAME] [NAME] [NAME] was a caseworker at [NAME] and that he represented [NAME] [NAME] at the hearing.

2. However, it has since come to our attention that [NAME] [NAME] was not in fact employed by, or acting in any capacity on behalf of, [NAME] and that [NAME] were not acting for [NAME] [COUNSEL].

3.

Accordingly, the Tribunal’s decision is hereby corrected so as to remove any reference to [NAME] [NAME] being employed by, or acting in any capacity on behalf of, [NAME] and also so as to remove any inference that [NAME] were acting for [NAME].

Name: Judge P [NAME]: 17th December 2019

1 Regulation 50 The Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013.