First-tier Tribunal Rules on Service Charges for Major Works

OUTCOME: Dismissed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) & IN THE COUNTY COURT Business Centre, sitting at 10 [ADDRESS] [POSTCODE]

[ADDRESS] number : LON/00BE/LSC/2021/0357 CVP REMOTE H6QZ09W2

Property : 67a [ADDRESS] [POSTCODE] Applicant : [redacted] Representatives : Mr [RESPONDENT] (Enforcement Officer) Respondent : [redacted] : In person Type of Application : At the Tribunal - For the determination of the liability to pay and reasonableness of service charges (s.27A Landlord and Tenant Act 1985) Tribunal Members : Judge [NAME] and venue of Hearing : 21 March 2022 by online video hearing Date of Decision : 24 March 2022

DECISION

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Summary of the decisions made by the Tribunal

The following sums are payable by Ms [NAME] to Southwark Council by 5th May 2022: (i) Service charges: £3945.17

Summary of the decisions made by the Court

The following sums are payable by Ms [NAME] to Southwark Council by 5th May 2022: (ii) County Court issue fee £455; (iii) There is no award of interest (iv) [ADDRESS] makes no award in respect of the defendant’s Counterclaim (v) [ADDRESS] makes no award for costs

The application 1. This application relates to 67a [ADDRESS] [POSTCODE] It is one of two flats in a brick built terraced property. The respondent’s lease is dated 10 January 2005 which grants a term of 125 years from 10th January 2005. The Applicant is the freeholder and lessor.

2. By the lease of the property and by clause 2(1) of the Lease the respondent covenanted to pay the Service Charges set out in the Third Schedule at times and in the manner, there set out. By Paragraph 2(1) of the Third Schedule to the Lease, the applicant has covenanted before the commencement of a service charge year to produce an estimate of the amount payable by the respondent and to notify the respondent of the same. By Paragraph 2(2) of the Third Schedule to the Lease, the respondent covenanted to pay the estimated invoice provided by the applicant in 4 equal instalments on the quarter days commencing from 1 April.

3. By Paragraph 4(1) of the Third Schedule to the Lease, the applicant covenanted that as soon as practicable after the conclusion of a service year to ascertain the actual service charge for that year and to notify the respondent of the same. By Paragraph 5(1) of the Third Schedule to the Lease, the respondent covenanted that, in the event that the actual service charge exceeds the estimated sum previously invoiced, to pay such balance as is outstanding to the applicant within one month. In this case an estimate was indeed prepared followed by ascertained actual service charge amounts the details of which are set out above.

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4. On 1 June 2021 the Applicant landlord issued proceedings in the County Court Business Centre claiming, as set out on the Claim form: (i) service charges of £5005.72; (ii) County Court issue fee of £455. There was also a claim for interest.

5. At the hearing the applicant confirmed that the amount of the claim was in the final sum of £4833.94 less amounts paid or credited of £546.46 and £144.81 being a net claim of £4142.67. On 1 July 2021 the Respondent tenant filed a Defence and Counterclaim which was not quantified and appeared to repeat the basis for challenging the claim made by the applicant 6. On 24 August 2021, the case was transferred by the County Court by an order of [NAME] that said “Transfer to First-tier Tribunal (Property Chamber)”. On 16 November 2021, the Court/Tribunal held a Case Management Hearing (“CMH”). [ADDRESS]/Tribunal held the CMH so that the issues in dispute could be identified and Directions given so that these could be determined fairly and in a proportionate manner. The Judge allocated the case to the small claims track. The Judge recorded that the Respondent was challenging the reasonableness and the payability of the service charges.

7. The tenant seeks a determination pursuant to s.27A of the Landlord and Tenant Act 1985 (“the 1985 Act”) as to the amount of service charge payable by the respondent in respect of service charges payable for services provided for [ADDRESS]228 QA, (the property) and the liability to pay such service charge.

8. The application to the Tribunal was concerned with service charges arising from major works in 2017. These works covered an extensive list of items including painting decorating brickwork and other substantial works.

9. To clarify the nature of the cost of works done at [ADDRESS] the applicant confirmed that the works were completed under the [COMPANY] 2016/17 – Batch 3 Contract (“the Works”). The Works were done under a Qualifying Long-Term Agreement. A Section 20 Notice served on 12 September 2016 outlined the Works and estimated the Defendant’s contribution at £5,998.80. A copy of that Notice was exhibited to the Tribunal. Furthermore, a spreadsheet with a detailed specification of the Work, a breakdown of the estimated cost and the final cost was also exhibited and shown to the Tribunal. In his witness statement Mr [APPELLANT] on behalf of the applicant stated that in the event the actual cost of the works to the

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Defendant was £4,833.94 as set out in the Draft Final Account dated 3 June 2020. The Draft Final Account was also exhibited.

10. The relevant legal provisions are set out in the Appendix to this decision. Additionally, rights of appeal are set out below in an annex to this decision The hearing 11. The applicant was represented by Mr [APPELLANT], a Local Authority Enforcement Officer and the respondent appeared in person.

12. The tribunal did not inspect the property as it considered the documentation and information before it in the trial bundle enabled the tribunal to proceed with this determination and also because of the restrictions and regulations arising out of the Covid-19 pandemic.

13. This has been a remote hearing which has been consented to by the parties. The form of remote hearing was coded as CVPREMOTE - use for a hearing that is held entirely on the Ministry of Justice CVP platform with all participants joining from outside the court. A face-to- face hearing was not held because it was not possible due to the COVID-19 pandemic restrictions and regulations and because all issues could be determined in a remote hearing. The documents that were referred to were in one bundle of many pages, the contents of which we have recorded and which were accessible by all the parties. Therefore, the tribunal had before it a trial bundle of documents prepared by the respondent. This was augmented by additional documents that the applicant requested to be before the Tribunal.

14. These proceedings are being administered by the Tribunal under the Deployment Pilot Scheme. Judge Abbey will deal with all the issues in the case, including if appropriate costs, at the same time as the Tribunal decides the payability of the service charges. Judge Abbey (sitting alone as a District Judge of the County Court) will make all necessary County Court orders. Decision The claim for service charges – The Tribunal 15. The Tribunal is required to consider whether the services were reasonably incurred and were they of a reasonable standard being the

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issue transferred to it by the County Court. To do this the Tribunal considered in detail written and oral evidence and the surrounding documentation as well as the oral submissions provided by both the parties at the time of the video hearing.

16. The Tribunal were required to consider service charges arising in service charge year 2017 that were itemised major works.

17. One item in dispute relating to scaffolding at the property. The respondent objected to the charge as she maintained that she should not have to pay the extra cost for 8 days of unnecessary scaffolding. At the hearing Mr [NAME] pointed out that the scaffolding costs were fixed and that in fact there was no extra charge arising out of any “extra days”. The charge applied however long the scaffolding was in place and did not vary. In the circumstances the respondent accepted that she would not proceed further with this aspect of the challenge to the service charges.

18. The service charges started as estimated charges that were subsequently reduced to reflect the actual charges incurred by the applicant once the major works were essentially completed. Although the respondent rigorously challenged the standard and quality of the works, she regrettably failed to produce any convincing evidence to support her challenges to the works completed by the applicant, for example, the respondent did not produce any corroborating reports from a surveyor or [NAME] to confirm the quality of the remedial works. She did produce some photos and alternative painting estimates but these did not persuade the Tribunal that the charges in dispute were unreasonable. Given the nature of the works the Tribunal did not consider the charges excessive. Therefore, the Tribunal was of the view that the service charge for the major works was reasonable and payable save for two items.

19. The applicant conceded that there could have been two items listed in the works that had not been completed. They were the laying of fire- retardant floor covering in the common area and work to glass panels on the communal door. The door cost for the respondent was a half of £75 giving a deduction of £37.50. The flooring cost for the respondent was a half of what the Tribunal estimated to be a reasonable sum for this work which they calculated to be in the sum of £160. Therefore, the total deductions were £197.50. This being so by deducting that sum from the claim sum (£4142.67 less £197.50) this gives the final sum due from the respondent to the applicant being the reasonable and payable service charges for the major works from 2017.

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The claim for the County Court issue fee– Judge Abbey 20. The claimant sought the refund of the issue fee in the County Court in the sum of £455. Mr [NAME], on behalf of the Council confirmed that otherwise they would not be seeking any costs. Bearing in mind that the Council did mostly succeed in their claim there should be an award of the sum of £455 payable by the respondent to the applicant within 28 days from the date of this decision. There is no order as to any other costs. The claim for interest– Judge Abbey 21. The claimant seeks interest on the judgment sum at the contractual rate expressed in the lease to be 5 % above the [NAME] base rate. Judge Abbey noted that the claimant conceded during the hearing that the conduct of the claimant had not measured up to what might have been expected of the local authority. The respondent had claimed that the claimant had repeatedly failed to respond to her legitimate claims and correspondence and had failed to deal with the requirements of the Tribunal in a timely and appropriate manner. For example, the Tribunal wrote to the parties on 1 November 2021 to state that “Judge N Carr has reviewed this case ahead of the Case Management Hearing scheduled for tomorrow. The Applicant has failed to respond to the Direction given by Judge Martynski on 22 October 2021 that they must provide a copy of the full Particulars of Claim. It has failed to provide email details of a specific individual dealing with this case, to whom a follow up request can be made. No response has been received at all to the tribunal's email of 22 October 2021. In the circumstances, the case management hearing must be adjourned.” 22. The failings on the part of the claimant had plainly forced an adjournment and considerable extra effort for the Tribunal. Judge Abbey accepted that there had indeed been failings on the part of the claimant and that the claimant had failed to respond such that it had caused the respondent some evident stress. In the light of this Judge Abbey thought the award of interest was entirely inappropriate and disproportionate given the conduct of the parties. Therefore, there is no award of interest.

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The counter claim – Judge Abbey 23. As for the respondent’s Counterclaim this appears to be a repetition of the issues regarding the quality of the major works to the property. The respondent denied that they formed any separate counterclaim. Items were added to the Counterclaim despite the Judge on the directions hearing observing that the Defendant had not obtained permission to amend her Counterclaim. The matters added relate to costs and a personal injury claim which has its own legal procedure and is wholly outside the Tribunal’s jurisdiction. For all these reasons Judge Abbey is of the view that there is no coherent and quantified counterclaim that can be allowed and therefore the counter claim is refused and the Court makes no award in respect of the defendant’s Counterclaim

Name: Judge Professor Robert Abbey Date: 24 March 2022

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Appendix of relevant legislation and rules

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 [NAME], 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

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

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ANNEX - RIGHTS OF APPEAL

1. Appealing against the tribunal’s decisions

A written application for permission must be made to the First-tier Tribunal at the Regional tribunal office which has been dealing with the case.

2. The application for permission to appeal must arrive at the Regional tribunal office within 28 days after the date this decision is sent to the parties.

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

4. The application for permission to appeal must state the grounds of appeal, and state the result the party making the application is seeking. All applications for permission to appeal will be considered on the papers 5. Any application to stay the effect of the decision must be made at the same time as the application for permission to appeal. Appealing against the County Court decision 1. A written application for permission must be made to the court at the Regional tribunal office which has been dealing with the case.

2. The date that the judgment is sent to the parties is the hand-down date.

3. From the date when the judgment is sent to the parties (the hand- down date), the consideration of any application for permission to appeal is hereby adjourned for 28 days.

4. The application for permission to appeal must arrive at the Regional tribunal office within 28 days after the date this decision is sent to the parties.

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5. The application for permission to appeal must state the grounds of appeal, and state the result the party making the application is seeking. All applications for permission to appeal will be considered on the papers.

6. If an application is made for permission to appeal and that application is refused, and a party wants to pursue an appeal, then the time to do so will be extended and that party must file an Appellant’s Notice at the appropriate County Court (not Tribunal) office within 14 days after the date the refusal of permission decision is sent to the parties.

7. Any application to stay the effect of the order must be made at the same time as the application for permission to appeal. Appealing against the decisions of the tribunal and the County Court In this case, both the above routes should be followed.