First-tier Tribunal Rules on Service Charges Liability

OUTCOME: Allowed

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FIRST – TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

__________________________________________________________

Case Reference : CAM/00MX/LSC/2023/0017

Property : 23 Millgate, [ADDRESS], High Wycombe [POSTCODE]

Applicant: [redacted]

Respondent : [redacted]

Application : Application, pursuant to s27A of the Landlord & Tenant Act 1985, to determine the liability to pay and reasonableness of service charges.

Tribunal Members : Judge Stephen Reeder

Date of hearing : 3 June 2024 convened remotely by CVP platform Date of Decision : 3 June 2024 Date Written : 3 June 2024

__________________________________________________________________________________

DECISION __________________________________________________________________________________

© CROWN COPYRIGHT

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DECISION

A. The tribunal determines that the tenancy imposes liability to pay a variable service charge which includes a management charge.

B. The respondent has withdrawn the management charge for the financial year 2023/2024 in the sum of £245.30 and has refunded the same by applying a credit to the applicant’s rent and service charge account. The applicant has accepted that outcome. Accordingly, the tribunal does not make any determination as to the reasonableness of that sum.

C. The applicant has paid both an issue fee of £100 and a hearing fee of £200. Having regard to Rule 13(2) of The Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 and to the parties’ conduct and to the outcome of the proceedings, the tribunal makes an order directing the respondent to re-imburse those costs to the applicant.

D. Having regard to section 20C of the Landlord & Tenant Act 1985 and to the parties’ conduct and to the outcome of the proceedings the tribunal considers that it is just and equitable to grant an order providing that all or any of the costs incurred by the landlord in connection with proceedings before this tribunal are not to be regarded as relevant costs payable as a service charge payable by the applicant.

E. In considering whether to exercise its power to make any party costs order the tribunal has careful regard to section 29(2) of the Tribunals, Courts and Enforcement Act 2007 and Rule 13(1)(b) of the Tribunal Procedure (First-tier Tribunal)(Property Chamber) Rules 2013 read against the overriding objective in Rule 3 of the 2013 Rules and the guidance given by the Chamber President and Deputy President in [ADDRESS] [COMPANY] v [NAME], [NAME] v [NAME], [NAME] v [NAME] Rd Management [COMPANY] [2016] UKUT 0290 (LC). Having regard to the parties’ conduct and to the outcome of the proceedings the tribunal does not make any party costs order.

REASONS

The application, the property & the parties

1. The application is brought pursuant to s27A of the Landlord & Tenant Act 1985 to determine the liability to pay and the reasonableness of service charges and administration charges demanded in respect of 23 Millgate, [ADDRESS], High Wycombe [POSTCODE] (‘the property’).

2. The application was received on 29 April 2024 and relates to the 2023/2024 accounting year only. In section 7 of the pro-forma leasehold 3 form the applicant does not identify any earlier year as subject to challenge. The application seeks a determination of “management charge £5 p/w”, and poses the question “is there a management charge or not?”.

3. The applicant and tenant of the property is [APPELLANT] (hereafter ‘the applicant’).

4. The respondent landlord demanding the relevant service charges is [COMPANY] (hereafter ‘the respondent’).

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The procedural history

5. The application was commenced by pro forma leasehold 3 form received on 29 April 2024. A case management hearing was held on 12 December 2023 and both parties attended. As directed by and after that hearing the respondent wrote to the applicant on 3 January 2024 providing an explanation of the management charge. This is stated to be 15% the combined and apportioned estate and block charges. The 38 property estate charge totals £28,172.99 and is apportioned at 1/38th to equal £741.39. The 10 property block charge totals £8,939.48 and is apportioned at 1/10th to equal £893.94. The combined individual estate and block charge is £1,635.33. The management charge calculated at 15% of that individual estate and block charge is £245.30.

6. Judge Hardman made a directions order on 19 February 2024. This directed the applicant to serve a schedule identifying the items and amounts in dispute, why that is, and what reasonable amount should be payable. A schedule has been filed which confirms the sole item in dispute to be the management charge. The applicant has not complied with the direction to identify a reasonable sum he will pay.

7. In response to Judge Harman’s directions order dated 19 February 2024 the tribunal has been provided with an indexed documents bundle which is not paginated, a schedule of disputed service charges, and a statement dated 17 April 2024 from [RESPONDENT] [NAME] (service charge team manager for the respondent) with four documentary exhibits.

8. At 16.10 hours on Friday 31 May 2024 [RESPONDENT] [NAME] for the respondent emailed the tribunal office to attach correspondence sent to the applicant “withdrawing the disputed service charges, which are the subject matter of the Hearing scheduled for Monday” [3 June 2024].

9. The attached email to the applicant states as follows –

“Dear Mr [APPELLANT],

Management fee Cancellation - 1st April 2023 – 31st March 2024.

Upon review of your case scheduled for the Tribunal on June 3, 2024, we have decided to cancel the management fee previously levied for the financial year 2023/2024. Please note that the sum of £245.30 has been refunded and applied as a credit to your rent and service charge account. Should you have any further question, please do not hesitate to contact me via our Hub.

Yours Sincerely,

[NAME] Service Charge Team Manager”

10. The tribunal convened a remote video hearing by CVP (cloud video platform) on 3 June 2024. Neither party requested an in-person hearing in response to the directions order. Having regard to the issues raised and evidence and information filed on the application the tribunal is satisfied that the remote video hearing is an appropriate and proportionate procedure to determine these proceedings. Neither party requested an inspection of the property or the building in which it is located. The tribunal is satisfied that an inspection was not necessary in order to determine the issues raised in the application. The tribunal made its determinations on 3 June 2024.

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The matters in issue

11. The application was received on 29 April 2024 and relates to the 2023/2024 accounting year only. In section 7 of the pro-forma leasehold 3 form the applicant does not identify any earlier year as subject to challenge. The application seeks a determination of “management charge £5 p/w”, and poses the question “is there a management charge or not?”. He states “I raised the same issue in 2015.

12. The tribunal interprets this as a challenge to the liability to pay a management charge and to the reasonableness of the charge of £245.30 for the accounting year 2023/2024.

The hearing

13. The applicant, [APPELLANT], has represented himself. The Respondent has been represented by [COUNSEL] [NAME], solicitor for the in-house legal service of the respondent.

14. In response to Judge Harman’s directions order dated 19 February 2024 the tribunal has been provided with a documents bundle which is not paginated. The tribunal has had careful regard to the documents filed in that bundle including the application in pro forma leasehold 3 form received on 29 April 2024, the assured periodic tenancy agreement which commenced on 8 December 2006, the statement of [RESPONDENT] [NAME] (service charge team manager for the respondent) dated 17 April 2024, the estimated service charge statement (identifying the relevant services and component costs) for April 2023 to March 2024 resulting in a weekly service charge of £36.17, the final service charge statement for the same period resulting in a weekly service charge of £35.48, a letter from the respondent to the applicant dated 10 March 2023 confirming a weekly service charge of £35.48, and the letter dated 3 January 2024 setting out the calculation of the estate and block charges and apportionment and the resulting service charge. The documents bundle also includes a previous decision of the tribunal made on 26 January 2015 which considered, amongst other issues, the payability and reasonableness of the service charge at that time having regard to the services at that time.

The tenancy

15. The tribunal is provided with a copy of the assured periodic tenancy in respect of the property. The preamble on the first addresses ‘payment for the premises’ and expressly states a sum of £5 as the service charge due as payment for services provided under the agreement. Clause 1.2 provides that the service charge may be varied in accordance with Schedule 1 to the tenancy. That schedule particularises the service charge components and addresses apportionment and management costs.

16. In respect of apportionment, it states that “the costs are split equally by the number of properties and are calculated on actual costs incurred which are outstanding for the last accounting period”.

17. In respect of management costs, it states that “these are the [respondent’s] costs of administering and supervising the provision of services to your estate and are calculated as a percentage of the actual service charge costs”.

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The law

18. The Landlord & Tenant Act 1985 as amended by the Commonhold & Leasehold Reform Act 2002 (hereafter ‘the LTA 1985’) sets out the Tribunal’s jurisdiction to determine liability to pay service charges. Section 27A(1) of 1985 Act provides as follows –

An application may be made to a leasehold valuation 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 is payable.

19. Section 18 sets out the meanings of ‘service charge’ and ‘relevant costs’.

20. Section 19 sets out that jurisdiction to limit service charges to those relevant costs which are reasonably incurred and to those which arise from works and services of a reasonable standard.

21. Section 20C LTA 1985 sets out the jurisdiction, where the tribunal considers that it is just and equitable to do so, to grant an order providing that all or any of the costs incurred by the landlord in connection with proceedings before this tribunal are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the lessee or any other person or persons specified in the application. Paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 provides jurisdiction for the Tribunal to make an order to reduce or extinguish the tenant’s’ liability to pay an administration charge in respect of litigation costs.

22. Part 1 of Schedule 11 to the Commonhold & Leasehold Reform Act 2002 (hereafter ‘CLARA 2002’) sets out the Tribunal’s jurisdiction to determine the payability and reasonableness of administration charges. Section 5(1) of Part 1 to Schedule 11 provides –

An application may be made to a leasehold valuation tribunal for a determination whether an administration 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.

23. Section 1 provides a definition of ‘administration charge’. Sections 2 & 3 provide that a variable administration charge is payable only to the extent that the charge specified in lease is reasonable, that the formula specified for determining the charge is reasonable, and that amount of the charge is reasonable.

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Discussion and determinations

24. The tribunal addresses the applicant’s question “is there a management charge or not?” as a challenge to the liability to pay a management charge. The assured periodic tenancy granted to the applicant expressly imposes a liability to pay a variable service charge which itself expressly includes a charge in respect of management costs described as “the [respondent’s] costs of administering and supervising the provision of services to your estate and are calculated as a percentage of the actual service charge costs”. The tribunal determines that the tenancy imposes liability to pay a management charge.

25. Insofar as the applicant relies upon a previous decision of the tribunal in 2015 with his averment that “I raised the same issue in 2015” as supporting his argument that no management charge is payable, a reading of the tribunal decision of 26 January 2015 confirms that it recognised liability to pay a variable service charge including a management charge.

26. Insofar as the applicant relies upon the figure of zero for the total management fee in the service charge statement for 2023/2024, the tribunal accepts Mr [NAME] explanation that this is a merely an anomaly in a computer-generated document. Moreover, the existence of a management fee is confirmed by that document itself when the adjacent columns identify the applicant’s apportioned share of the total management fee and identify the resulting weekly cost.

27. The tribunal does not make any determination as to the reasonableness of the charge of £245.30 for the accounting year 2023/2024 as this charge was withdrawn by the respondent prior to the hearing and the applicant confirmed at the hearing that he accepted that outcome.

28. During the hearing Mr [APPELLANT] stated that he understood why the applicant may be confused by the service charge documents provided and further understood why the applicant made the application to the tribunal. He accepted that the respondent could and should provide more detailed explanatory information to the applicant as a precursor to serving a service charge demand (including the management charge) and would ensure this was provided within 2 weeks of the tribunal hearing.

Fees and Costs

29. The applicant has paid both an issue fee of £100 and a hearing fee of £200. Having regard to Rule 13(2) of The Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 and to the parties’ conduct and to the outcome of the proceedings, the tribunal makes an order directing the respondent to re-imburse those costs to the applicant. It was only at 16.10 hours on Friday 31 May 2024 (ie. after office hours on the last working day before the hearing) that [NAME] for the respondent emailed the tribunal office to attach correspondence sent to the applicant withdrawing the disputed management charge. Further, Mr [NAME] fairly stated in the hearing that he understood why the applicant may be confused by the service charge documents provided and further understood why the applicant made the application to the tribunal.

30. Having regard to section 20C of the Landlord & Tenant Act 1985 and to the parties’ conduct and to the outcome of the proceedings the tribunal considers that it is just and equitable to grant an order providing that all or any of the costs incurred by the landlord in connection with proceedings before this tribunal are not to be regarded as relevant costs payable as a service charge payable by the applicant. During the hearing Mr [APPELLANT] confirmed that no such charge would be levied. This order ensures that position remains.

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31. In considering whether to exercise its power to make any party costs order the tribunal has careful regard to section 29(2) of the Tribunals, Courts and Enforcement Act 2007 and Rule 13(1)(b) of the Tribunal Procedure (First-tier Tribunal)(Property Chamber) Rules 2013 read against the overriding objective in Rule 3 of the 2013 Rules and the guidance given by the Chamber President and Deputy President in [ADDRESS] [COMPANY] v [NAME], [NAME] v [NAME], [NAME] v [NAME] Rd Management [COMPANY] [2016] UKUT 0290 (LC). Having regard to the parties’ conduct and to the outcome of the proceedings the tribunal does not make any party costs order.

Stephen Reeder Judge of the First Tier Tribunal, Property Chamber 4 June 2024

ANNEX - RIGHTS OF APPEAL

a. This annex notifies the parties of any right of appeal pursuant to Rule 36(2) of the (First- tier Tribunal) (Property Chamber) Rules 2013.

b. If a party wishes to appeal this decision to the Upper Tribunal ([NAME]) then a written application for permission must be made to the First-tier Tribunal at the Regional office which has been dealing with the case.

c. 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.

d. 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.

e. 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.

f. If the tribunal refuses permission to appeal then a further application for permission may be made to the Upper Tribunal ([NAME]).

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__________________________________________________________

Case Reference : CAM/00MX/LSC/2023/0017

Property : 23 Millgate, [ADDRESS], High Wycombe [POSTCODE]

Applicant: [redacted]

Respondent : [redacted] tribunal

Tribunal Members : Judge Stephen Reeder

Date of Decision : 17 July 2024

© CROWN COPYRIGHT

DECISION

1. The tribunal has determined to treat the application sent to the tribunal office by the appellant as an attachment to an email dated 28 June 2024 as an in-time application for permission to appeal the decision of the First-tier tribunal dated 3 January 2024 and accordingly grants any necessary extension of time pursuant to rule 6(3)(a) of the Tribunal Procedure (First-tier tribunal) (Property Chamber) Rules 2013.

2. The tribunal has determined that it will not review its decision either in whole or part.

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3. The tribunal has determined that permission to appeal the decision to the Upper Tribunal ([NAME]) be refused.

4. In accordance with section 11 of the Tribunals, Courts and Enforcement Act 2007 and Rule 21 of the Tribunal Procedure (Upper Tribunal) ([NAME]) Rules 2010, the applicant may make a further application for permission to appeal to the Upper Tribunal ([NAME]). Such application must be made in writing and received by the Upper Tribunal ([NAME]) no later than 14 days after the date on which the First-tier tribunal sent notice of refusal to the party applying for permission. The address of the Upper Tribunal ([NAME]) is 5th [ADDRESS] [POSTCODE].Where possible you should send your further application for permission to appeal by email to [EMAIL], as this will enable the Upper Tribunal ([NAME]) to deal with it more efficiently.

REASONS

5. The tribunal heard this matter by remote CVP hearing on 3 June 2024. The written decision with reasons was drafted the same day. The decision makes clear that –

a. The tribunal determined that the assured periodic tenancy granted to the applicant expressly imposes a liability to pay a variable service charge which itself expressly includes a charge in respect of management costs described as “the [respondent’s] costs of administering and supervising the provision of services to your estate and are calculated as a percentage of the actual service charge costs”.

b. The tribunal determined that the tenancy imposes liability to pay a management charge.

c. The tribunal did not make any determination as to the reasonableness of the charge of £245.30 for the accounting year 2023/2024 as this charge was withdrawn by the respondent prior to the hearing and the applicant confirmed at the hearing that he accepted that outcome.

d. During the hearing the respondent’s representative stated that he understood why the applicant may be confused by the service charge documents provided, that the respondent could and should provide more detailed explanatory information to the applicant as a precursor to serving a service charge demand (including the management charge) and would ensure this was provided within 2 weeks of the tribunal hearing.

6. The applicant has filed a pro forma RP PTA form dated 28 June 2024 seeking permission to appeal. The grounds stated are –

“Although it came to light that I have been treated as a fixed service charge tenant we have never had this charge levied against us not last year or 15 years ago not ever. This has been confused with the 2015 case where although about the service charge was not management charge specific where as I had successfully challenged it by conventional means in 2009 when it had first appeared without any consultation or agreement The fact of the matter remains that the housing association has on three occasions failed to enter into the above consultation period in order to reach agreement and create a budgeting period for tenants as stated in the tenancy agreement and must explain this as directed by the tribunal The solicitor present for the hearing has missed this whole point in response and ends with stating the 2024/25 charge has been removed which it has not”.

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7. The tribunal has received a written reply from the respondent by letter dated 12 July 2024. This states that the respondent has complied with the decision of 3 June 2024 in that the 2023/24 management charge was withdrawn prior to the hearing, the tribunal fees were reimbursed to the applicant on 19 June 2024, and a letter was sent to the applicant on 18 June 2024 confirming that the 2024/2025 service charge was being withdrawn and will be re-served with better information about the charges.

8. The tribunal has applied rules 3, 53 & 55 of the Tribunal Procedure (First-tier tribunal) (Property Chamber) Rules 2013 in determining whether to review its decision and whether to give permission to appeal its decision whether in whole or in part.

9. The tribunal has regard to the decision of the Deputy President in [NAME] v HQ (Block 1) Action Management Co [2013] UKUT 487 (LC) such that permission to appeal to the Upper Tribunal should be given in any case where there is a reasonable prospect of the applicant demonstrating that the tribunal has wrongly interpreted or applied the relevant law, and that the test is generally whether the appeal has a real or realistic prospect of success, as opposed to only a fanciful prospect, although the tribunal should be slower to grant permission in the case of appeals on purely technical points than in cases of more substance.

10. The tribunal has regard to the decision of the Deputy President in [NAME] v Calthorp Estate [2013] UKUT 469 (LT) which addressed the discretionary power of the first-tier tribunal to review its decision pursuant to Rule 55 of the Tribunal Procedure (First-tier tribunal) (Property Chamber) Rules 2013, rather than giving permission to appeal, if it satisfied that a ground of appeal is likely to be successful.

11. The tribunal determines that the application does not disclose any grounds for appeal with any real or realistic prospect of success.

12. The application does not specify and does not disclose any reasonable prospect of establishing that–

a. the decision shows that the First-tier tribunal wrongly interpreted or wrongly applied the relevant law, and/or

b. the decision shows that the First-tier tribunal wrongly applied or misinterpreted or disregarded a relevant principle of valuation or other professional practice, and/or

c. the First-tier tribunal took account of irrelevant considerations, or failed to take account of relevant considerations of evidence, or that there was a substantial procedural defect, and/or

d. The point or points at issue is or are of potentially wide implication.

13. In the circumstances, the tribunal has determined that it will not review its decision either in whole or part.

14. In the circumstances, the tribunal has determined that permission to appeal the decision to the Upper Tribunal ([NAME]) be refused.

Stephen Reeder Judge of the First-tier tribunal (property chamber) 17 July 2024

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