First-tier Tribunal Rules on Service Charges Payability

OUTCOME: Allowed in Part

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00AW/LSC/2023/0200 HMCTS code : Face-to-face Hearing Property : [ADDRESS], [POSTCODE] [ADDRESS], [POSTCODE]

Applicants : [redacted] [NAME_4] : [NAME_1] - [NAME_6] (Solicitor) [NAME_3] – [NAME_7] Respondent : [redacted] : [NAME_9] & [NAME_11] ([NAME_18], Managing Agent)

Type of application : Payability and reasonableness of Service Charges Section27A and 20C Landlord and Tenant Act 1985 and Schedule 11, Paragraph 5A Commonhold and Leasehold Reform Act 2002 Tribunal members :

Judge [NAME_15]

Date and Venue of hearing : 15 [ADDRESS], [POSTCODE] Date of decision : 22 January 2024

DECISION

Decisions of the tribunal (1) The Tribunal is satisfied that the service charges as follows are due: (a) 2015 – total of £6,924.40. The [NAME_1] proportion (11.52%) was £797.69. If the [NAME_3] proportion was different, the figures shall be adjusted accordingly; (b) 2016 – total of £10,947.50. The [NAME_1] proportion (11.52%) was £1,261.16. If the [NAME_3] proportion was different, the figures shall be adjusted accordingly; (c) 2017 – total of £9,092.10. The [NAME_1] proportion (11.52%) was £1,047.41. If the [NAME_3] proportion was different, the figures shall be adjusted accordingly; (d) 2018 – total of £10,934. The [NAME_1] proportion (11.52%) was £1,259.60 (this excludes the credit applied in respect of Director Liability Insurance as this was not included in the previous year’s figures above and to allow for the credit would give double-recovery). If the [NAME_3] proportion was different, the figures shall be adjusted accordingly; (e) 2019 – the total is £5,427.50, of which the [NAME_1] proportion (11.52%) is £625.25 (the total amount that would have been due £10,855 but 50% of these sums are not due as a result of the Tribunal’s decision in relation to s.20B). If the [NAME_3] proportion was different, the figures shall be adjusted accordingly; (f) 2020 – total of £14,678. The [NAME_1] proportion (11.52%) was £1,690.91. If the [NAME_3] proportion was different, the figures shall be adjusted accordingly; (g) 2021 – total of £14,217. The [NAME_1] proportion (11.52%) was £1,637.80. If the [NAME_3] proportion was different, the figures shall be adjusted accordingly; (h) 2022 – total of £16,571. The [NAME_1] proportion (11.52%) was £1,908.98. (this does not include the credit in respect of the [NAME_16] for the same reason as given above, but does include the credit of £144). If the [NAME_3] proportion was different, the figures shall be adjusted accordingly; (i) 2023 – total of £13,551. The [NAME_1] proportion (11.52%) was £1,561.08 (this includes the credit of £1,018). If the [NAME_3] proportion was different, the figures shall be adjusted accordingly. (2) The Administration Charges are not due. (3) Orders are made pursuant to s.20C Landlord and Tenant Act 1985 and para. 5A, Sch. 11 Commonhold and Leasehold Reform Act 2002. The Application 1. The First Applicant is the [ADDRESS], [POSTCODE] (“the [NAME_1]”). The Respondent is the Freeholder. The Property is a studio flat in a converted terrace house.

2. The Tribunal received an application from the First Applicant on 5 June 2023. The application had a covering letter which stated that the Applicant had been unable to complete the form as she was missing information on service charges, insurance details and proof of building repairs from the Freeholders or their [NAME_17]. The application states that the First Applicant was asking the Tribunal to decide on “several years of service charges”, but no further detail was given.

3. On 20 July 2023 there was a Case Management Hearing (CMH) at which directions (p.5) were drawn up in consultation with the First Applicant and the Respondent’s representative. It was noted that the First Applicant was unclear about the scope of her application, but that the Tribunal had identified the following issues to be determined (but they were to be amplified by the First Applicant in her Statements of Case that was to be provided after disclosure had taken place): (a) The service charge years 2015 to 2023; (b) Whether the works were within the landlord’s obligations under the lease/whether the cost of the works were payable by the leaseholder under the lease; (c) Whether the costs were payable by reason of s.20B 1985 Act; (d) Whether the costs of the works were reasonable, in particular, in relation to the nature of the works, the contract price and the supervision and management fee; (e) Whether an order under s.20C 1985 Act and/or para. 5A Sch. 11 2002 Act should be made; (f) Whether an order for reimbursement of application/hearing fees should be made.

4. The directions provided for, among other things: (a) Disclosure by the Respondent by 17 August 2023; (b) The First Applicant to send a schedule setting out the disputed matters detailed in the order by 14 September 2023 along with a statement in support of these by 14 September 2023; (c) The Respondent’s response to the schedule and statement by 12 October 2023; (d) The [NAME_1] brief supplementary response by 19 October 2023; (e) Exchange of witness statements by 2 November 2023.

5. The order made at the CMH noted that the First Applicant indicated that another lessee in the building wished to join the application and she was told

that the lessee needed to write to the Tribunal, indicating her wish and giving her signed consent to be joined to the application.

6. On 13 December 2023, the Tribunal joined the prospective applicant, [NAME_3] as an applicant (referred to as the “Second Applicant”). [NAME_3] owns the lease of [ADDRESS], [POSTCODE] (“the [NAME_3]”).

Documentation 7. The First Applicant has provided a bundle of documents which runs to 627 pages. References herein are to that bundle. The bundle included: Applicant’s Summary of Claim (p.13); Summary of Respondent’s Response to Applicants on Service Charge (p.18); schedules (p.24-30), statements of account (p.31-33), the Applicant’s witness statement (p.34), the witness statement of [NAME_12] (p.42), the witness statement of [NAME_10] (p.56), service charge accounts (p.436, p.441, p.446, p.452, p.458, p.464, p.470, p.476), service charge invoices (p.488, p.492, p.494, p.502, p.504, p.510, p.517, p.526, p.533, p.535, p.538, p.541, p.549, p.557, p.566, p.572, ) and administration charge invoices (p.507, p.515, p.523, p.544, p.552, p.561, p.581, p.588, p.594, p.600, p.612, p.619).

8. A copy of the [NAME_3] Lease was provided at the hearing, along with a short statement made by [NAME_7] on behalf of the Second Applicant. The Hearing 9. The First Applicant was represented by [NAME_6] (who had provided a Skeleton Argument in advance of the hearing). The First Applicant was also in attendance and gave evidence. [NAME_10] and [NAME_10] of [NAME_18], the Managing Agent attended on behalf of the Respondent and gave evidence. [NAME_7], who holds Power of Attorney for the Second Applicant, attended and gave evidence on behalf of the Second Applicant.

10. Prior to the hearing, the Respondent had admitted that the [NAME_1] does not allow service charges to be billed in advance and should be charged in arrears, and when this came to its attention, it ceased charging in advance and charged in arrears, based on expenditure. The charges (for all years) in respect of Director [NAME_16] were conceded by the Respondent. In the course of the hearing, the Respondent conceded the professional fees charged in 2022.

11. At the start of the hearing, [NAME_7] was asked what evidence she would wish to rely upon and what role she would seek to play in the hearing, to establish whether the hearing could proceed that day. [NAME_7] stated that she would want to put in some evidence, being the one-page statement that she had brought to the hearing and she said that she would wish to ask [NAME_10] and

[NAME_10] some questions. Having heard from all the parties, the Tribunal decided that it could proceed to hear the application that day. 12. [NAME_7] did indicate that she would wish to rely on any and all matters raised by [NAME_6] on behalf of the First Applicant, and the Tribunal has treated all of the issues raised by [NAME_6] to have also been raised on behalf of the Second Applicant.

13. The Tribunal commenced the hearing by establishing the issues with the parties, and confirming which charges were in issue and which were not pursued or were conceded. In doing so, the Tribunal heard from the parties on the issue of whether the Applicant could pursue a defence on the basis of set- off, premised on a claim for alleged disrepair (water penetration) and loss of profit income. The Tribunal gave a brief ruling on this (the reasons are detailed further in this decision) and then proceeded with the hearing.

14. The First Applicant gave evidence (her witness statement, her schedule and her Summary of Claim standing as her evidence in chief) and was asked questions by the Respondent. Her evidence consisted mainly of matters relating to the alleged disrepair at the premises and what works (and their efficacy) had been carried out on behalf of the Respondent. She did say that her solicitor had identified a number of mistakes in the service charge demands, but that if she was going to be asked specific questions about the numbers, she would not be able to answer them and she would rather say nothing. She said that it was not her job to go through the numbers. 15. [NAME_7] gave evidence (with her statement standing as her evidence in chief) and was asked questions by the Respondent. She said that she accepted the lease included management costs and believed it did include the costs of the managing agent providing a service if it was provided. 16. [NAME_10] and [NAME_12] gave evidence (with their completed schedule, witness statements and their response to the [NAME_1] Summary of Claim standing as their evidence in chief) and were asked questions by [NAME_6] and [NAME_7]. [NAME_10] accepted that the lease did not permit invoices to be raised in advance and that there was no provision in the Lease for a sinking fund. He was asked whether he accepted that the landlord had to comply with its obligations whether it was in funds or not and he said that it could not comply without funds. He was asked about the reports of water penetration and gave evidence as to what he said the Respondent had done. [NAME_10] said, in relation to the administration costs, that the managing agent raises an invoice for £75 plus VAT to the Landlord for the service charge fund and then a charge is then raised as against the tenant. He said that on the service charge expenditure report, it was not an expense as such, as the managing agent did not pay the invoice for £90 until the fee was recovered from the lessee, it was not paid from the service charge funds and did not appear on the service charge accounts. She said that it was an administration fee and related to the managing agent’s administration.

17. In our decision, we have focused on the documents to which we were referred during the course of the hearing.

The Applicants’ Leases – p.59 18. The bundle contained a Lease (p.59) dated 17 October 1996 between [COMPANY_20] and [NAME_19]. The Respondent bought the freehold interest of the building in which the [NAME_1] and [NAME_3] are situate in or about 2006. There is no dispute that the First Applicant purchased the lease of the [NAME_1] and holds her interest on the same terms as [NAME_19]’s lease.

19. During the hearing, the Tribunal was handed a Lease dated 22 June 1973 between [COMPANY_20] and [NAME_21]. There is no dispute that the Second Applicant purchased the lease of the [NAME_3] in 2007 and holds her interest on the same terms as [NAME_21]’s lease.

20. It is also not disputed that the terms of both leases are the same in all material respects, save that clause cl. 2(16) of the [NAME_1] as cl. 2(15) of the [NAME_3] Lease. The following are the material clauses:

21. Clause 1 provides that the Lessee covenants to pay “by way of further or additional rent from time to time a sum or sums of money equal to the amount which [NAME_23] may expend in effecting or maintaining the insurance of the said premises or any part thereof against loss or damage by fire such last mentioned rent is to be paid without any deduction on the quarterly day for payment of rent next following each such expenditure by [NAME_23] as aforesaid”.

22. Clause 2(3) provides that the Lessee covenants with [NAME_23] to pay a proper proportion of all outgoings, including lights and cleaning of the premises and to pay a proper proportion of the costs of painting in every third year of the said term and also in the last year of all the outside wood, iron, stucco, cement and other like work in or upon the said premises or any addition thereto and of keeping in substantial repair the main structure of the said property and all the external parts thereof including the entrance passage and entrance hall the common staircase landings and passage and all the drains ducts conduits and water pipes, such proportions to be determine by [NAME_23]’s surveyor and to be calculated by reference to the rateable value of the said premises but provided that the sum payable shall not be less than fifteen pounds per annum.

23. Clause 2(16) (cl. 2(15) of the [NAME_3] Lease) provides that the Lessee covenants to pay all expenses (including solicitors costs and surveyors fees) which may be incurred by [NAME_23] in or in contemplation of the service of any notice under section 146 of the Law of Property Act 1925 notwithstanding

forfeiture of the term hereby granted may be waived or avoided otherwise than by relief granted by the court.

24. By clause 4(1) [NAME_23] covenanted with the lessee to repair and keep in repair the retained parts the main structure of the said property known as [ADDRESS] aforesaid and the roof and all external parts (excluding the glass of windows and of the flats) thereof and all sewers drains pipes ducts wires and conduits other than those repairable by the tenants under their respective Leases and also to keep in repair the common passages and paths which are not the liability of individual [NAME_24].

25. By clause 4(3) [NAME_23] covenanted with the lessee to insure or cause to be insured the said property and all buildings which may be erected in connection therewith during the term hereby granted against loss or damage by fire or accident in no insurance office of repair in the full value thereof.

26. It was agreed between the parties that the [NAME_1] proportion of expenditure is 11.52%. The Tribunal was not told the [NAME_3] proportion but has worked on the basis it is also 11.52%. Even if it is not, the Tribunal has dealt with the matters raised by the First Applicant, and these are the same matters relied on by the Second Applicant. There is only one additional item raised by the Second Applicant and the Tribunal has been able to do deal with this as set out below.

The Background 27. [NAME_18] was instructed as the managing agent for the freeholder in 2012 in respect of the whole building. Among other things, it administers services and issues service charge demands.

The Law 28. Section 18 of the Landlord and Tenant Act 1985 provides: “(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 service, 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 estimate 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.

29. Section 19 of the 1985 Act provides: “(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 provision 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” 30. Section 27A provides: “(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 31. In Waaler v Hounslow LBC [2017] EWCA Civ 45 the Court of Appeal said that “reasonableness” has to be determined by reference to an objective standard, not the lower standard of rationality.

32. In Nogueira v Westminster LBC [2014] UKUT 327 (LC) it was said that where the Tribunal is satisfied that there are significant defects in the standard of works, it would be almost certainly wrong in principle for it to make no limitation on service charges under s.19(1)(b).

33. Paragraph 1 of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 provides as follows-

(1) In this Part of this Schedule “administration charge” means an amount payable by a tenant of a dwelling as part of or in addition to the rent which is payable, directly or indirectly— (a) for or in connection with the grant of approvals under his lease, or applications for such approvals, (b) for or in connection with the provision of information or documents by or on behalf of the landlord or a person who is party to his lease otherwise than as landlord or tenant, (c) in respect of a failure by the tenant to make a payment by the due date to the landlord or a person who is party to his lease otherwise than as landlord or tenant, or (d) in connection with a breach (or alleged breach) of a covenant or condition in his lease.

34. Paragraph 2 of Schedule 11 to the Act provides that a variable administration charge is payable only to the extent that the amount of the charge is reasonable.

35. Paragraph 5 of Schedule 11 to the Act provides as follows- (1) An application may be made...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. (2) Sub-paragraph (1) applies whether or not any payment has been made. (3) ... (4) No application under sub-paragraph (1) 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. (6) ...

The Issues 36. During the hearing, it was agreed that the years the Tribunal were considering were 2015-2023 only and that the only items in dispute were: (a) Professional fees – 2015, 2022, 2023; (b) [NAME_25] – 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022, 2023; (c) Insurance excess – 2017, 2019, 2020, 2021 (d) Bank administration fee – 2019 (£72 of the fee was conceded by the Respondent), 2020 (£72 of the fee was conceded by the Respondent), 2021 (£72 of the fee was conceded by the Respondent), 2022 (£72 of the fee was conceded by the Respondent), 2023 (£72 of the fee was conceded by the Respondent); (e) Health & Safety inspection – 2023; (f) Insurance – 2023 (challenged by [NAME_3] only); (g) Administration fees.

37. An issue in respect of s.20B Landlord and Tenant Act 1985 was also raised in respect of an invoice said to have been raised on 16 August 2023 for service charges for the period 24 June 2018-24 December 2018 in the amount of £839.81.

38. The Applicant sought to rely on a defence by way of set-off in respect of alleged disrepair to the [NAME_1] as a result of water penetration. In Continental Property Ventures Inc v White [2006] 1 EGLR 85 it was decided that the LVT was entitled to conclude that a breach of the landlord’s covenant to repair would give rise to a claim in damages, and that if the breach resulted in further disrepair, imposing a liability on the lessee to pay an increase service charge, that is part of what might have been claimed by way of damages, and such a claim would give rise to an equitable set-off within the rules laid down in Hanak v Green [1958] 2 QB 9 and such constitute a defence.

39. The Tribunal informed the parties during that hearing that it would not permit questions or submissions on this matter and gave some reasons during the hearing, but said that fuller reasons would be provided in the written decision. The reasons for the Tribunal’s decision are as follows:

40. It was a matter that was not raised in the application, either in the application form itself or in the [NAME_1] schedule. It was only raised in a very limited way in the [NAME_1] Summary of Claim (p.13) provided in September 2023. The first time that it was dealt with, in any real sense, was in the [NAME_1] witness statement dated 30 October 2023 (p.34). It was clear from the directions that the issue was at least mentioned (as the directions envisage disclosure on this issue – para. 2, p.7) but no directions had been given in respect of this issue, e.g. in respect of expert evidence.

41. Further, whilst the First Applicant had put in some evidence on the issue, the Respondent had put in limited evidence on the issue. Taking everything into account, the Tribunal did not have, from either side, all of the evidence which would be necessary to determine the issue. To do so, the Tribunal would need evidence on the following matters: the covenants relied upon, the nature of the breaches alleged, when and how the Respondent was said to have been put on notice, what would be a reasonable time for works to have been carried out, what works had in fact been carried out, whether those works were sufficient in terms of the covenants relied upon and (if the cause of action was made out), the value of the claim (at least to the extent of establishing whether the claim was worth at last the value of the amounts owed to the Respondent), taking account of any alleged failure to mitigate.

42. It was accepted that the Applicants could rely upon any allegations that the Respondent had not responded appropriately to allegations of disrepair in terms of the reasonableness of the service charges (particularly in respect of the management fees). [NAME_6] submitted that it would be a “short step” from this to the [NAME_1] claim being made out, but this was not accepted by the Tribunal, taking account of the additional evidence, questioning and submissions that would required.

43. It was said in “Service Charges and Management” (5th ed.) at para. 33-12: “… where the counterclaim by the tenant giving rise to the set-off is a complex on, and it concerns difficult issues of fact and law the Appropriate Tribunal is less obviously an appropriate venue to determine such matters, particularly with the absence of formal pleadings, detailed witness statements etc.”

44. The Tribunal took the view that this is a matter which ought to be raised in the County Court. The First Applicant sought to raise the issue in the Tribunal solely by way of set-off (save that, as stated above, it sought to raise it in terms of the reasonableness of the service charges). This, however, was not a case where it was argued that a particular charge had not been reasonably incurred as the landlord’s delay had exacerbated the problem and rendered the cost of remedying it more expensive.

45. Further, HHJ Rich QC, in [COMPANY_26] v [NAME_27] (Unrep. 5 December 2025 Lands Tr), quoted at some length from his decision in Continental Property Ventures. He emphasised that, although the effect of the new s.27A was to confer a considerably increased jurisdiction on the LCT, it would have to exercise restrain to ensure that it did not deal with matters that would more properly be dealt with by the County Court.

46. The Tribunal also had regard to the fact that it could not give judgment in favour of lessee in respect of any sums overpaid, and the First Applicant was of the view that her claim was quite substantial (said to be up to about £90,000).

Service Charges Year to June 2015 – p.25, p.436 47. Professional fees: The total charge for the year was £1,322. The [NAME_1] share was £152.29. The charge was made up of: (a) [NAME_18] invoice for £900 (p.229) for completion of re-instatement cost assessment as required by insurance company; and (b) [NAME_28] invoice for £420 (p.230) for fees in respect of structural engineering inspection and report;

48. The Respondent asserts that these charges fall within cl. 2(3) as it falls within “all outgoings”. [NAME_10] said that the costs had been incurred, at least in respect of the [NAME_18] invoice, as part of insuring the building, and that the landlord could not comply with its obligation to insure the building without knowing that it was being insured correctly.

49. The First Applicant asserted that the Lease required the landlord to pay the insurance premium, but not the expenses associated with insuring the Building, and that nothing in the Lease required the tenants to pay the costs associated with obtaining the insurance.

50. The Lease does provide that the lessee shall pay a proportion of “all outgoings”. It goes on to make clear that the outgoings include light and cleaning, but the obligation is far wider than that – it relates to “all outgoings”. The professional fees of [NAME_18] therefore do fall within cl. 2(3) of the Lease.

51. In respect of the [NAME_18] invoice, the First Applicant compared the charge of £900 to the later charge on 19 September 2022 from [NAME_29] (p.247) for a re-instatement cost assessment report and relied on this to demonstrate that the [NAME_18] invoice was unreasonable in amount. [NAME_10] informed the Tribunal that [NAME_18] carried out the measurement

of the building in 2015, and [NAME_29] was then able to use those measurements (reducing the amount of work [NAME_29] had to do). The Tribunal accepts this and finds that the [NAME_18] charge was reasonable in amount.

52. In respect of the [NAME_28] invoice, [NAME_10] told the Tribunal that there was a structural issue which [NAME_18] needed to investigate, but he could not say what it was, the report was not available at the hearing and he did not remember what the issue was. On the current evidence, the Tribunal is prepared to find that this is something which falls under cl. 2(3) of the Lease, but the Tribunal does not find that the charge is reasonable and finds that it is not payable.

53. The reasonable total charge for 2015 in terms of professional fees was, therefore, £900. 54. [NAME_25]: The total charge for the year was £2,776. The [NAME_1] share was £319.80.

55. The Respondent asserts that this falls within cl. 2(3) of the Lease, as “all outgoings”. [NAME_10] stated that the Respondent could not run the building without paying the managing agent to run the building. The First Applicant submitted that her Lease was granted in 1973 and that things had moved on since then: the obligation in cl. 2(3) referred to outgoings in relation to the premises, not the outgoings of the landlord. The First Applicant submitted that the Respondent could run the building without a managing agent and instructing a managing agent did not mean that the cost was an “outgoing” of the property. It was said that the Respondent was seeking to re-write the Lease.

56. In [NAME_30] v [NAME_31]/51/2005 Lands Tribunal it was held that a management fee levied in respect of work carried out by the council in fulfilling the obligations and functions set out in cl. 6 of the lease was recoverable. The President held that works of repair would have to be supervised and paid for and as the council could only act through employee or agents, it would have to incur expenditure. If it did so, the lessee was liable to pay a reasonable part of it. The President came to the same conclusion in Norwich CC v Marshall LRX/114/2007 Lands Tribunal in which he made it clear that the Council was entitled to include in the specific service charges the costs of management reasonably incurred for the specific services which the Council was obliged to provide under the terms of the lease and he could not see any basis for implying any greater entitlement.

57. Clause 2(3) imposes an obligation to pay a “proper proportion” of “all outgoings” including “lighting and cleaning of the premises”. The words “the premises” refer to the lighting and cleaning rather than the “all outgoings”. The fees of the managing agent are “outgoings” and do fall within the Lease. In any event, the management of the building, including the Applicant’s properties, are outgoings in relation to those properties and would be outgoings of those properties. The Tribunal therefore finds that the management fees do fall within the scope of cl. 2(3) of the Lease.

58. Turning to the amount of the charges, in the absence of a contractual price for management, the usual principles for determining the reasonableness of the relevant costs apply. It is therefore appropriate to compare the management fees with those being charged by other [NAME_17] for similar blocks.

59. Where it is found that [NAME_17] have failed to manage a building properly, for example, by failing to respond to leaseholder’s concerns, it is common to make a deduction from the fees claimed on the basis that the service was not of a reasonable standard. In Kullar and Prior Place Residents Association v Kingsoak Homes Ltd [2013] UKUT 15 (LC) a deduction of 10% was made from the [NAME_17]’ fees due to their failure to deal with problems at the block property.

60. The First Applicant referred to paragraph 17 of her Skeleton Argument, stating that they had increased substantially in excess of inflation. Further, it was said that the service provided had been “disastrous”: they did limited work, such as organising the cleaning, paying for the electricity, doing some repairs, obtaining insurance and raising invoices. In terms of the repairs, the First Applicant questioned [NAME_10] about the reports she had made about the water penetration to her flat and, in summary, submitted that the Respondent had either not responded or not responded adequately, over a period of years. In terms of the invoices, the First Applicant relied upon the issuing and re-issuing of invoices, the charging of service charges in advance and charging for a [NAME_16], neither of which was permitted under the terms of the Lease, resulting in adjustments to the service charge demands. All of this, it was said, made it impossible for the First Applicant to work out how much was due. When asked what about be a reasonable amount for the Respondent to charge would be, the First Applicant said about £1,000-£1,500, possibly more if the Respondent had to do more in respect of repairs. [NAME_7] said that the Respondent was not managing the building. The Respondent told the Tribunal that the charges were at the lower end of the fees charged in the market-place and referred to paragraph 14 at p.22.

61. The First Applicant has clearly been raising issues with water penetration for many years, but the Tribunal did not have sufficient information as to the notice given to the Respondent, the attempts at works, works that were carried out to make a proper assessment as to allegations of failings on the part of the Respondent in terms of responding to allegations of disrepair/carrying out works. It does, however, appear that there have been errors on the part of the Respondent: [redacted] account (see, for example, p.541, p.565, p.572).

62. The Respondent’s response (p.22) states that the range of fees charged by [NAME_17] in central London is £350-£750 per unit. It is acknowledged that these are the current fees and the Tribunal is considering what would have been reasonable in 2015.

63. The Tribunal makes a deduction of 10% and finds that the amount of £2,498.40 would have been a reasonable charge, of which the [NAME_1] share would have been £287.82. If the [NAME_3] proportion is different, the figures shall be adjusted accordingly.

64. As stated above, the charges in respect of Director [NAME_16] were conceded by the Respondent.

65. Charges due: The lawful charges are: Cleaning

£958 General repairs & maintenance

£545 Community electricity

£35 Accountant

£432 Professional fees

£900 [NAME_25] fees

£2,498.40 Insurance

£1,556 Total:

£6,924.40

Year to June 2016 – p.26, p.441 66. [NAME_25]: The total charge for the year was £2,915. The [NAME_1] share was £335.81.

67.

For the reasons set out above, the fees of the managing agent are “outgoings” and do fall within the Lease. In any event, the management of the building, including the Applicant’s properties, are outgoings in relation to those properties and would be outgoings of those properties. The Tribunal therefore finds that the management fees do fall within the scope of cl. 2(3) of the Lease.

68. The Tribunal adopts the reasoning set out above in relation to “Year to June 2015” in terms of the reasonableness and amount of the [NAME_25]. The Tribunal makes a deduction of 10% and finds that the amount of £2,623.50 would have been a reasonable charge, of which the [NAME_1] share would have been £287.82. If the [NAME_3] proportion is different, the figures shall be adjusted accordingly.

69. As stated above, the charges in respect of Director [NAME_16] were conceded by the Respondent. 70. Charges due: The lawful charges are: Cleaning

£1,000 General repairs & maintenance

£2,494 Health & safety inspection

£300 Roof repairs

£534 Community electricity

£111 Accountant

£486 Professional fees

£6 [NAME_25] fees

£2,623.50 Insurance

£3,393 Total:

£10,947.50

Year to June 2017 – p.26, p.446, p.488, p.492, p.501 71. [NAME_25]: The total charge for the year was £3,249. The [NAME_1] share was £395.02.

72.

73. The Tribunal adopts the reasoning set out above in relation to “Year to June 2015” in terms of the reasonableness and amount of the [NAME_25]. The Tribunal makes a deduction of 10% and finds that the amount of £3,086.10 would have been a reasonable charge, of which the [NAME_1] share would have been £355.52. If the [NAME_3] proportion is different, the figures shall be adjusted accordingly.

74. Insurance excess: The total charge for the year was £105. The [NAME_1] share was £12.10.

75. Clause 1 of the Lease imposes an obligation to pay “by way of further or additional rent from time to time a sum or sums of money equal to the amount which [NAME_23] may expend in effecting or maintain the insurance of the said premises or any part thereof against loss or damage by fire such last mentioned rent to be paid without any deductions…”. The Tribunal therefore finds that, if the charge had related to an insurance excess, it would have fallen within the terms of the Lease. This item, however, has been charged as insurance excess, but in fact the charge relates to an invoice from [NAME_32] (p.234) for £105 for works done as set out in the invoice. [NAME_10] told the Tribunal that the landlord chose to carry out those works rather than make an insurance claim. He said that the works were carried out for reinstatement following an insurable incident: if there was no excess there would be an insurance claim, but if the excess was £500, there was no point in making a claim. He said that the [NAME_24] have no control over what the excess is, and it would be inequitable to charge the lessee.

76. The charges do not relate to insurance excess and do not fall within clause 1. They may have properly fallen within another clause of the Lease, but the charge has been made for “insurance excess”. In any event, for the same reasons, the item is not reasonable as an insurance excess charge. The Tribunal therefore does not allow this item and finds that it is not payable.

77. As stated above, the charges in respect of Director [NAME_16] were conceded by the Respondent.

78. Charges due: The lawful charges are: Cleaning

£1,000 General repairs & maintenance

£212 Health & safety inspection

£50 Community electricity

£158 Accountant

£486 [NAME_25] fees

£3,086.10 Insurance

£4,100 Total:

£9,092.10

Year to June 2018 – p.27, p.452, p.494, p.504, p.525 79. [NAME_25]: The total charge for the year was £4,050. The [NAME_1] share was £466.56.

80.

81. Turning to the amount of the charges, as stated above, in the absence of a contractual price for management, the usual principles for determining the reasonableness of the relevant costs apply. It is therefore appropriate to compare the management fees with those being charged by other [NAME_17] for similar blocks. Please see the reasoning above in relation to “Year to June 2015”.

82. As stated above, the Respondent’s response (p.22) states that the range of fees charged by [NAME_17] in central London is £350-£750 per unit. It is acknowledged that these are the current fees and the Tribunal is considering what would have been reasonable in 2018. Taking everything into account, the Tribunal finds that the amount of £350 per unit would have been a reasonable charge. The total reasonable amount for [NAME_25] fees in 2018 would therefore have been £3,150, of which the [NAME_1] share would have been £362.88. To this, the Tribunal applies a 10% deduction, for the reasons set out above. This results in the total amount for [NAME_25] fees being £2,835 of which the [NAME_1] share would have been £326.60. If the [NAME_3] proportion is different, the figures shall be adjusted accordingly.

83. As stated above, the charges in respect of Director [NAME_16] were conceded by the Respondent.

84. Charges due: The lawful charges are: Cleaning

£1,000 Electrical maintenance

£198 General repairs & maintenance

£1,160 Gutters

£524 Health & safety inspection

£113 Community electricity

£280

Accountant

£486 [NAME_25] fees

£2,835 Insurance

£4,338 Total:

£10,934

Year to June 2019 – p.27, p.133, p.169, p.458, p.509, p.512, p.517, p.532, p.571 85. For this year, the First Applicant used the budgeted figures, not the actual figures that were charged at the end of the year. The Tribunal clarified the correct figures with the parties. 86. [NAME_25]: The total charge for the year was £4,050. The [NAME_1] share was £466.56.

87.

88.

89. Turning to the amount of the charges, as stated above, in the absence of a contractual price for management, the usual principles for determining the reasonableness of the relevant costs apply. It is therefore appropriate to compare the management fees with those being charged by other [NAME_17] for similar blocks. Please see the reasoning above in relation to “Year to June 2015”.

90. As stated above, the Respondent’s response (p.22) states that the range of fees charged by [NAME_17] in central London is £350-£750 per unit. It is acknowledged that these are the current fees and the Tribunal is considering what would have been reasonable in 2019. Taking everything into account, the Tribunal finds that the amount of £400 per unit would have been a reasonable charge. The total reasonable amount for [NAME_25] fees in 2019 would therefore have been £3,600, of which the [NAME_1] share would have been £414.72. To this, the Tribunal applies a 10% deduction, for the reasons set out above. This results in the total amount for [NAME_25] fees being £3,240 of which the [NAME_1] share would have been £373.25. If the [NAME_3] proportion is different, the figures shall be adjusted accordingly.

91. Insurance excess: The total charge for the year was £410. The [NAME_1] share was £47.23.

92. Clause 1 of the Lease imposes an obligation to pay “by way of further or additional rent from time to time a sum or sums of money equal to the amount which [NAME_23] may expend in effecting or maintain the insurance of the said premises or any part thereof against loss or damage by fire such last mentioned rent to be paid without any deductions…”. The Tribunal therefore finds that, if the charge had related to an insurance excess, it would have fallen within the terms of the Lease. There is no explanation as to what this item relates to. In the absence of information, the Tribunal does not find that this falls within the terms of the Lease (and in any event, would not find it to be reasonable). The Tribunal therefore does not allow this item and finds that it is not payable.

93. Bank administrative charges: The total charge for the year was £72. The [NAME_1] share was £8.29. The Respondent states that this falls within cl. 2(3) of the lease as one of the “all outgoings”. It said that it was necessary to have a bank account and it had a trustee bank account with dual authorisation, for which there was a charge.

94. The First Applicant said that the landlord has chosen to employ an agent to collect money on its behalf but that it could not charge the cost to the [NAME_24]. It was said that it was not an “outgoing” and the [NAME_24] should not have to pay for the way the landlord chooses to do business. It was asserted that the charge was not for the protection of the [NAME_24] and as there was no provision in the lease for charges in advance or any [NAME_16], the [NAME_24] should not have to pay for this service which they did not want.

95. The Tribunal accepts the submissions of the Respondent and finds that this is a proper charge and which falls within cl. 2(3) of the Lease.

96. Nothing specific was said about the amount and the Tribunal finds that the amount is reasonable. The Tribunal therefore allows the total sum of £72, with the [NAME_1] share as £8.29. If the [NAME_3] proportion is different, the figures shall be adjusted accordingly.

97. As stated above, the charges in respect of the [NAME_16] were conceded by the Respondent.

98. Charges due: The lawful charges are: Cleaning

£1,000

Drains & gutter maintenance

£540 General repairs & maintenance

£480 Health & safety

£395 Community electricity

£49 Accountant

£540 Bank admin. Fee

£72 Legal fees

£27 [NAME_25] fees

£3,240 Insurance

£4,512 Total:

£10,855

99. This is, however, subject to the s.20B issue, which is dealt with below.

Year to June 2020 – p.27, p.464, p.526, p.529, p.533, p.535, p.541 100. For this year, the First Applicant used the budgeted figures, not the actual figures that were charged at the end of the year. The Tribunal clarified the correct figures with the parties. 101. [NAME_25]: The total charge for the year was £4,500. The [NAME_1] share was £518.40. 102.

For the reasons set out above, the fees of the managing agent are “outgoings” and do fall within the Lease. In any event, the management of the building, including the Applicant’s properties, are outgoings in relation to those properties and would be outgoings of those properties. The Tribunal therefore finds that the management fees do fall within the scope of cl. 2(3) of the Lease. 103.

For the reasons set out above, the fees of the managing agent are “outgoings” and do fall within the Lease. In any event, the management of the building, including the Applicant’s properties, are outgoings in relation to those

properties and would be outgoings of those properties. The Tribunal therefore finds that the management fees do fall within the scope of cl. 2(3) of the Lease. 104. Turning to the amount of the charges, as stated above, in the absence of a contractual price for management, the usual principles for determining the reasonableness of the relevant costs apply. It is therefore appropriate to compare the management fees with those being charged by other [NAME_17] for similar blocks. Please see the reasoning above in relation to “Year to June 2015”. 105. As stated above, the Respondent’s response (p.22) states that the range of fees charged by [NAME_17] in central London is £350-£750 per unit. It is acknowledged that these are the current fees and the Tribunal is considering what would have been reasonable in 2020. Taking everything into account, the Tribunal finds that the amount of £450 per unit would have been a reasonable charge. The total reasonable amount for [NAME_25] fees in 2020 would therefore have been £4,050, of which the [NAME_1] share would have been £466.56. To this, the Tribunal applies a 10% deduction, for the reasons set out above. This results in the total amount for [NAME_25] fees being £3,645 of which the [NAME_1] share would have been £419.91. If the [NAME_3] proportion is different, the figures shall be adjusted accordingly. 106. Insurance excess: The total charge for the year was £155. The [NAME_1] share was £17.86. 107. Clause 1 of the Lease imposes an obligation to pay “by way of further or additional rent from time to time a sum or sums of money equal to the amount which [NAME_23] may expend in effecting or maintain the insurance of the said premises or any part thereof against loss or damage by fire such last mentioned rent to be paid without any deductions…”. The Tribunal therefore finds that, if the charge had related to an insurance excess, it would have fallen within the terms of the Lease. This item, however, has been charged as insurance excess, but in fact the charge relates to an invoice from [NAME_33] (p.235) for £155 for works done as set out in the invoice. [NAME_10] told the Tribunal that the landlord chose to carry out those works rather than make an insurance claim. He said that the works were carried out for reinstatement following an insurable incident: if there was no excess there would be an insurance claim, but if the excess was £500, there was no point in making a claim. He said that the [NAME_24] have no control over what the excess is and it would be inequitable to charge the lessee. 108. The charges do not relate to insurance excess and do not fall within clause 1. They may have properly fallen within another clause of the Lease, but the charge has been made for “insurance excess”. In any event, for the same reasons, the item is not reasonable as an insurance excess charge. The Tribunal therefore does not allow this item and finds that it is not payable.

109. The charges do not relate to insurance excess and so are not reasonable as an insurance excess charge. The Tribunal therefore does not allow this item. 110. Bank administrative charges: The total charge for the year was £144The [NAME_1] share was £16.58. The Respondent has conceded £72 of this, leaving a charge of £72. The Respondent states that this falls within cl. 2(3) of the lease as one of the “all outgoings”. It said that is was necessary to have a bank account and it had a trustee bank account with dual authorisation, for which there was a charge. 111. The First Applicant said that the landlord has chosen to employ an agent to collect money on its behalf but that it could not charge the cost to the [NAME_24]. It was said that it was not an “outgoing” and the [NAME_24] should not have to pay for the way the landlord chooses to do business. It was asserted that the charge was not for the protection of the [NAME_24] and as there was no provision in the lease for charges in advance or any [NAME_16], the [NAME_24] should not have to pay for this service which they did not want. 112. The Tribunal accepts the submissions of the Respondent and finds that this is a proper charge and which falls within cl. 2(3) of the Lease. 113. Nothing specific was said about the amount (after the concession by the Respondent) and the Tribunal finds that the amount is reasonable. The Tribunal therefore allows the total sum of £72, with the [NAME_1] share as £8.29. If the [NAME_3] proportion is different, the figures shall be adjusted accordingly. 114. As stated above, the charges in respect of the [NAME_16] were conceded by the Respondent. 115. Charges due: The lawful charges are: Cleaning

£915 Electrical maintenance

£66 General repairs & maintenance

£1,397 Major works expenditure

£2,153 (No credit for funds utilised from provision as no [NAME_16] allowed) Community electricity

£141

Accountant

£540 Bank admin. Fee

£72 Legal/Professional fees

£909 [NAME_25] fees

£3,645 Insurance

£4,840 Total:

£14,678

Year to June 2021 – p.28, p.236, p.470, p.538, p.541, p.549, p.554, p.557 116. [NAME_25]: The total charge for the year was £4,725. The [NAME_1] share was £544.32. 117.

For the reasons set out above, the fees of the managing agent are “outgoings” and do fall within the Lease. In any event, the management of the building, including the Applicant’s properties, are outgoings in relation to those properties and would be outgoings of those properties. The Tribunal therefore finds that the management fees do fall within the scope of cl. 2(3) of the Lease. 118.

For the reasons set out above, the fees of the managing agent are “outgoings” and do fall within the Lease. In any event, the management of the building, including the Applicant’s properties, are outgoings in relation to those properties and would be outgoings of those properties. The Tribunal therefore finds that the management fees do fall within the scope of cl. 2(3) of the Lease. 119. Turning to the amount of the charges, as stated above, in the absence of a contractual price for management, the usual principles for determining the reasonableness of the relevant costs apply. It is therefore appropriate to compare the management fees with those being charged by other [NAME_17] for similar blocks. Please see the reasoning above in relation to “Year to June 2015”. 120. As stated above, the Respondent’s response (p.22) states that the range of fees charged by [NAME_17] in central London is £350-£750 per unit. It is acknowledged that these are the current fees and the Tribunal is considering what would have been reasonable in 2021. Taking everything into account, the Tribunal finds that the amount of £450 per unit would have been a reasonable charge. The total reasonable amount for [NAME_25] fees in 2021 would therefore have been £4,050, of which the [NAME_1] share would have been £466.56. To this, the Tribunal applies a 10% deduction, for the reasons set out above. This results in the total amount for [NAME_25] fees being £3,645 of which the [NAME_1] share would have been £419.91. If the [NAME_3] proportion is different, the figures shall be adjusted accordingly. 121. Insurance excess: The total charge for the year was £100. There is no charge shown for the [NAME_1] on the completed schedule and it is not clear if this was charged to the First Applicant. The Tribunal therefore finds that, if the charge had related to an insurance excess, it would have fallen within the terms of the Lease. There is no explanation as to what this item relates to. In the absence of information, the Tribunal does not find that this falls within the terms of the Lease (and in any event, would not find it to be reasonable). The Tribunal therefore does not allow this item and finds that it is not payable. 122. Bank administrative charges: The total charge for the year was £144. The [NAME_1] share was £16.58. The Respondent has conceded £72 of this, leaving a charge of £72. The Respondent states that this falls within cl. 2(3) of the lease as one of the “all outgoings”. It said that is was necessary to have a bank account and it had a trustee bank account with dual authorisation, for which there was a charge. 123. The First Applicant said that the landlord has chosen to employ an agent to collect money on its behalf but that it could not charge the cost to the [NAME_24]. It was said that it was not an “outgoing” and the [NAME_24] should not have to pay for the way the landlord chooses to do business. It was asserted that the charge was not for the protection of the [NAME_24] and as there was no provision in the lease for charges in advance or any [NAME_16], the [NAME_24] should not have to pay for this service which they did not want. 124. The Tribunal accepts the submissions of the Respondent and finds that this is a proper charge and which falls within cl. 2(3) of the Lease. 125. Nothing specific was said about the amount (after the concession by the Respondent) and the Tribunal finds that the amount is reasonable. The Tribunal therefore allows the total sum of £72, with the [NAME_1] share as £8.29. If the [NAME_3] proportion is different, the figures shall be adjusted accordingly. 126. As stated above, the charges in respect of the [NAME_16] were conceded by the Respondent. 127. Charges due: The lawful charges are: Cleaning

£996 General repairs & maintenance

£3,631 Community electricity

£128

Accountant

£540 Bank admin. Fee

£72 [NAME_25] fees

£3,645 Insurance

£5,205 Total:

£14,217

Year to June 2022 – p.28, p.243, p.245, p.476, p.557, p.566, p.559 128. [NAME_25]: The total charge for the year was £4,725. The [NAME_1] share was £544.32. 129.

For the reasons set out above, the fees of the managing agent are “outgoings” and do fall within the Lease. In any event, the management of the building, including the Applicant’s properties, are outgoings in relation to those properties and would be outgoings of those properties. The Tribunal therefore finds that the management fees do fall within the scope of cl. 2(3) of the Lease. 130.

For the reasons set out above, the fees of the managing agent are “outgoings” and do fall within the Lease. In any event, the management of the building, including the Applicant’s properties, are outgoings in relation to those properties and would be outgoings of those properties. The Tribunal therefore finds that the management fees do fall within the scope of cl. 2(3) of the Lease. 131. Turning to the amount of the charges, as stated above, in the absence of a contractual price for management, the usual principles for determining the reasonableness of the relevant costs apply. It is therefore appropriate to compare the management fees with those being charged by other [NAME_17] for similar blocks. Please see the reasoning above in relation to “Year to June 2015”. 132. As stated above, the Respondent’s response (p.22) states that the range of fees charged by [NAME_17] in central London is £350-£750 per unit. It is acknowledged that these are the current fees and the Tribunal is considering what would have been reasonable in 2022. Taking everything into account, the Tribunal finds that the amount of £500 per unit would have been a reasonable charge. The total reasonable amount for [NAME_25] fees in 2022 would therefore have been £4,500, of which the [NAME_1] share would have been £518.40. To this, the Tribunal applies a 10% deduction, for the reasons set out above. This results in the total amount for [NAME_25] fees being £4,050 of which the [NAME_1] share would have

been £466.56. If the [NAME_3] proportion is different, the figures shall be adjusted accordingly. 133. Professional fees: These were conceded by the Respondent. 134. Bank administrative charges: The total charge for the year was £144. The [NAME_1] share was £16.58. The Respondent has conceded £72 of this, leaving a charge of £72. The Respondent states that this falls within cl. 2(3) of the lease as one of the “all outgoings”. It said that is was necessary to have a bank account and it had a trustee bank account with dual authorisation, for which there was a charge. 135. The First Applicant said that the landlord has chosen to employ an agent to collect money on its behalf but that it could not charge the cost to the [NAME_24]. It was said that it was not an “outgoing” and the [NAME_24] should not have to pay for the way the landlord chooses to do business. It was asserted that the charge was not for the protection of the [NAME_24] and as there was no provision in the lease for charges in advance or any [NAME_16], the [NAME_24] should not have to pay for this service which they did not want. 136. The Tribunal accepts the submissions of the Respondent and finds that this is a proper charge and which falls within cl. 2(3) of the Lease. 137. Nothing specific was said about the amount (after the concession by the Respondent) and the Tribunal finds that the amount is reasonable. The Tribunal therefore allows the total sum of £72, with the [NAME_1] share as £8.29. If the [NAME_3] proportion is different, the figures shall be adjusted accordingly. 138. Charges due: The lawful charges are: Cleaning

£1,041 Electrical maintenance

£514 General repairs & maintenance

£1,882 Pest control

£300 Major works

£1,250 (credit of £1,106 not applied as [NAME_16] has not been allowed) Less share to flat 7

(£144)

Community electricity

£1,340 Accountant

£540 Bank admin. Fee

£72 [NAME_25] fees

£4,050 Insurance

£5,726 Total:

£16,571

Year to June 2023 – p.28, p.249, p.482, p.569 139. [NAME_25]: The total charge for the year was £4,725. The [NAME_1] share was £544.32. 140.

For the reasons set out above, the fees of the managing agent are “outgoings” and do fall within the Lease. In any event, the management of the building, including the Applicant’s properties, are outgoings in relation to those properties and would be outgoings of those properties. The Tribunal therefore finds that the management fees do fall within the scope of cl. 2(3) of the Lease. 141. The Tribunal adopts the reasoning set out above in relation to “Year to June 2015” in terms of the reasonableness and amount of the [NAME_25]. The Respondent’s response (p.22) states that the range of fees charged by [NAME_17] in central London is £350-£750 per unit. It is acknowledged that these are the current fees and the Tribunal is considering what would have been reasonable in 2023, but taking everything into account, the Tribunal finds that the amount of £500 per unit would have been a reasonable charge. The total reasonable amount for [NAME_25] fees in 2023 would therefore have been £4,500, of which the [NAME_1] share would have been £518.40. To this, the Tribunal applies a 10% deduction, for the reasons set out above. This results in the total amount for [NAME_25] fees being £4,050 of which the [NAME_1] share would have been £466.56. If the [NAME_3] proportion is different, the figures shall be adjusted accordingly. 142. Professional fees: The total charge for the year was £480. The [NAME_1] share was £55.30. The charge was made up of an invoice from [NAME_29] for the preparation of a Re-instatement Cost Assessment Report.

143. The Respondent asserts that these charges fall within cl. 2(3) as it falls within “all outgoings”. [NAME_10] said that the costs had been incurred as part of insuring the building, and that the landlord could not comply with its obligation to insure the building without knowing that it was being insured correctly. 144. The First Applicant asserted that the Lease required the landlord to pay the insurance premium, but not the expenses associated with insuring the Building, and that nothing in the Lease required the tenants to pay the costs associated with obtaining the insurance. 145. The Lease does provide that the lessee shall pay a proportion of “all outgoings”. It goes on to make clear that the outgoings include light and cleaning, but the obligation is far wider than that – it relates to “all outgoings”. The professional fees of [NAME_29] therefore do fall within cl. 2(3) of the Lease. 146. The First Applicant did not submit anything specific about the amount of the report and the Tribunal finds that the charge was reasonable in amount. 147. Bank administrative charges: The total charge for the year was £144. The [NAME_1] share was £16.58. The Respondent has conceded £72 of this, leaving a charge of £72. The Respondent states that this falls within cl. 2(3) of the lease as one of the “all outgoings”. It said that is was necessary to have a bank account and it had a trustee bank account with dual authorisation, for which there was a charge. 148. The First Applicant said that the landlord has chosen to employ an agent to collect money on its behalf but that it could not charge the cost to the [NAME_24]. It was said that it was not an “outgoing” and the [NAME_24] should not have to pay for the way the landlord chooses to do business. It was asserted that the charge was not for the protection of the [NAME_24] and as there was no provision in the lease for charges in advance or any [NAME_16], the [NAME_24] should not have to pay for this service which they did not want. 149. The Tribunal accepts the submissions of the Respondent and finds that this is a proper charge and which falls within cl. 2(3) of the Lease. 150. Nothing specific was said about the amount (after the concession by the Respondent) and the Tribunal finds that the amount is reasonable. The Tribunal therefore allows the total sum of £72, with the [NAME_1] share as £8.29. If the [NAME_3] proportion is different, the figures shall be adjusted accordingly. 151. Health & Safety inspection: The total charge for the year was £746 and the First Respondent’s share was £85.94. 152. The Tribunal finds that this falls within cl. 2(3) as one of the “all outgoings”.

153. The First Applicant submitted that the [NAME_34] can do an inspection for nothing and that the fee seemed excessive. The Respondent submitted that the [NAME_34] do not do a full risk assessment and that the landlord was obliged to appoint a competent person to give advice on fire compliance. The Tribunal uses it expert knowledge and accepts the submissions of the Respondent. It finds that the charge is reasonable in amount. 154. Insurance: The Second Applicant challenges this item. The full charge was £7,460. 155. It was not disputed that this was a charge which fell within cl. 1 of the Lease. 156. [NAME_7] for the Second Applicant submitted that there had been a “jump” in the amount from the previous year, which she acknowledged could be explained by higher premiums and she did not know if quotations had been given by more than one insurance company. The Second Applicant did not produce any comparables. 157. [NAME_10] told the Tribunal that [NAME_18] employed brokers, who took the property folio to the market, which happened every year, to try to get the best price from the insurance company. He stated that they only used reputable companies and whilst it may be possible to get cheaper quotations, there may then be issues if they had to make a claim. 158. The Tribunal finds that this amount was reasonable. 159. Charges due: The lawful charges are: Cleaning

£996 General repairs & maintenance

£225 Health & safety inspection

£746 Community electricity

(£1,018) Accountant

£540 Bank admin. Fee

£72 Professional fees

£480 [NAME_25] fees

£4,050 Insurance

£7,460

Total:

£13,551 Administration charges – p.29, p.169, p.432, p.497, p.499, p.507, p.515, p.523, p.544, p.552, p.561, p.583, p.588, p.594, p.600, p.604, p.612, p.619 160. The First Applicant submitted that the charges were not incurred by the Respondent, but were charged to the First Applicant. 161. It was also submitted that there was no evidence of the costs incurred and that they were arbitrary. It was said that there was no suggestion that advice was being given to the Respondent, that the Respondent would not be getting the same advice every time there was a breach in terms of non-payment. It was also said that the charge was in fact a penalty fee. 162. The Respondent stated that they were fees incurred in contemplation of forfeiture proceedings. [NAME_10] said that a flat fee was charged, rather than billing on a “time basis”. He said that they consider the file and decide what is the best process. It was said that clause 2(16) (cl. 2(15) in the [NAME_3] Lease) of the [NAME_1] required the First Applicant to pay a share of the expenses, that an invoice could be raised to the Respondent and then be passed on to the First Applicant. The work was said to have been done in preparing a case to go to solicitors and in contemplation of action pursuant to s.146. 163. Clause 2(16) requires the First Applicant to pay “all expenses (including solicitors costs and surveyors fees) which may be incurred by [NAME_23] in or in contemplation of the service of any notice under Section 146 of the law of Property Act 1925 notwithstanding forfeiture of the terms hereby granted may be waived or avoided otherwise than by relief granted by the court”. 164. This charge is not being claimed as a cost, but as a service charge. There is no evidence of invoices to the Respondent or the incurring of costs by the Respondent (save the evidence given by [NAME_10]) and [NAME_10]’s evidence was that the managing agent did not pay the invoice for £90 until the fee was recovered from the lessee, it was not paid from the service charge funds and did not appear on the service charge accounts. On the information before the Tribunal, it does not find that this charge is properly recoverable under the Lease, but in any event would not find it to be reasonable. The Tribunal is not satisfied that there is a causal relationship between the recovery of the administration charges demanded and failure of the Applicant to pay service charges for which they are liable.

s.20B

165. This relates to an invoice said to have been raised on 16 August 2023 for service charges for the period 24 June 2018-24 December 2018 in the amount of £839.81. 166. Section 20B provides: (1) If any of the relevant costs taken into account in determining the amount of any service charges were incurred more than 18 months before a demand for payment of the service charge is served on the tenant, then (subject to subsection (2)), the tenant shall not be liable to pay so much of the service charge as reflects the costs so incurred; (2) Subsection (1) shall not apply if, within the period of 18 months beginning with the date when the relevant costs in question were incurred, the tenant was notified in writing that these costs had been incurred and that he would subsequently be required under the terms of his lease to contribute to them by the payment of a service charge. 167. On 4 July 2018 (p.510) service charges were invoiced for £876.67 for the period of 24 June 2018-24 December 2018. On 16 August 2023 (p.223), the service charges for 24 June 2018-24 December 2018 of £876.67 were “cancelled” and re-charged in the sum of £839.81 (being half of the sum that was due, £1,696.61, p.574). 168. The First Applicant submitted that the invoice of 16 August 2023 was more than 18 months after the charges it related to. It was said that the original invoice was incorrect and invalid, as it was for charges in advance, which was not permitted by the terms of the Lease. As a result, those charges were not due and had not been incurred: the statutory requirement was for the charges to be invoiced within 18 months of being incurred and when the original invoice was sent, nothing had been incurred: the first time that the incurred costs were claimed was on 16 August 2023, which was outside the permitted time. 169. The Respondent relied on the letter accompanying the 16 August 2023 invoice (p.222) which stated that the amendment was as a result of two items (company secretary costs and Directors & Officers costs) which were freeholder costs, not service charge costs, and so they should not have been on the service charge invoice, so they were removed and a credit was put on the “amended” invoice of 16 August 2023. [NAME_10] said that the Respondent was trying to be transparent and if it had issued a credit notice, this issue would not have arisen. 170. By virtue of s.20B(2), the bar to recovery does not apply in the event that the tenant was informed in writing within 18 months of the costs being incurred that those costs had been incurred and that the same would be recoverable from the tenant. In Gilje v Charlegrove Securities Ltd [2003] EWHC 1284 (Ch) Etherton J said that “… the policy behind s.20B of the Act is that the tenant should not be faced with a bill for expenditure, of which he or she was not sufficiently warned to set aside provision. It is not directed at preventing [NAME_23] from recovering any expenditure on matters, and to the extent, of which there was adequate prior notice”. 171. A demand which specifies an incorrect amount or an incorrect proportion but is otherwise in compliance with the requirement of the lease will be sufficient to stop time running. 172. The expression “relevant costs” means the “costs or estimated costs incurred or to be incurred by or on behalf of the landlord in connection with the matters for which the service charge is payable”. 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: ss.18(2) and (3) L&TA 1985. 173. In Burr v OM Property Management Ltd [2013] EWCA Civ 479 the Court of Appeal held, among other things: (a) There is a distinction between a liability to pay and the incurring of costs; (b) Although a liability may exist when the service is provided, that liability does not give rise to an “incurred” cost for the purpose of s.20B; (c) Costs are not “incurred” on the mere provision of services or supplies to the landlord or management company, but only when they are quantified or crystallised by the presentation of an invoice (or other demand for payment) or the making of a payment. 174. In Ground Rents (Regisport) Ltd v Dowlen [2014] UKUT 144 (LC) the Upper Tribunal considered whether disputed water charges were incurred by the appellant when it was first sent an invoice for those charges by [NAME_35] in May 2010. The Upper Tribunal preferred the date when an invoice was provided by a water supplier to the “relevant landlord”. 175. In Skelton & Ors v DBS Homes (Kings Hill) Ltd [2017] EWCA Civ 1139 the tenants contended that service charges were not payable as they had not been demanded in accordance with the lease. [ADDRESS] of Appeal held that none of the service charges were payable. 176. The Tribunal is not satisfied that the costs had been incurred when the demand was sent on 4 July 2018 and, in any event, the demand was not a lawful and valid demand as the Lease did not permit the service charges to be paid in advance. No further demand was sent until 16 August 2023, which was outside the period permitted by s.20B.

For these reasons, the Tribunal finds that the charges for the period for the period 24 June 2018-24 December 2018 are not payable.

177. The total amount that would have been due £10,855 but 50% of these sums are not due as a result of the Tribunal’s decision in relation to s.20B, so the total due is £5,427.50, of which the [NAME_1] proportion (11.52%) is £625.25. If the [NAME_3] proportion was different, the figures shall be adjusted accordingly;

Costs 178. Section 20C of the Landlord and Tenant Act 1985 provides as follows: “(1) A tenant may make an application for an order that all or any of the costs incurred, or to be incurred, by the landlord in connection with proceedings before…. the First-tier 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 tenant or any other person or persons specified in the application”. 179. When faced with such an application, the Tribunal may make such order as it considers just and equitable in the circumstances. 180. The relevant part of paragraph 5A reads as follows: “A tenant of a dwelling in England may apply to the relevant… tribunal for an order reducing or extinguishing the tenant’s liability to pay a particular administration charge in respect of litigation costs’. 181. The Respondent confirmed that it was not intending to pass on any charges. 182. The Tribunal finds that it would be just and equitable to order that the costs incurred by the Respondent in connection with the proceedings before the Tribunal in relation to the application (in respect of service chargers and administration charges) are not be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the Applicants and makes the orders, pursuant to s.20C and para. 5A,

Judge Sarah McKeown 22 January 2024

Rights of appeal By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the tribunal is required to notify the parties about any right of appeal they may have. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber), 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. 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. 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. 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. If the tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber)