First-tier Tribunal Rules Service Charges Unreasonable and Unenforceable

OUTCOME: Allowed

FIRST-TIER TRIBUNAL [NAME] CHAMBER ([NAME])

Case Reference

:

HAV/00HP/LSC/2024/0523 [NAME]

: 446-450a [ADDRESS] [POSTCODE] & [ADDRESS] [POSTCODE]

Applicants

:

[redacted] [NAME] (Flat 1) (2) [NAME] (Flat 4) (3) [NAME] (Flat 5) (4) [NAME] (Flat 7) (5) [NAME] (Flat 8) (6) [NAME] & [NAME] (Flat 9) (7) [NAME] (Flat 10) (8) [NAME] [NAME] ([NAME]) (9) [COUNSEL] (Flat 12) (10)

Representative

:

[NAME] [COUNSEL]

Respondent: [redacted]

:

n/a

Type of Application

:

Determination of liability to pay and reasonableness of service charges (Section 27A Landlord and Tenant Act 1985) and Determination as to liability to pay an administration charge (Schedule 11 Commonhold and Leasehold Reform Act 2002)

Tribunal Member

:

Judge D Gethin

Date of Decision

:

23 October 2025 DECISION

Decisions of the Tribunal

(1) The Tribunal determines that none of the sums demanded by the Respondent as either a service charge or as an administration charge relating to the years 2021, 2022, 2023 and 2024 are payable by the Applicants.

(2) The Tribunal makes an order under section 20C of the Landlord and Tenant Act 1985 and under paragraph 5A, Schedule 11 to the Commonhold and Leasehold Reform Act 2002 so that none of the Respondent’s costs of the Tribunal proceedings may be passed to the lessees through any service charge or as an administration charge.

(3) The Tribunal determines that the Respondent shall pay the Applicant £337 within 28 days of this decision, in respect of the reimbursement of the Tribunal fees paid by the Applicants.

The Application

1. The First Applicant is [APPELLANT] (“the [COMPANY]”) which, further to the Tribunal’s decision dated 2 December 2020 (CHI/00HP/LRM/2020/0003), was entitled to acquire the right to manage the [NAME] on 28 April 2020 and subsequently did so in 2021. The Second to Tenth Applicants are various leasehold owners of flats at [ADDRESS] [POSTCODE].

2. The Applicants seek a determination pursuant to s.27A of the Landlord and Tenant Act 1985 (“the 1985 Act”) and Schedule 11, paragraph 5 to the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”) as to whether they owe service charges and administration charges which were demanded by the Respondent in respect of the years 2021-2024. The Application was received by the Tribunal on 2 September 2024. The disputed charges relate to insurance premiums, broker’s fees and management fees which will be collectively referred to below as “the Insurance Cost”, as well as [NAME] and Late Payment Fees.

3. The Applicants further seek orders pursuant to Section 20C of the Landlord and Tenant Act 1985 and paragraph 5A of Schedule 11 of the Commonhold and Leasehold Reform Act 2002.

4. Directions were issued on 20 February 2025 setting down a case management and dispute resolution hearing on 9 April 2025.

5. That hearing was attended by [NAME] and [RESPONDENT] on behalf of the Applicants. The Respondent did not attend and has not provided any explanation as to why it was unable to attend.

6. In the directions dated 9 April 2025 (“the April Directions”, pp. 1-6), Regional Judge Whitney made the following directions concerning the Respondent’s representation.

“Representatives

11. The Tribunal also requires the Respondent to provide an authority for its representative to act on its behalf by 6 March 2025.

12. Unless and until an authority is supplied the Tribunal and the parties will correspond directly with the Applicant or Respondent and not with any representative. Any correspondence received from a representative will not be considered, actioned or replied to unless and until authority is provided.”

7. The Respondent did not, and never has, provided such authority which will be addressed below.

8. Following the failure by the Applicants to submit a hearing bundle prior to the 23 May 2025, the Tribunal struck out the proceedings on 27 May 2025 and vacated the scheduled hearing (pp. 7-9).

9. The Applicants’ application to reinstate its application (pp. 10-12) was received by the Tribunal on 11 June 2025 and [NAME], having regard for the Applicants’ explanation that it had misunderstood the Tribunal’s requirements and for the fact that the Respondent had not objected to the application, reinstated the application and relisted the hearing in the Reinstatement Decision and Directions dated 27 June 2025 (“the Decision”).

10. The hearing was scheduled to take place remotely by video on 31 July 2025 and the parties were directed to provide contact information for each person proposing to attend the hearing.

11. Paragraphs 18-20 of the Decision stated:

“Correspondence with the Respondent

18. The Directions noted that correspondence must be with a party until a representative had been authorised. The exception to that is where the representative is a lawyer who is professional able to conduct litigation. A non-lawyer may represent in Tribunal proceedings and some Court proceedings, if specifically authorised by the given party to do so. That does not apply to lawyers with the right to conduct litigation. A non-lawyer representative seeking to conduct litigation without authority commits an offence.

19. The Tribunal has not received written authority that [NAME] is representing the Respondent in these proceedings, despite requests in both sets of earlier Directions.

20. These Directions and all correspondence from now, in relation to these proceedings will be sent to the Respondent only, until such time as authority is received to do otherwise.”

12. A hearing was held remotely on 31 July 2025, attended by representatives of both parties. [APPELLANT] ([NAME]) represented the Applicant and [COUNSEL] of Counsel represented the Respondent. Neither the Respondent, nor [NAME] [RESPONDENT] or any other person connected with [COMPANY], attended the hearing.

13. Following consideration of submissions by [NAME] [NAME], the Tribunal reluctantly adjourned the hearing notwithstanding that it recorded that the Respondent had failed to comply with the directions previously made.

14. In further directions dated 31 July 2025 (“the Hearing Directions”), the Tribunal directed the Respondent to send the Applicants a statement of case. Paragraph 9 of the Further Directions states:

“Directions

9. The Respondent will send to the Applicant and to the Tribunal a statement of case setting out its response to the application together with all supporting documents upon which it wishes to rely by 5.00 pm on 14 August 2025. The statement of case must contain a statement with a statement of truth (i.e. “I believe that the facts stated in this statement are true”). If the Respondent fails to serve and file a statement of case by that time and date it will be debarred from taking any further part in these proceedings.”

15. [NAME] [NAME] [NAME] of [APPELLANT] submitted a statement to the Applicant and the Tribunal after 5.00pm on 14 August 2025 headed:

“Response to Lessees’ Case – Insurance Charges Post-RTM Case Reference: HAV/00HP/LSC/2024/0523/ST Respondent: [redacted] Prepared by: [RESPONDENT] [NAME]”

The Respondent’s ‘response’ was not signed and did not contain a statement of truth.

16. The ‘response’ provided by [NAME] [NAME] (“the Response”) did not comply with the Tribunal’s directions but was filed by the Tribunal in its case file. The Tribunal informed the Applicant that it could make a case management application to debar the Respondent from taking any further part in the proceedings.

17. The Applicant made a case management application dated 19 August 2025 (“the CMA”), which referred to the clear direction made by the Tribunal following the adjourned hearing, which directed that the Respondent submit a statement of case with a statement of truth. It said that the Respondent had missed the deadline for the submission of that statement, and that the Response, which was submitted at 5.45pm on 14 August 2025, did not contain a state of truth. It said that it had emailed [NAME] [NAME], who had provided the Response, and that his response was “There is no statement of truth because there is no witness evidence just a legal statement which is quite clear.”

18. The Applicant stated in its application that it has concluded that the Respondent has, and had, no intention of complying with the directions for which reason the Applicant is unwilling to believe that the statement is true and it therefore requested that it be removed from the proceedings and that the Respondent take no further part.

19. The Tribunal has, to date, still not received any confirmation that [RESPONDENT] ([NAME] [RESPONDENT]) has been authorised to act as the Respondent’s representative.

20. The Tribunal noted that [NAME] [COUNSEL] has on several occasions corresponded with the Applicant and the Tribunal notwithstanding that he has not secured written confirmation from the Respondent that he is authorised to do so.

21. In further Directions dated 1 September 2025 (“the [NAME]”), the Tribunal decided not to bar the Respondent despite the persistent failure to

comply with directions as it may have to consider a further application by the Respondent for reinstatement which would unnecessarily prolong proceedings further, contrary to the Tribunal’s overriding objective under rule 3 of The Tribunal Procedure (First-tier Tribunal) ([NAME] Chamber) Rules 2013 (“the 2013 Rules”) to deal with cases fairly and justly.

22. The Respondent, and [NAME] [RESPONDENT] of [RESPONDENT] if he is indeed the Respondent’s representative, are reminded of their duty under rule 3(4) of the 2013 Rules to (a) help the Tribunal to further the overriding objective and (b) co-operate with the Tribunal generally.

23. This includes complying with directions and doing so in a timely manner, as well as including a Statement of Truth on Statements of Case and not merely on witness statements as [NAME] [RESPONDENT] believes applies. Neither the Respondent, nor [NAME] [RESPONDENT], should expect to be treated with such lenience in the future.

24. The Tribunal accepted the Response notwithstanding the failings noted above. The [NAME] stated that the Applicants would be permitted to respond to the Response as well as make submissions in accordance with paragraph 35 of the Directions, namely in respect of reimbursement of Tribunal fees and the section 20C and paragraph 5A, Schedule 11 applications.

25. In light of the parties’ agreement provided during the hearing on 31 July 2025, the [NAME] confirmed that the Tribunal would determine the present application based upon the Hearing Bundle provided for the hearing on 31 July 2025, the Response and the Applicants’ reply (“the Reply”).

26. The Reply was received on 15 September 2025.

The Background

27. The [NAME] is a 4-storey building built in or around 2017 with twelve flats on the upper floors (known as Flats 1-[ADDRESS]) and commercial premises on the ground floor (known as 446-[ADDRESS]). It consists of a single building. Neither party requested an inspection, and the Tribunal did not consider that one was necessary to resolve the matters in dispute.

28. The [COMPANY] was entitled to acquire the right to manage the [NAME] on 28 April 2020 and subsequently did so in 2021. The dispute centres around a series of demands which the Respondent has made in relation to Insurance Costs for the whole building relating to the years 2021-2024, together with demands for [NAME] and Late Payment Fees where the Applicants have not made payment of the disputed charges.

29. The Applicants’ case is that the sums demanded in relation to building insurance for the years in dispute are not recoverable from the [NAME] by way of a service charge as the responsibility for insuring the entire building was transferred to the [COMPANY] on the acquisition of the right to manage. The Applicants have exhibited a schedule of insurance for 22 August 2024 to 22 August 2025 (pp. 168-177) showing that the [COMPANY] insured the entire building during that period.

30. From the various witness statements in the Hearing Bundle, each [NAME] has been charged the same Insurance Cost for a particular year. The demands presented by [RESPONDENT] as managing agent on behalf of the Respondent state the insurance premium for that year, a broker’s fee of £50.00 and a management fee which I have calculated to be 15% of the insurance premium and broker’s fee combined. That gives a total figure, and the demand then gives the sum to be paid by the [NAME], referred to in this decision as the Insurance Cost.

31. From the documents exhibited in the Hearing Bundle, the Insurance Cost was demanded in each year is as follows:

2021 – Insurance renewal date 1 August 2021 £279.98 demanded on 17 August 2021 (pp. 82, 98, 112, 82, 98, 112)

2022 – Insurance renewal date 1 August 2022 £562.50 demanded on 23 August 2022 (pp. 31-34, 59-61, 72-74, 83, 99, 113)

2023 – Insurance renewal date 1 August 2023 £459.61 demanded on 18 July 2023 (pp. 34-38, 62-64, 70, 75-76, 85, 114)

2024 – Insurance renewal date 1 August 2024 £473.27 demanded on 17 April 2024 (pp. 38-41, 65-67, 71, 89-91, 94)

32. Where monies were not paid by the [NAME], the Respondent turned to the [COMPANY] for payment (pp. 115-118) in 2022. From the evidence in the Hearing Bundle, it is not ascertainable how much, if anything, the [COMPANY] paid in 2022 or for any other years.

33. In addition, there is evidence of Late Payment Fees having been demanded by the Respondent via their agent on the following dates where [NAME] have not paid the Insurance Cost:

21 September 2023 – £120.00 (pp. 88, 93, 100, 114) 2 September 2024 – £150.00 (pp. 41-43, 79-81, 92, 101)

34. There is also evidence of a [NAME] having been demanded by the Respondent via their agent on the following date:

29 May 2024 – £60.00 (pp. 86)

35. The Respondent’s case is that the responsibility to insure the building did not pass to the [COMPANY] due to the existence of the separate commercial premises on the ground floor.

The Issues

36. The Tribunal has identified the relevant issues for determination as follows:

(i) Whether the sums demanded in relation to the Insurance Costs were payable as a service charge; (ii) Whether the sums demanded in relation to [NAME] were payable as a service charge or administration charge; (iii) Whether any of the Late Payment Fees were payable.

37. Having considered the Hearing Bundle, Response and Reply provided, the Tribunal has made determinations on the various issues as follows.

The Relevant Law – Service Charge, the Right to Manage and Transfer of Management Functions

38. A service charge is defined by section 18(1) of the 1985 Act reads as follows:

18 Meaning of “service charge” and “relevant costs”.

(1) In the following provisions of this Act “service charge” means an amount payable by a tenant of a dwelling as part of or in addition to the rent—

(a) which is payable, directly or indirectly, for services, repairs, maintenance improvements or insurance or the landlord’s costs of management, and (b) the whole or part of which varies or may vary according to the relevant costs.

39. Part 1 of Chapter 2 to the Commonhold and Leasehold Reform Act 2022 provides a statutory mechanism by which qualifying [NAME] can acquire the right to manage their building via a Right to Manage (RTM) company without having to prove any default on the part of the landlord. At the relevant

time when the [COMPANY] applied for a Tribunal determination that it was entitled to acquire the right to manage, the right applied to residential buildings and also to mixed use buildings where the floor area of the non-residential units did not exceed 25% of the whole. Section 71 introduces the chapter and provides:

71 The right to manage

(1) This Chapter makes provision for the acquisition and exercise of rights in relation to the management of premises to which this Chapter applies by a company which, in accordance with this Chapter, may acquire and exercise those rights (referred to in this Chapter as a [COMPANY])

Section 72 defines the premises to which the Chapter applies:

72 Premises to which Chapter applies

(2) This Chapter applies to premises if—

(a) they consist of a self-contained building or part of a building, with or without appurtenant [NAME], (b) they contain two or more flats held by qualifying tenants, and (c) the total number of flats held by such tenants is not less than two-thirds of the total number of flats contained in the premises.

(3) A building is a self-contained building if it is structurally detached.

(4) A part of a building is a self-contained part of the building if—

(a) it constitutes a vertical division of the building, (b) the structure of the building is such that it could be redeveloped independently of the rest of the building, and (c) subsection (4) applies in relation to it.

(5) This subsection applies in relation to a part of a building if the relevant services provided for occupiers of it—

(a) are provided independently of the relevant services provided for occupiers of the rest of the building, or (b) could be so provided without involving the carrying out of works likely to result in a significant interruption in the

provision of any relevant services for occupiers of the rest of the building.

40. Section 96 of the 2002 Act provides that:

96 Management functions under leases

(1) This section and section 97 apply in relation to management functions relating to the whole or any part of the premises.

(2) Management functions which a person who is landlord under a lease of the whole or any part of the premises has under the lease are instead functions of the [COMPANY]. …

(4) Accordingly, any provisions of the lease making provision about the relationship of—

(a) a person who is landlord under the lease, and (b) a person who is party to the lease otherwise than as landlord or tenant,

in relation to such functions do not have effect.

(5) “Management functions” are functions with respect to services, repairs, maintenance, improvements, insurance and management.

(6) But this section does not apply in relation to—

(a) functions with respect to a matter concerning only a part of the premises consisting of a flat or other unit not held under a lease by a qualifying tenant, or (b) functions relating to re-entry or forfeiture

41. Section 97 of the 2002 Act provides that:

97 Management functions: supplementary

(1) Any obligation owed by the [COMPANY] by virtue of section 96 to a tenant under a lease of the whole or any part of the premises is also owed to each person who is landlord under the lease.

(2) A person who is—

(a) landlord under a lease of the whole or any part of the premises, (b) party to such a lease otherwise than as landlord or tenant, or (c) a manager appointed under Part 2 of the 1987 Act to act in relation to the premises, or any premises containing or contained in the premises,

is not entitled to do anything which the [COMPANY] is required or empowered to do under the lease by virtue of section 96, except in accordance with an agreement made by him and the [COMPANY]

(3) But subsection (2) does not prevent any person from insuring the whole or any part of the premises at his own expense

The Insurance Costs

42. [NAME] [RESPONDENT] on behalf of the Respondent in the Response does not take issue with the fact that the [NAME] is a self-contained building as defined by s72(2) of the 2002 Act.

43. The submissions in the Response can be summarised as follows:

(i) the lease expressly reserves the Respondent’s right and obligation to insure the building and to recover the costs from doing so by way of an Insurance Rent; (ii) that s.97(3) preserves the right of the Respondent to insure the whole or any part of the premises; (iii) that the RTM does not override the express lease terms unless varied and the [COMPANY] has not sought a variation or Tribunal determination to transfer this function; (iv) that the [COMPANY] cannot manage or insure commercial units; (v) if the lease requires the Respondent to insure the entire building, including the commercial parts, the Respondent retains the responsibility for doing so; (vi) payments made under ‘protest or confusion’ do not void the contractual obligations under the lease; and (vii) guidance from the Tribunal and Upper Tribunal have consistently held that RTM companies cannot manage or insure commercial parts, and that where the lease requires the landlord to insure, that obligation remains even after the RTM is acquired.

44. The Response cites the terms of the lease of Flat 3, but it is not exhibited to the Response. The lease of [NAME] (pp. 135-167) is included in the Hearing Bundle and I am satisfied that it will be on the same or broadly similar terms.

45. In the Response, the Respondent relies on three decisions in support of the submissions above, namely:

(i) [COMPANY] v [NAME] Co [COMPANY] [2012] UKUT 366 (LC) (“[NAME]”) as authority that where a lease expressly reserves the landlord’s right to insure, that right is not transferred to the [COMPANY]; (ii) [COMPANY] v [NAME]) [COMPANY] [2014] UKUT 0261 (LC) (“[NAME]”) reaffirms the position that lease terms prevail over general RTM functions; (iii) [COMPANY] (Sunderland) [COMPANY] v [NAME] Company [COMPANY] [2024] UKSC 27 (“[COMPANY]”) confirmed that statutory RTM rights do not override express lease provisions unless Parliament clearly intended them to.

46. In its Statement of Case attached to the original application (pp. 25-28), the Applicants accept at paragraph 10 that under s.96(6)(a) of the 2022 Act it is open to the Respondent to insure individual commercial units, but the costs of doing so would not be chargeable to any of the Applicants unless the [COMPANY] were to agree to that which the [COMPANY] has not done. The Respondent has not challenged that position or provided evidence that counters the Applicants’ position. I am satisfied that the [COMPANY] has not reached such an agreement with the Respondent.

47. The Applicants also seek to rely on the effect of s.97(3) (paragraph 11, p. 27). The Applicants submit that whilst it does permit the landlord to insure, if it does so the landlord will insure the “whole or any part of the premises at his own expense” (emphasis added). I concur with the Applicants’ view. Own expense means the cost is to be incurred and born by the landlord, not subsequently recovered from another party.

48. The Respondent makes reference to the Insurance Rent. The lease requires the lessee to pay Rent, an Insurance Rent, and a Service Charge. [NAME] [NAME] appears to suggest that the Insurance Rent is not a Service Charge. The Insurance Rent is defined as follows:

“the proportion specified in the Particulars of the expense incurred by the Landlord from time to time in insuring the Development to include any Insurance Premium Tax or other tax payable… and the expression “the

Insurance Rent” shall also mean all or any increased premium payable by reason of any act or default of the Tenant”

49. The Insurance Rent is an amount that, if it were not for ss.96-97 of the 2002 Act, would be payable by the [NAME] directly to the landlord for insuring the building and which varies, or may vary, according to the relevant costs. Although named something else, it continues to fall within the definition of a service charge. This follows the decision of Judge Cooke in the Upper Tribunal decision of [RESPONDENT] v Hoye & Fox [2022] UKUT 173 (LC) in which the present Respondent was the appellant.

50. In the Applicants’ Position Statement (pp. 29-30), it is stated that the Respondent’s practice of continuing to insure the building alongside the [COMPANY] created an issue whereby [NAME] could not sell their flats because there were two insurance policies in place. I make no finding in respect of that. As a consequence, the [COMPANY]’s managing agent, [COMPANY], withdrew their insurance policy to facilitate the conveyances.

51. The Applicants have evidenced the insurance put in place by the [COMPANY] for the period 22 August 2024 to 22 August 2025. There is no suggestion that the [NAME] is not currently insured by the [COMPANY].

52. It appears that for some period of time, the Respondent was the only party insuring the [NAME]. That does not mean that the Respondent is entitled to recover its costs of doing so.

53. In the Reply, [NAME] [NAME] exhibited the most recent letter from [RESPONDENT] dated 21 August 2025 in which the Respondent once again demands an Insurance Cost of £492.04 (broken down in the usual way as the premium, broker’s fee and 15% management fee).

54. The responsibility to insure the premises is a management function within the meaning of s.96. I do not accept that the lease expressly reserves the obligation upon the landlord to insure the building, nor do I accept that the obligation to insure the building does not pass in this instance due to the fact that the right to manage includes commercial premises on the ground floor.

55. In the present case, the commercial premises are not appurtenant to the [NAME], rather the commercial premises are part of the [NAME]. The commercial units and the flats form part of the same self-contained premises albeit they have been allocated separate postal addresses because the entrance to the flats is at the rear of the building on [ADDRESS] and the commercial premises face on to [ADDRESS]. If there was appurtenant [NAME], the Supreme Court decision in [COMPANY] v [COMPANY] [2022] UKSC 1 (“[NAME]”) would be of relevance, but there is not.

56. While s.96(6)(a) prevents management functions which relate to parts of the premises not owned by qualifying tenants from passing to the [COMPANY], this only applies to functions which solely relate to such premises. The obligation to insure however relates to the whole building.

57. The purpose of s.97(3) is to permit the landlord to insure the building should it so wish, but that it does so at its own expense; the view of Parliament is clear that if the landlord does so, it will not be able to recover the costs through the service charge. The provision is intended to protect a landlord’s position such as where the RTM has been exercised but the [COMPANY] has not insured the building.

58. In the present case, the [COMPANY] withdrew from insuring the [NAME] only because of the Respondent’s insistence in continuing to insure the [NAME]. There was no suggestion that the [COMPANY] was not willing to insure the [NAME]. Section 97(3) does not, as [NAME] [RESPONDENT] submits, preserve the right of the landlord to insure the building and recover the costs of doing so from the [NAME]. The obligation to insure the [NAME], and the correlated right to demand payment from the [NAME], has passed to the [COMPANY].

59. Turning to the three decisions cited in the Response, [NAME] [NAME] makes a bare statement that [NAME] is authority that where a lease expressly reserves the landlord’s right to insure, that right is not transferred to the [COMPANY]. I am not taken to a particular part of the Upper Tribunal’s decision (noting the incorrect citation of which more below). [NAME] was a decision in the context of the right to manage of any shared estate facilities, and so can be distinguished from the present case, and the approach has since been overturned by [NAME].

60. The correct citation is [COMPANY] v [NAME] Co [COMPANY] [2011] UKUT 425 (LC). This concerned an estate which comprised both leases of flats within two buildings, as well as leases of coach houses, but where the RTM had not been acquired in respect of the coach houses.

61. The Chamber President at the time, [NAME], records at paragraph 17 of his decision that:

“Under section 96(2) the [COMPANY] succeeds to the duties of the landlord and the management company, under each lease of a flat in these buildings, in relation to the services to be provided in categories A, B, C, E and F… The landlord and the management company have no entitlement

under any of those leases to carry out such services (including, for instance, maintenance of the roadway and gardens), with the exception of category F (insurance): see section 97(2) and (3). But the landlord is still required, and therefore entitled, under the leases of the coach houses to provide the services in categories A, B, C, D and F, including, therefore, maintenance of the of those parts of the [NAME] over which those tenants have rights; and the tenants of those flats are still liable to pay to the landlord the service charge as provided under their leases.”

62. In doing so, the President was not saying that the landlord was still entitled to recover the costs of insuring the premises, simply that he recognised that s.97(3) permits the landlord to continue to do so at his own expense. He previously recorded at paragraph 5 that under s.96(2) management functions, including relating to insurance, are functions of the [COMPANY] once the [COMPANY] has acquired the right to manage the premises.

63. The Upper Tribunal decision in [NAME] concerned a tripartite lease where there was a third-party management company, rather than a [COMPANY] that had exercised the statutory right to manage. It is of no relevance.

64. The Supreme Court decision in [COMPANY] considered whether failure to serve a claim notice on an intermediate landlord with no management responsibilities invalidated a right to manage claim under the 2002 Act. Again, I am not taken to a particular part of the Supreme Court’s decision, and I find nothing in [COMPANY] that supports [NAME] [NAME] position.

65. I am satisfied that the wording of s.96(2) that “Management functions which a person who is landlord under a lease of the whole or any part of the premises has under the lease are instead functions of the [COMPANY]” taken together with s.97(2)(a) that a “landlord under a lease of the whole… of the premises… is not entitled to do anything which the [COMPANY] is required or empowered to do under the lease by virtue of section 96, except in accordance with an agreement made by him and the [COMPANY]”, is clear and should be given its ordinary meaning.

66. I also have had regard for the email dated 4 June 2024 sent to [NAME] [NAME] (p. 102), where ‘[NAME] of [COMPANY] writes “I am not quite sure what your point is about the insurance as we are not insuring this [NAME] since the RTM took over… Since July 2021 we are not insuring this [NAME] according to our records.” It appears that ‘[RESPONDENT] understood that the Respondent was no longer obliged to insure the [NAME]. This is clearly at odds with the demands for Insurance Costs and Late Payment Fees sent by [COMPANY] in the Hearing Bundle.

67. I have determined that the Insurance Costs, namely the costs relating to the buildings insurance premium together with the broker’s fee and 15% management fee, are not payable as a service charge for any of the years 2021- 2024.

68. The current appeal does not consider the year 2025, but if the Respondent does not withdraw such demands for 2025 and cease doing so in the future, it is likely that the Applicants will bring a further appeal.

Administration Charges – Late Payment Fee and [NAME]

69. Paragraph 5 of Schedule 11 to the 2002 Act provides:

Liability to pay administration charges

(1) An application may be made to the appropriate 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.

70. Administration charges are defined by paragraph 1 of Schedule 11 to the 2002 Act as:

Meaning of “administration charge”

(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) …, (b) …, (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…

Late Payment Fees

71. The Late Payment Fees demanded by the Respondent in respect of non- payment of the Insurance Costs are administration charges within the meaning of the 2002 Act.

72. In the email dated 4 June 2024 (p. 102), [NAME] of [COMPANY] writes that the Late Payment Fee is due under “clause 4.12 9” of the lease. I presume she was referring to clause 4.1.2(p) of the lease. This states:

“(p) To employ at the discretion of the Landlord a surveyor accountant or other individual firm or company in connection with the surveying or accounting functions or the management of the Development and (in the entire discretion of the Landlord) to appoint managing agents in connection with the management of the Development collection of Service Charge and performance of the Services and any other duties in or about the Development or any part of it including the general management administration security maintenance protection and cleanliness of the Development and to pay the proper fees of such persons”

73. Given the determination that the Insurance Costs are not payable, there are consequently no arrears of service charge, and thus no obligation to pay the landlord’s cost of seeking payment. Consequently, the Late Payment Fees are not payable by the Applicants.

[NAME]

74. The Applicants also raise the question as to their liability to pay the [NAME].

75. An application concerning the liability to pay the [NAME] by [NAME] [NAME] ([NAME]) has already been separately determined by Regional Judge Whitney in his decision dated 30 April 2025 (“the GR Decision” – HAV/00HP/LVA/2024/0500).

76. I am not bound to follow the GR Decision in respect of the other applicants, nor in respect of any demand subsequently sent after the date of that decision. In the Reply, [NAME] [NAME] exhibited a letter from [RESPONDENT] dated 28 May 2025 in which the Respondent demands the ground rent of £200.00 together with the [NAME] of £60.00 in spite of the GR Decision.

77. Judge Whitney determined that [NAME] was not liable to pay the [NAME]. Whilst a statutory ground rent demand was served,

the invoice that included the fee for collecting the ground rent did not include the statutory summary of rights and obligations. Further, Judge Whitney accepted the submission that even if a statutory summary of rights and obligations had been attached, the clause relied on under the lease, namely clause 4.1.2(p), does not allow recovery of a fee for collecting ground rent.

78. Collection of ground rent is not a ‘management function’ which has transferred to the [COMPANY] and I accept that it remains a function of the Respondent. However, in the case of a long lease of a dwelling, a tenant is not liable to make payment of rent under the lease unless the landlord has given a notice relating to the payment, see s.166 of the 2002 Act.

79. I was not referred to any authority by the parties, but the Court of Appeal decision in [NAME] v [NAME] [2022] EWCA Civ 1375 is authority that a landlord may not charge a ground rent fee for giving a s.166 notice.

80. I find that any [NAME] demanded by the Respondent are not payable by the Applicants.

81. The current appeal does not consider the year 2025, but it is regrettable to note that in light of Judge Whitney’s decision in HAV/00HP/LVA/2024/0500, the Respondent, or its agent [RESPONDENT], has continued to make such a demand of [NAME] [RESPONDENT]. If the Respondent does not withdraw such demands, it is likely that the Applicants will bring a further appeal.

Improper Use of AI

82. [NAME] [NAME] reliance on [NAME] in the Response, a decision involving a tripartite management company rather than a [COMPANY], gave cause for me to consider why he would cite such a case. I typed the following wording without a question mark at the end into Microsoft’s M365 Copilot on an Android device:

Is there case law that a landlord’s right to insure is preserved after the right to manage has been exercised

83. The AI generated response from M365 Copilot, including replicating the formatting below, was as follows:

Yes, there is case law addressing the issue of a landlord’s right to insure the building after the right to manage (RTM) has been exercised under the Commonhold and Leasehold Reform Act 2002.

A key case is:

[COMPANY] v [NAME] ([COMPANY] [2014] EWCA Civ 1211

Key points from the Judgment:

• [ADDRESS] of Appeal held that the right to manage does not extinguish the landlord’s right to insure the building if that right is reserved in the lease.

• The [COMPANY] acquires management functions, but does not displace the landlord’s contractual rights under the lease unless those rights are inconsistent with the [COMPANY]’s statutory functions.

• In this case, the lease gave the landlord the right to insure, and the court found that this right remained intact even after the [COMPANY] took over the management functions.

Implications:

• If the lease expressly gives the landlord the right to insure, the right is preserved post-RTM.

• The [COMPANY] may also have a statutory right to insure, but this does not automatically override the landlord’s contractual right unless there is a direct conflict.

84. The Upper Tribunal decision in [NAME] was to the best of my knowledge never subject to appeal to the Court of Appeal. The case reference above concerned the Court of Appeal decision in long running care proceedings.

85. I then typed the same wording into M365 Copilot on an Android device but adding a question mark at the end which gave a similar response, although the phrasing was markedly different, and it referred to the Upper Tribunal decision cited by [NAME] [NAME] rather than the ‘hallucinated’ Court of Appeal citation. Repeating the same question sometime later would not re-produce reference to the Upper Tribunal decision, showing that AI adapts and an earlier answer may no longer be returned as the algorithm learns, demonstrating the care that needs to be taking in using AI. The idiom ‘shifting sands’ comes to mind.

86. Typing the same wording without the question mark into Microsoft Copilot on a desktop PC returned the following:

Yes, there is case law addressing this issue. The landmark case [COMPANY] v [NAME]) [COMPANY] [2014] UKUT 0261 (LC) clarified that even after the Right to Manage (RTM) has been exercised under the Commonhold and Leasehold Reform Act 2002, the landlord retains the right to insure the building if the lease explicitly grants that right.

87. Typing the same wording later returned reference to another wholly ‘hallucinated’ Court of Appeal decision with a different citation, [COMPANY] v [NAME]) [COMPANY] [2018] EWCA Civ 1612. Inputting that citation into bailii.org does not return any judgment.

88. It may be the case that had I used an iOS device, or another operating system or different versions of Copilot, I would get similar answers but phrased differently. It matters not.

89. [NAME] [NAME] cited a legitimate case reference for [NAME] in the Upper Tribunal, however M365 Copilot ‘hallucinated’ “Key Points from the Judgment” which are broadly similar to [NAME] [NAME] submissions. I note that [NAME] [NAME] did not include either of the ‘hallucinated’ Court of Appeal case references.

90. In the Response, [NAME] [NAME] submits that [NAME] “Reaffirmed that lease terms prevail over general RTM management functions. The [COMPANY] cannot assume functions expressly reserved to the landlord.”

91. I have read the Upper Tribunal decision upon which [NAME] [NAME] relies. [NAME]) [COMPANY] was not a [COMPANY]. It was a management company under a tripartite lease, and it was for that reason in the particular circumstances of the case that the landlord’s obligation to insure was retained. Chapter 1 of Part 2 of the 2002 Act relating to the right the manage was not invoked, and it follows that the 2002 Act was not referred to at any point in Judge Cousin’s decision. [NAME] taken the time to read the decision, he would have realised it was of no assistance.

92. I find that [NAME] [NAME] only cited [NAME] as a result of using AI to assist his legal research which became the basis for the drafting of his submissions, which bear a strong resemblance to the answer that was initially returned by M365 Copilot which I have quoted verbatim above.

93. With respect to [NAME] [NAME] submissions regarding [COMPANY] v [NAME] Co [COMPANY] [2012] UKUT 366 (LC) [sic], I note with some concern that [NAME] [NAME] has provided an invalid case citation. I have explained above why I do not accept that [NAME] assists [NAME] [NAME], but in any event I am not satisfied that [NAME] [NAME] ever read the decision given he has not provided the correct case citation. I conclude that the citation provided by [NAME] [NAME] was another AI ‘hallucination’.

94. I recognise that litigants in person (“LiP”) are increasingly turning to AI for legal research. That does not, however, exempt LiPs in general from their obligation to take any AI output and check its accuracy before drafting submissions to the tribunal based upon it.

95. However, [NAME] [NAME] signs his emails as [NAME] LL.M which would suggest he intends the reader to know that he holds a Master of Laws degree. A search of the website of the Solicitors Regulation Authority reveals that [NAME] [COUNSEL] was admitted as a solicitor on 20 March 2023 and was issued with an

annual practising certificate on 1 November 2024, although there is no indication that [NAME] [COUNSEL] is acting as a solicitor in this case.

96. Nonetheless, I am mindful that the Respondent, [RESPONDENT] and [NAME] regularly appear in matters before both the First-tier Tribunal and Upper Tribunal, often without legal representation, and I have had regard for the fact that in recent years [NAME] [COUNSEL] has been admitted as a solicitor.

97. My concerns regarding the Respondent’s and [NAME] [RESPONDENT] conduct of this case, and their continuing practices contrary to the decisions in other Tribunal cases often on very similar factual circumstances, have been raised with Regional Judge Whitney.

Application Under s.20C and Para.5A and Refund of Fees

98. The Applicants have applied for an order for the reimbursement of fees paid by the Applicants in connection with these proceedings. Having considered submissions from the parties and taking into account the determinations above, the Tribunal orders the Respondent to refund all fees paid by the Applicants in connection with these proceedings in the sum of £337.00 within 28 days of the date of this decision.

99. In the application form, the Applicants applied for an order under section 20C of the 1985 Act and under paragraph 5A of Schedule 11 to the 2002 Act preventing the Respondent from recovering any of its legal costs of these proceedings either as a service charge or as an administration charge from any of the [NAME]. A list of the [NAME] is attached to the application. Having considered the written submissions from the parties and taking into account the determinations above, the Tribunal determines that it is just and equitable in the circumstances for an order to be made under section 20C of the 1985 Act and under paragraph 5A of Schedule 11 to the 2002 Act, so that the Respondent may not pass any of its costs incurred in connection with the proceedings before the Tribunal either through the service charge or as an administration charge.

Rights of appeal

1. A person wishing to appeal this decision to the Upper Tribunal (Lands Chamber) must seek permission to do so by making written application to the First-tier Tribunal at the Regional office which has been dealing with the case.

2. The application must arrive at the Tribunal within 28 days after the Tribunal sends to the person making the application written reasons for the decision. Where possible you should send your further application for permission to appeal by email to [EMAIL] as this will enable the First-tier Tribunal to deal with it more efficiently.

3. If the person wishing to appeal does not comply with the 28-day time limit, the person shall include with the application for permission to appeal a request for an extension of time and the reason for not complying with the 28-day time limit; the Tribunal will then decide whether to extend time or not to allow the application for permission to appeal to proceed.

4. The application for permission to appeal must identify the decision of the Tribunal to which it relates, state the grounds of appeal, and state the result the party making the application is seeking.