Reasonableness of Service Charges Determined by First-tier Tribunal

OUTCOME: Allowed in Part

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : CAM/OOKB/HTA/2023/003 Property : The [APPELLANT], 25 [ADDRESS], [POSTCODE] Applicant: [redacted] Respondent : [redacted] : An [NAME] under section 27A [NAME] 1985 Tribunal : Judge Shepherd Gerard Smith MRICS FAAV Date of Decision : 17th January 2025

DETERMINATION

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1. This matter originates from an [NAME] made by a number of residents of The [APPELLANT], [ADDRESS], Bedford, MK42 OFW. There are 47 [NAME] in total involved. Hereafter they will be referred to as “The Applicants”. The Respondent is [COMPANY].

2. The [APPELLANT] is a block of apartments, converted in 2013 from the former [NAME] high rise office building in Bedford town centre. It has 13 floors and 109 apartments including two on the ground floor. Floors 1 to 6 contain 51 apartments owned by [NAME] as a corporate let who rent the flats as social housing. The remaining 58 apartments are owned by individuals as residential [NAME] on floors 7 to 13 as well as two on the ground floor.

3. [COMPANY] acquired the freehold of the premises in December 2017, and retained the incumbent [NAME] agent [NAME] until November 2018 when they were replaced by [NAME]. In July 2019 [COMPANY] replaced SDL with [COMPANY], a company owned by [COMPANY] and run by the same members of the family as those under SDL.

4. The Applicants challenge service charges going back to 2018. The parties prepared a useful Scott Schedule of issues which we have used to define the issues we were required to decide. The matter took up a considerable amount of Tribunal time. There were a total of three days of hearing time. These included an inspection and virtual hearings. The last of which took place on 9th and 10th December 2024.

5. [NAME], the director of [COMPANY] gave evidence on behalf of the Respondents and was in the witness box for an extended period of time. He was challenged at length about the absence of invoices for some of the relevant years, in particular 2019. He said that he had sought to obtain the relevant invoices from SDL the former [NAME]. He provided documentation showing this. He also said that he had searched everywhere for the invoices. Some of the invoices provided appeared to relate to a different development.

6. In his evidence Mr [NAME] was defensive and appeared to be lacking in real knowledge of the day to day management of the development. He provided expenditure reports for the relevant years which were of some assistance but there was no statement from an accountant to confirm their validity. There was also no indication as to who prepared the reports. His evidence in relation to the caretaking charges was particularly weak. He said the [NAME] acted as the caretaker but could not identify which duties she carried out. He was only able to say that she looked after the building. In support of the repairs to the

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common areas he relied on photos of damage to the building but these were undated. He accepted he did not check the work done by contractors. Much of the work was carried out by his own contractors, NPSL who invoiced him. He was not able to offer a proper explanation of what had happened to the reserve fund and what he had done to chase this. No legal action had been taken against the previous [NAME]. He had owned the [NAME] for SDL and ought to be able to control the transfer of the reserve fund.

7. The Applicants did not submit any witness statements other than a late statement and report from the [NAME] [NAME] agent which we did not admit because they were submitted too late and this was considered unfair to the Respondent.

8. The relevant lease terms were the following:

9. Clause 1 contains the following definitions:

13.1 "Building" means "the tower block of Apartments built or to be built on the Development"

13.2 "Common Parts" means "the parts of the Development not demised or intended to be demised that are provided by the landlord from time to time for the common use and enjoyment of the owners and occupiers of the Apartments including the boundaries, play area, bin stores, gardens and grounds of the Development and (where the context so required) the Accessway and Car Parking Area and the hallways lightwells entrances lobbies landings passages lifts staircases fire escapes storage cupboards service ducts vents plant and equipment in the Building"

13.3 "Development Expenditure" means "the aggregate of all proper costs and expenses incurred by the Landlord (and/or the [NAME] where they are appointed) in and incidental to providing the Development Services including any VAT (to the extent that the Landlord cannot recover the same as input tax) incurred by the Landlord (and.ir the [NAME] where they are appointed) in relation to the Development Services"

13.4 "Development Services" are "the services facilities and works listed in the Sixth Schedule"

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13.5 "Service Charge" is "the proportion specified in paragraph B.2 of the Particulars (or such other proportion as shall become payable pursuant to the provisions of this Lease) fo the Development Expenditure incurred by the landlord (and/or the [NAME] where appointed) in a Financial Year such proportion to be payable in accordance with the provisions contained in the Ninth Schedule" 13.6 "Service Charge Payment Days" means "1 January, 1 April, 1 July and 1 October in each Financial Year or such other dates as the Landlord may from time to time determine"

10. By clause 3.1 of the Leases, the tenant covenants "to observe and perform the obligations set out in Part I of the Fourth Schedule". Those covenants include: To pay to the Landlord on demand as additional rent a fair proportion of all sums (including the proper costs of valuations for insurance purposes) plus VAT thereon (if any) which the Landlord or the [NAME] shall from time to time pay in the performance of its covenants contained in clause 5 of the Fifth Schedule to this Lease 11. Further, at clause 3.2, the tenant covenants to observe the covenants in Part II of the Fourth Schedule, which includes, at paragraph 1, "To pay to the Landlord or the [NAME] the Service Charge in accordance with the provisions contained in the Ninth Schedule". By the Ninth Schedule, the Service Charge is payable on the Service Charge Payment Days quarterly in advance the Landlord's estimate of the Service Charge for the financial year, with payment of any balancing charge forthwith upon the Landlord furnishing an account of the Service Charge (to be provided as soon as practicable after signature of the Certificate), or credit being given where the actual costs are less than the estimate (or transferred to the reserves on account of future expenditure).

12. By paragraph 5 of the Fifth Schedule of the Lease, the Landlord covenants to keep the Development insured.

13. The Landlord's Service Covenants are contained in Part I and Part II of the Sixth Schedule and includes (but is not limited to):

Keeping in good repair and decoration the main structure of the Building, the Services in under and upon the Development, security equipment and plant and machinery, door entry systems, communal fire, burglar or entry alarm

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systems, windows and external window farms and the gardens and grounds (paragraph 1.1, Part I)

Keeping in good repair, clean, tidy and reasonably lit the Common Parts (paragraph 3, Part I);

Decoration of the exterior parts of the Building (paragraph 4, Part I);

Clean the windows and exterior to the window frames of the Common Parts and the Apartments (paragraph 5, Part I)

Maintain, alter, repair, operate, inspect, clean, renew and replace all lifts, security equipment, communal boilers, pumps and all other plant and machinery, door telephone in the Common Parts and communal fire, burglar or entry alarm systems and complying with all recommendation of the appropriate authority in relation to fire precautions and any requirements of the [NAME] (paragraph 6, Part I)

Keep clean, properly lit and I good repair and decoration the Car Parking area (paragraph 8, Part I)

[NAME], [NAME], [NAME], managers, staff, contractors, solicitors, [NAME] and accountants (paragraph 3, Part II)

To pay all proper legal and other costs incurred by the Landlord (paragraph 4, Part II)

To cause to be prepared annual audited or certified accounts of the expenditure (paragraph 5, Part II)

To accumulate a reserve fund (paragraph 6, Part II)

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The law

14. The [NAME] 1985,s.19 states the following:ௗௗ ௗௗ19.— Limitation of service charges: reasonableness. (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.

15. The Tribunal’s jurisdiction to address the issues in s.19 is contained in s.27A [NAME] 1985 which states the following:ௗௗ ௗௗ 27A Liability to pay service charges: jurisdictionࣟࣟ 1. An [NAME] may be made to [the appropriate tribunal]2 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, andࣟࣟ e. the manner in which it is payable.ࣟࣟ 2. Subsection (1) applies whether or not any payment has been made.ࣟࣟ 3. An [NAME] may also be made to [the appropriate tribunal]2 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—ࣟࣟ

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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, andࣟࣟ e. the manner in which it would be payable.ࣟࣟ 4. No [NAME] 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, orࣟࣟ 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.ࣟࣟ

16. In [NAME] v [NAME] [2017] EWCA Civ 45 the Court of Appeal held the following:

Whether costs were “reasonably incurred” within the meaning of section 19(1)(a) of the [NAME] 1985 , as inserted, was to be determined by reference to an objective standard of reasonableness, not by the lower standard of rationality, and the cost of the relevant works to be borne by the [NAME] was part of the context for deciding whether they had been so reasonably incurred; that the focus of the inquiry was not simply a question of the landlord's decision-[NAME] process but was also one of outcome; that, where a landlord had chosen a course of action which led to a reasonable outcome, the costs of pursuing that course of action would have been reasonably incurred even if there were a cheaper outcome which was also reasonable; that, further, before carrying out works of any size the landlord was obliged to comply with consultation requirements and, inter alia, conscientiously to consider the [NAME]' observations and to give them due weight, following which it was for the landlord to make the final decision; that the court, in deciding whether that final decision was reasonable, would accord a landlord a margin of appreciation; that, further, while the same legal test applied to all categories of work falling within the scope of the definition of “service charge” in section 18 of the 1985 Act, as inserted, there was a real

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difference between work which the landlord was obliged to carry out and work which was an optional improvement, and different considerations came into the assessment of reasonableness in different factual situations.

Determination

17. The parties were able to agree some if the items on the Scott Schedule of issues but numerous issues remained. These are taken in turn below:

Reserves

18. This was a repeated item for the years in issue covering sub-categories including reserves car park, reserves building and reserves owned apartment. The repeated criticism was that reserves had disappeared without explanation. Mr [NAME] said that the reserves were held by SDL central office, not the [NAME] and SDL had refused to release the funds. Mr [NAME] had bought into the [NAME]. There was no evidence to support the fact that SDL were holding the reserve or that they would not release the sums. We remain surprised by Mr [NAME] account. Unfortunately, however we don’t have jurisdiction to deal with this issue. The appropriate course is through the County Court. The reserves ought to be held on trust. If they are used for anything other than what they were intended for this constitutes a potential breach of trust.

Cleaning owned apartment

19. This item was repeated for the years in question (2018- 2023). The charges were challenged by the Applicants as being excessively high. There were no invoices provided for 2018 and few for 2019.The expenditure accounts were of limited assistance but we are concerned that most of the work was carried out by Mr [NAME] company and not at arms-length. The [NAME] [NAME] who manage the premises estimate a cost of £17,000 for the cleaning of the whole building. This compares with the charges for the owned apartment area sought by the Respondents of £21132 in 2018, £23094 in 2019£24748 in 2020. £56,296 in 2021, £30,000 in 2022 and 2023. We inspected the building but this was at a time when [NAME] were manging the premises, so it was of limited use in assessing the cleaning in prior years. We consider the charges for cleaning owned apartment areas/floors are excessive and allow £10,000 per

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annum for this item for each of the years in question. This is a fair proportion of the amount quoted by [NAME] for the whole building.

Cleaning – car park (2020, 2021),

20. The Applicants suggested that no cleaning had taken place. We consider that some cleaning was done but the charges were not justified. There was no proper evidence of jet washing for example. We allow 50% of the sought sums - £36,66.50 for 2020 and £2,102.50 for 2021.

Cleaning building (2020)

21. The sum charged was £ 2,310. There were invoices to justify the fact that cleaning had taken place. We allow this charge in full.

Lift costs Owned apartment (2018, 2019,2021, 2022, 2023)

22. This involved a third party company called [NAME] for some of the years. The sum for 2018 was reasonable at £5956. After that there was some concern that invoices from other estates had been included by mistake. Although there have been repeated vandalism and trespass into the lifts some of this originated from the social housing. Claims should have been made of [NAME]. NSPL, Mr [NAME] company were undertaking the call outs for soft re-setting; its not clear if they were qualified to do so and no evidence was provided to suggest they were. We consider that a sum of £10,000 is appropriate each of the years in question i.e. for 2019, 2021 and 2022. In 2023 the budget should be set at £10,000 also.

[NAME], [NAME] (2018, 2019,2020,2021, 2022, 2023)

23.The main concern of the Applicants was the fact that the Respondents had not paid the communal electricity charges. This does not affect the reasonableness of those charges. We were told the amounts due and they appeared reasonable. All of these charges should be allowed. The budgeted amount for 2023 is excessive and £25,000 should be allowed.

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[NAME] electricity car park ( 2019, 2021, 2022)

23. Here the Applicants had assessed the reasonable sum based on RPI increases. This is not an appropriate measure. Invoices were provided and the sums that were due appeared reasonable. Therefore, the sums are allowed in full.

[NAME] landlords water supply (2021, 2022, 2023)

24. These sums are allowed for the same reasons as above.

Cleaning- jet wash car park (2019, 2020, 2021,2022, 2023)

25. There was no real evidence of jet washing. The photos in the bundle did not support this. In order to jet wash the car park properly the cars would need to be removed which had not happened. These sums are disallowed in full.

Common area repairs car park (2019, 2022,2023)

26. The Applicants said the amounts were excessive but there was no real basis given for this objection. The photographs in the bundle demonstrated damage had been caused. When we inspected there was not the level of damage demonstrated in the photographs which supported the fact that the repairs had been done and invoices paid. The sums are allowed in full.

[NAME] ( 2020,2021, 2022,2023).

27. Here the sums for 2019 were agreed by the parties. They were of a similar amount to these years save for 2022 which was exceptionally high without any real explanation for this. We allow the sums save for 2022 for which we allow £26,000.

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Common area repairs owned apartment ( 2019,2020, 2021, 2022,2023)

28. The sums seemed to vary considerably from year to year without any proper explanation. There is some concern that much of the work was said to have been done by Mr [NAME] own company. In addition it was repeatedly said by Mr [NAME] that damage had been caused or originated from the [NAME] tenants in the building but there was no proper evidence of him trying to recover these sums from [NAME] or taking adequate security steps to prevent further damage in the future. We allow the sum for 2019. In 2020 and 2021 we allow £15,000. The figures for 2022 and 2023 are allowed.

Window cleaning building (2019, 2022,2023)

29. A sum of £5,000 was agreed for 2020 and 2021. Accordingly, we allow £5000 for these years as well as there is nothing to justify a departure from the agreed sums.

Water tank maintenance (2019)

30. This sum is allowed in full. The maintenance is essential and prudent. It is unlikely the [NAME] would be aware if work had taken place.

Sprinkler system maintenance ( 2019, 2022)

31. These sums are allowed in full. The work is essential for fire safety.

Management fees building (2019, 2020, 2021, 2022, 2023, 2024)

32. The Applicants had a number of justified criticisms of the management carried out by the Respondents. Accounts had not been provided for the last two years despite orders made by the Tribunal, sales and lettings had been deliberately obstructed, reserves had been apparently mislaid. Mr [NAME] was evasive and defensive in his evidence. On occasions he was unable to provide a clear answer as he was not the person carrying out the management duties. We consider a

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reasonable sum in light of all of these failings would be £15,000 per annum for all of the years in question.

Caretaking owned apartment (2020,2021, 2022,2023) 33. We consider that there was no real evidence of there being a caretaking service. Mr [NAME] was vague on the subject; he said that the work was carried out by a [NAME] but he was unsure of what her duties entailed. We disallow this sum in full.

Heating system /leak repairs (2020, 2021, 2022,2023)

34. This is expected expenditure which we allow in full.

Access control gates – car park (2020, 2022)

35. There was evidence that the gates were left open to facilitate the 3rd party parking agreement. The Respondents had entered into an agreement with a [COMPANY] and was using the parking spaces for a pay as you go tap and park scheme without the agreement of [NAME]. This a pears to have been a commercial agreement which Mr [NAME] did not dispute, but could not explain where the proceeds went. We disallow these sums in full.

Gates common area repairs (2020, 2022)

36. This sum is disallowed for the same reasons.

Communal boiler maintenance (2020, 2021, 2022, 2023)

37. These sums are allowed for 2021 and 2022. The budget for 2022 and 2023 should be £6,000 which better reflects previous years’ expenditure.

Accountancy fees building (2020,2021)

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38. The evidence we heard suggested that the fees had been inflated because the Respondents had failed to provide the accountant with appropriate information when requested. We allow £5,000 for both years.

[NAME] building ( 2021)

39. This sum is allowed in full. No comparators were provided by the Applicants.

s.20 C [NAME] 1985

40.There has been a catalogue of poor practice and negligence by the Respondents. Unfortunately, we did not have the jurisdiction to deal with the extremely worrying issues about the reserve fund depletion. It was absolutely right for the Applicants to bring the case and they were successful in many areas. We exercise our discretion and make an order under s.20C Lanbdlord and Tenant Act 1985 which prevents the Respondents from recovering their legal fees from the service charge. We also order the Respondents to pay the Applicants’ [NAME] fee and hearing fee – namely the sum of £320.

Judge Shepherd

24th January 2025

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 [NAME] for permission must be made to the First-tier Tribunal at the [NAME] which has been dealing with the case. The [NAME] should be made on [NAME] available at https://www.gov.uk/government/publications/form-rp-pta-[NAME]-for- permission-to-appeal-a-decision-to-the-upper-tribunal-lands-chamber

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The [NAME] for permission to appeal must arrive at the [NAME] within 28 days after the Tribunal sends written reasons for the decision to the [NAME]. If the [NAME] is not made within the 28-day time limit, such [NAME] 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 [NAME] for permission to appeal to proceed, despite not being within the time limit. The [NAME] 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 [NAME] the [NAME] is seeking. If the Tribunal refuses to grant permission to appeal, a further [NAME] for permission may be made to the Upper Tribunal (Lands Chamber).

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : CAM/OOKB/HTA/2023/003 Property : The [APPELLANT], 25 [ADDRESS], [POSTCODE] Applicant: [redacted] Respondent : [redacted] : An [NAME] for permission to appeal Tribunal : Judge Shepherd

Date of Decision : 14th March 2025

DECISION

PERMISSION TO APPEAL IS REFUSED

REASON FOR THE DECISION

1. The tribunal has considered the Respondent’s request for permission to appeal and determines that: (a) it will not review its decision; and (b) permission be refused. 2. You may make a further [NAME] for permission to appeal to the Upper Tribunal (Lands Chamber). Any such [NAME] must be made no later than

14 days after the date on which the First-tier Tribunal sent notice of this refusal to the party applying for permission to appeal.

3. Where possible, you should make your further [NAME] for permission to appeal on-line using the Upper Tribunal’s on-line document filing system, called CE-File. This will enable the Upper Tribunal to deal with it more efficiently and will enable you to follow the progress of your [NAME] and submit any additional documents quickly and easily. Information about how to register to use CE-File can be found by going to this web address: https://www.judiciary.uk/wp-content/uploads/2021/07/Practice-Note-on- CE-filing-Lands-Chamber-17.6.21_.pdf 4. Alternatively, you can submit your [NAME] for permission to appeal by email to: [EMAIL].

5. The Upper Tribunal can also be contacted by post or by telephone at: Upper Tribunal (Lands Chamber), 5th [ADDRESS] [POSTCODE] (Tel: [PHONE]).

REASONS FOR THE

DECISION 1. The test for whether to grant permission to appeal is whether there is a realistic prospect of success.

2. In the present case, the tribunal does not consider that there is such a realistic prospect.

3. The Applicants are seeking to reopen matters that have already been decided. They state they are concerned with parts of the decision. Its not clear if they are appealing these parts. The Respondent was unable to find invoices – this was true. Its not clear why this is appealed. The Respondent also lacked knowledge on the day to day management of the building. Again, its not clear why this finding is appealed.

4. The Applicant is seeking to include new evidence which was not allowed at the hearing. The Tribunal were faced with a number of lever arch volumes of information. The new evidence was not permitted for reasons of its lack of relevance and proportionality. The Applicant raises a number of other issues which were already raised or ought to have been raised at the hearing. These do not found appeal grounds. On [NAME], [NAME] and fees the Applicant is again trying to introduce new evidence. An appeal is not simply a second bite of the cherry. The Tribunal carefully considered all of the evidence and reached a fair decision.

5. The identified errors are not significant enough to justify review. If the parties agree that the determination in relation to accountancy fees needs to be amended they should write jointly to the Tribunal requesting this. 6. In light of the refusal to give permission the stay sought is also refused. Judge Shepherd

14th March 2025

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : CAM/OOKB/HTA/2023/003 Property : The [APPELLANT], 25 [ADDRESS], [POSTCODE] Applicant: [redacted] Respondent : [redacted] : An [NAME] for Rule 13 costs Tribunal : Judge Shepherd

Date of Decision : 14th March 2025

DECISION

1. The Applicant is seeking costs pursuant to Rule 13 of the Tribunal Procedure ( First Tier Tribunal) Rules 2013. The costs they seek are significant - £35322.60. They base their claim on the following matters:  Illegal behaviour by the Respondent and his family.  Alleged Irregularities by the Respondent an in the management of the reserve fund.  Failure to comply with directions.  The manner of the provision of evidence. Rule 13 costs 2. The parties were invited to make submissions in relation to Rule 13 costs.

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3. The relevant parts of Rule 13 of the Tribunal Procedure ( First Tier Tribunal) ( Property Chamber) Rules 2013 state the following:

Orders for costs, reimbursement of fees and interest on costs 13.—(1) The Tribunal may make an order in respect of costs only— (a) under section 29(4) of the 2007 Act (wasted costs) and the costs incurred in applying for such costs; (b) if a person has acted unreasonably in bringing, defending or conducting proceedings in— (i) an agricultural land and drainage case, (ii) a residential property case, or (iii) a leasehold case; (iv) a tenant fees case; (c) in a land registration case, or (d) in proceedings under Schedule 3A to the Communications Act 2003 (the Electronic Communications Code)— (i) under Part 4A (code rights in respect of land connected to leased premises: unresponsive occupiers); or (ii) that have been transferred from the Upper Tribunal. ….. (3) The Tribunal may make an order under this rule on an [NAME] or on its own initiative. (4) A person [NAME] an [NAME] for an order for costs— (a) must, unless the [NAME] is made orally at a hearing, send or deliver an [NAME] to the Tribunal and to the person against whom the order is sought to be made; and (b) may send or deliver together with the [NAME] a schedule of the costs claimed in sufficient detail to allow summary assessment of such costs by the Tribunal. (5) An [NAME] for an order for costs may be made at any time during the proceedings but must be made within 28 days after the date on which the Tribunal sends— (a) a decision notice recording the decision which finally disposes of all issues in the proceedings; or (b) notice of consent to a withdrawal under rule 22 (withdrawal) which ends the proceedings.

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(6) The Tribunal may not make an order for costs against a person (the “paying person”) without first giving that person an opportunity to make representations. (7) The amount of costs to be paid under an order under this rule may be determined by— (a) summary assessment by the Tribunal; (b) agreement of a specified sum by the paying person and the person entitled to receive the costs (the “receiving person”); (c) detailed assessment of the whole or a specified part of the costs (including the costs of the assessment) incurred by the receiving person by the Tribunal or, if it so directs, on an [NAME] to a county court; and such assessment is to be on the standard basis or, if specified in the costs order, on the indemnity basis. (8) The Civil Procedure Rules 1998(a), section 74 (interest on judgment debts, etc) of the County Courts Act 1984(b) and the County Court (Interest on Judgment Debts) Order 1991 shall apply, with necessary modifications, to a detailed assessment carried out under paragraph (7)(c) as if the proceedings in the Tribunal had been proceedings in a court to which the Civil Procedure Rules 1998 apply. (9) The Tribunal may order an amount to be paid on account before the costs or expenses are assessed.

4. Wasted costs is what we are dealing with here. The Tribunal is primarily a no costs tribunal. Unlike the County Court costs do not follow the event. A victorious Applicant or Respondent cannot argue that their opponent was unreasonable simply by maintaining a claim or defence which was ultimately unsuccessful. Something more is required.

5. The criteria for Reg 13 costs were set out in the well known case of [ADDRESS] Co (1985) [COMPANY] v [NAME] v 231 [COMPANY] v [ADDRESS], [COMPANY] [2016]UKUT 290 (LC)

6. In that case the Upper Tribunal held that an assessment of whether behaviour was unreasonable required a value judgment on which views might differ, but the standard of behaviour expected of parties in tribunal proceedings ought not to be set at an unrealistic level. There was no reason to depart from the guidance on the meaning of "unreasonable" in Ridehalgh v Horsefield [1994] Ch. 205, [1994] 1 WLUK 563, Horsefield applied. Unreasonable conduct included conduct that was vexatious and designed to harass the other side rather than advance the resolution of the case. It was not enough that the conduct led to an unsuccessful outcome. The test could be expressed in different ways by asking whether a reasonable person in the position of the party would have conducted

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themselves in the manner complained of, or whether there was a reasonable explanation for conduct complained of.

7. The Upper Tribunal stated further that Tribunals ought not to be over-zealous in detecting unreasonable conduct after the event and should not lose sight of their own powers and responsibilities in the preparatory stages of proceedings (see paras 24, 26 of judgment).

8. The first stage of the analysis was an objective decision about whether a person had acted unreasonably. If so, a discretionary power was engaged and the tribunal had to consider whether it ought to make a costs order. If so, the third stage was the terms of the order.

9. There was no general rule in the tribunal that the unsuccessful party would be ordered to pay the successful party's costs. Unlike wasted costs, no causal connection between the conduct and the costs incurred was required, [NAME] v [COMPANY] ([NAME]) [2004] EWCA Civ 569, [2004] 3 All E.R. 266, [2004] 5 WLUK 273 applied.

10. Rule 13(1)(a) and (b) should be reserved for the clearest cases and it was for the party claiming costs to satisfy the burden of demonstrating that the other party's conduct had been unreasonable.

11. An [NAME] should be determined summarily, preferably without the need for a further hearing, and after the parties had had the opportunity to make submissions.

Determination

12. None of the issues raised by the Applicants engage Rule 13 costs. The alleged illegality and misuse of the reserve fund are not within the Tribunal’s jurisdiction. Neither side performed well in terms of complying properly with directions. The Tribunal were flooded with evidence from both sides much of which was not relevant or barely relevant to the case before us. Much of the evidence was filed late. This was despite the fact that both sides had solicitors and counsel instructed.

Judge Shepherd 14th March 2025

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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 [NAME] for permission must be made to the First-tier Tribunal at the [NAME] which has been dealing with the case. The [NAME] should be made on [NAME] available at https://www.gov.uk/government/publications/form-rp-pta-[NAME]-for- permission-to-appeal-a-decision-to-the-upper-tribunal-lands-chamber The [NAME] for permission to appeal must arrive at the [NAME] within 28 days after the Tribunal sends written reasons for the decision to the [NAME]. If the [NAME] is not made within the 28-day time limit, such [NAME] 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 [NAME] for permission to appeal to proceed, despite not being within the time limit. The [NAME] 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 [NAME] the [NAME] is seeking. If the Tribunal refuses to grant permission to appeal, a further [NAME] for permission may be made to the Upper Tribunal (Lands Chamber).

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : CAM/00KB/HTA/2023/0035 Property : The [APPELLANT], 25 St John’s [ADDRESS], [POSTCODE] Applicant: [redacted] Respondent : [redacted] : An [NAME] under section 27A [NAME] 1985 Tribunal : Judge Shepherd Gerard Smith MRICS FAAV Date of Decision : 3rd April 2025 2025

DETERMINATION as amended under the slip rule

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1. This matter originates from an [NAME] made by a number of residents of The [APPELLANT], 25 St John’s Street, Bedford, MK42 OFW. There are 46leaseholders in total involved. Hereafter they will be referred to as “The Applicants”. The Respondent is [COMPANY].

4. The Applicants challenge service charges going back to 2018. The parties prepared a useful Scott Schedule of issues which we have used to define the issues we were required to decide. The matter took up a considerable amount of Tribunal time. There were a total of four days of hearing time. These included an inspection and virtual hearings. The last of which took place on 9th and 10th December 2024.

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8. The relevant lease terms were the following:

9. Clause 1 contains the following definitions:

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13.5 "Service Charge" is "the proportion specified in paragraph B.2 of the Particulars (or such other proportion as shall become payable pursuant to the provisions of this Lease) of the Development Expenditure incurred by the landlord (and/or the [NAME] where appointed) in a Financial Year such proportion to be payable in accordance with the provisions contained in the Ninth Schedule" 13.6 "Service Charge Payment Days" means "1 January, 1 April, 1 July and 1 October in each Financial Year or such other dates as the Landlord may from time to time determine"

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To accumulate a reserve fund (paragraph 6, Part II)

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The law

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Determination

Reserves

Cleaning owned apartment

19. This item was repeated for the years in question (2018- 2023). The charges were challenged by the Applicants as being excessively high. There were no invoices provided for 2018 and few for 2019.The expenditure accounts were of limited assistance but we are concerned that most of the work was carried out by Mr [NAME] company and not at arms-length. The [NAME] [NAME] who manage the premises estimate a cost of £17,000 for the cleaning of the whole building. This compares with the charges for the owned apartment area sought by the Respondents of £21,132 in 2018, £23,094 in 2019 £24,748 in 2020. £56,296 in 2021, £30,000 in 2022 and 2023. We inspected the building but this was at a time when [NAME] were manging the premises, so it was of limited use in assessing the cleaning in prior years. We consider the charges for cleaning owned apartment areas/floors are excessive and allow £10,000 per

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Cleaning – car park (2020, 2021),

20. The Applicants suggested that no cleaning had taken place. We consider that some cleaning was done but the charges were not justified. There was no proper evidence of jet washing for example. We allow 50% of the sought sums - £3,666.50 for 2020 and £2,102.50 for 2021.

Cleaning building (2020)

21. The sum charged was £2,310. There were invoices to justify the fact that cleaning had taken place. We allow this charge in full.

Lift costs Owned apartment (2018, 2019,2021, 2022, 2023)

22. This involved a third party company called [NAME] for some of the years. The sum for 2018 was reasonable at £5,956. After that there was some concern that invoices from other estates had been included by mistake. Although there have been repeated vandalism and trespass into the lifts some of this originated from the social housing. Claims should have been made of [NAME]. NSPL, [NAME]’s company were undertaking the call outs for soft re-setting; its not clear if they were qualified to do so and no evidence was provided to suggest they were. We consider that a sum of £10,000 is appropriate each of the years in question i.e. for 2019, 2021 and 2022. In 2023 the budget should be set at £10,000 also.

[NAME], [NAME] (2018, 2019,2020,2021, 2022, 2023)

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[NAME] electricity car park ( 2019, 2021, 2022)

[NAME] landlords water supply (2021, 2022, 2023)

24. These sums are allowed for the same reasons as above.

Cleaning- jet wash car park (2019, 2020, 2021,2022, 2023)

Common area repairs car park (2019, 2022,2023)

[NAME] ( 2020,2021, 2022,2023).

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Window cleaning building (2019, 2022,2023)

Water tank maintenance (2019)

Sprinkler system maintenance ( 2019, 2022)

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Heating system /leak repairs (2020, 2021, 2022,2023)

34. This is expected expenditure which we allow in full.

Access control gates – car park (2020, 2022)

35. There was evidence that the gates were left open to facilitate the 3rd party parking agreement. The Respondents had entered into an agreement with a [COMPANY] and was using the parking spaces for a pay as you go tap and park scheme without the agreement of [NAME]. This appears to have been a commercial agreement which Mr [NAME] did not dispute, but could not explain where the proceeds went. We disallow these sums in full.

Gates common area repairs (2020, 2022)

36. This sum is disallowed for the same reasons.

Communal boiler maintenance (2020, 2021, 2022, 2023)

Accountancy fees building (2020,2021)

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[NAME] building ( 2021)

s.20 C [NAME] 1985

40.There has been a catalogue of poor practice and negligence by the Respondents. Unfortunately, we did not have the jurisdiction to deal with the extremely worrying issues about the reserve fund depletion. It was absolutely right for the Applicants to bring the case and they were successful in many areas. We exercise our discretion and make an order under s.20C [NAME] 1985 which prevents the Respondents from recovering their legal fees from the service charge. We also order the Respondents to pay the Applicants’ [NAME] fee and hearing fee – namely the sum of £320.

Judge Shepherd

3rd April 2025 2025

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