Service Charges for 2023 and 2024 Found Payable and Reasonable

OUTCOME: Dismissed

© CROWN COPYRIGHT FIRST-TIER TRIBUNAL [NAME] CHAMBER ([NAME]) Case Reference : CHI/24UB/LSC/2024/0001 [NAME] : 66 [ADDRESS], [POSTCODE] Applicant : [redacted] : Respondent : [redacted] : Type of Application : Application to determine whether service charges are payable and, if so, reasonable in amount. Section 27A Landlord and Tenant Act 1985 Tribunal Member : Tribunal Judge H Lumby Venue : Paper determination Date of Decision : 24 February 2025

DECISION

2 Decisions of the tribunal The tribunal determines that the service charges for the years 2023 and 2024 are payable and reasonable. The application 1. The Applicant has made an application for determination pursuant to section 27A of the Landlord and Tenant Act 1985 (“the 1985 Act”) of liability to pay and reasonableness of service charges for the years 2023 and 2024. The total amount in dispute is said to be £5,475.85.

2. The Applicant’s challenge in the application was said to be the approximate doubling of the service charges for these years without a proper explanation or breakdown. He is questioning the invoicing of the demand for 2024 in December 2023 rather than May 2024, when he says the sum is due.

3. The application was received on 21 December 2023. Directions were issued by the tribunal on 2 September 2024 and a case management and dispute resolution hearing held on 16 October 2024 to determine the correct Respondent in this matter; this was found to be [ADDRESS] (Basingstoke) [APPELLANT].

4. The Applicant has made no application for orders pursuant to section 20C of the Landlord and Tenant Act 1985 or paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002. This has therefore not been considered by the tribunal.

5. At the hearing, the tribunal set the matter down for a paper determination. The background 6. The [NAME] is a two bedroom flat on the top (second) floor of a purpose built block.

7. The Applicant is a long leaseholder, holding his interest pursuant to a lease dated 19th December 2008 for a term of 125 years from 1 January 2008. The Respondent is party to the lease as the management company. The lease 8. The lease provides that the tenant is to pay a maintenance charge based on the tenant’s proportion of the relevant costs. Costs include “spent or to be spent by the Management Company” and so on account expenditure is permitted. The charge is payable within 14 days of demand, there are no set payment dates.

3 9. The tenant’s proportion is defined as 8.3333% for buildings and common parts and by reference to the number of flats for amenity areas.

10. The service charge year reflects the calendar year, running from 1 January to 31 December.

11. The management company is to provide an estimate of expenditure for the year as soon as practicable after 1 January each year. It is to provide accounts after the year end with the payment for the next year adjusted for any surplus or shortfall of expenditure compared to the budget.

12. The services to be provided by the management company are listed in Schedule 5. This is a comprehensive list, including insurance.

13. The maintenance costs can include contributions towards a reserve fund, being: “such sum as the Management Company shall determine as desirable to be set aside in any year towards a reserve fund to make provision for expected future substantial capital expenditure including (without prejudice to the generality of the foregoing) the external decoration of the [NAME] and the Buildings and the resurfacing of the roads and footpaths comprised in the Amenity Areas and Common Parts” Tribunal determination 14. This has been a determination on the papers. The documents that the tribunal was referred to are in a bundle of 88 pages, the contents of which the tribunal have noted. The bundle contained the application, the tribunal’s directions in the case, service charge estimates and other information and email correspondence. The Applicant’s lease was provided separately.

15. No submissions have been made by the parties.

16. A summary of the applicable legislation is set out in the Appendix to this decision.

17. Having considered all of the documents provided, the tribunal has made determinations on the various outstanding issues as follows.

18. Whilst objecting to the service charge level, the Applicant has not been provided any specific objections or comparable quotations to show that any particular expenditure is unreasonable. The burden is on him as tenant to show that claimed sums are not reasonable or payable. Evidence could, by way of example, demonstrate that works said to have been carried out were in fact not carried out or were not completed to an acceptable standard or the charge for them was unreasonable. He is seeking a determination of the total charge in question for each service charge year but without evidence as

4 to why costs are unreasonable, it is difficult for the tribunal to reach any conclusion that any sums are excessive or what sums are instead reasonable. It is also noted that the bundle does contain explanations from the managing agent in general terms for the increase, including the general increase in insurance costs experienced by the [NAME] as a whole and the increase in the amount of reserves, in anticipation of major works in 2025.

19. The Applicant has stated in relation to the 2023 service charge year: “Not able to breakdown as not provided this and no additional works/services have commenced warranting the increase in service charge in comparison to 2022 and prior years The [NAME] manager at the time told me the increase was mainly due to the [NAME] 10 year plan where the general reserves increased due to planned internal recoderations [sic] and carpets. However we are at the end of the year and this work has not started” 20.He asks why the service charge has doubled and why sufficient evidence of the increase has not been provided, for example invoices or statements of works. He argues the increase is not reasonable given that no work has started.

21. The tribunal considers that it is reasonable for [NAME] to put in place future maintenance plans and to collect reserves against these, so as to ensure that costs are smoothed over time, rather than subject to spikes which may cause affordability and/or cash flow issues. The lease allows the collections of reserves and does not require this to be spent in the year collected. It is clear from the bundle that the biggest increase was in the amount put into reserves, prior to major works scheduled to occur in 2025 (and which appear to have been subject to a full consultation). It therefore determines that the Respondent is entitled to collect on account payments of the type described here and is not required to start the relevant works in the same service charge year. Without any evidence to the contrary, it determines that the amounts demanded are payable and reasonable. 22.The Applicant also questions the 2024 service charge demands on the same basis and the same comments and determinations apply. 23.In addition, the Applicant queries the fact that the [NAME] invoiced for the 2024 service charge year in December 2023, rather than in May 2024. The tribunal has considered this. The lease provides that the Respondent is to provide an estimate of the expenditure for the year ahead as soon as possible after 1 January so providing it in November or December is arguably premature. However, the tribunal does not consider that the Applicant suffers prejudice by this. More importantly, the maintenance charge is payable within 14 days of demand and there are no set payment dates (see paragraph 2 of Schedule 6 Part 1 of the lease). This is unrelated to the timing of the provision of the annual estimate and so there are no

5 restrictions in when it can demand payment. In any event, the invoice demanding payment (which appears to the tribunal to be valid in all respects and is in fact dated 29 November 2023) does not require payment until 1 January 2024. The tribunal therefore concludes that the demand made in November 2023 for the 2024 service charge year is payable. 24.The tribunal therefore determines that the service charges demanded for the years 2023 and 2024 are both payable and reasonable in amount.

6 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 by email to [EMAIL]

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.

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.

7 APPENDIX Appendix of relevant legislation Landlord and Tenant Act 1985 (as amended) Section 18 (1) In the following provisions of this Act "service charge" means an amount payable by a tenant of a dwelling as part of or in addition to the rent - (a) which is payable, directly or indirectly, for services, repairs, maintenance, improvements or insurance or the landlord's costs of management, and (b) the whole or part of which varies or may vary according to the relevant costs. (2) The relevant costs are the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a [NAME], in connection with the matters for which the service charge is payable. (3) For this purpose - (a) "costs" includes overheads, and (b) costs are relevant costs in relation to a service charge whether they are incurred, or to be incurred, in the period for which the service charge is payable or in an earlier or later period. Section 19 (1) Relevant costs shall be taken into account in determining the amount of a service charge payable for a period - (a) only to the extent that they are reasonably incurred, and (b) where they are incurred on the provisions of services or the carrying out of works, only if the services or works are of a reasonable standard; and the amount payable shall be limited accordingly. (2) Where a service charge is payable before the relevant costs are incurred, no greater amount than is reasonable is so payable, and after the relevant costs have been incurred any necessary adjustment shall be made by repayment, reduction or subsequent charges or otherwise. Section 27A (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 -

8 (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.