Service Charges for Drainage Works Deemed Reasonable by Tribunal

FIRST TIER PROPERTY CHAMBER DECISION

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case Reference

:

HAV/24UD/LSC/2024/0639

Property

:

[ADDRESS] [POSTCODE]

Applicant: [redacted] Limited

Representative

:

[RESPONDENT]

Respondent: [redacted]

([NAME])

Type of Application

:

Determination of liability to pay and reasonableness of service charges Section 27A Landlord and Tenant Act 1985

Tribunal

:

:

Judge T. [NAME] [NAME] (Lay member)

Date of Decision

:

4th September 2025

DECISION OF THE TRIBUNAL: -

The Tribunal determined that the final, actual cost of £223,456.24 for the ‘drainage works’ (as set out in the Specification report of 9th July 2024 and completed in 2o25) was reasonable and payable by way of service charges under the terms of the lease.

BACKGROUND and RELEVANT CHRONOLOGY.

1. The property in question is a purpose-built residential block containing 36 flats. The block has suffered from problems with rising damp for a number of years..

2. The freehold is held by [COMPANY] ([NAME]) [COMPANY], and the flats are all let on long leases.

3. Mr. [NAME] is the only leaseholder who responded to the Application.

4. On the 27th of June 2019 the then managers of the property, [COMPANY], issued a ‘Notice of Intention to carry out works’ [Page 290 of the bundle] in accordance with Section 20 of the Landlord and Tenant Act 1985 (hereinafter referred to as ‘The Act’). This Notice was sent out to [RESPONDENT], stating that the proposed works were - ‘To resolve damp issues and any other associated repairs.’

5. In the summer of 2020 there was a detailed survey by surveyors [NAME], and a decision was taken to focus on the exterior of the block first. Remedial works to deal with the drainage problems and water disposal were recommended.

6. A further ‘Notice of Intention to carry out works’ was sent to [RESPONDENT] on the 13th of November 2020 [Page 152], this time stating that the works were: - ‘...to resolve damp issues caused by rising damp, by refurbishing and updating the present drainage provision in order to ensure that excess water is properly carried away from the site.’

7. On the 9th of April 2021 a ‘Statement of Estimates’ followed [Page 252]. Three estimates had been obtained, with the lowest being £89,282.40 ([COMPANY].) and the highest £99,094.69 ([COMPANY].)

8. However the work was not commenced at that time, and delays may have been partly occasioned by a change of [NAME] from [COMPANY] to [COMPANY] in November 2021.

9. On the 8th of February 2023 a further Notice of Intention [Page 297] was sent to [RESPONDENT] by [COMPANY], referring to works that would - ‘...extend water drainage to discharge away from building.’

10. An updated ‘Statement of Estimates’ was sent out on the 18th of July 2023. [Page 278.] This time only 2 estimates had been obtained: the lowest was £129,182.40 ([COMPANY].) and the highest was £158,344.90 ([COMPANY].)

11. In November 2023 [NAME] formally referred the drainage plans to the Environment Agency, seeking a ‘Flood Risk Activity Permit’ in relation to discharge of water into the nearby culvert. The Environment Agency requested further information before the matter could be progressed.

12. After some additional delay, the Environment Agency finally approved the plans on the 17th of April 2024, but the required specification was far more extensive than the original.

13. A further report, dated the 9th of July 2024 and headed ‘SPECIFICATION FOR REPLACEMENT SURFACE WATER DRAINAGE INSTALLATION’ [Page 154] was prepared by [NAME] (of [NAME]) in conjunction with [COMPANY].

14. A fresh or updated ‘Statement of Estimates’ was then sent out on the 24th of September 2024. [Page 292] The final figures were as follows: £236,573.48 – [COMPANY]. £262,983.39 - Battleplan Groundworks.

15. No written observations or objections were received in response to any of the Notices or Statements of Estimates within the statutory time limit, but some questions were later raised by [RESPONDENT] at a meeting held on the 19th of November 2024.

16. On the 15th of November 2024 the [NAME], [COMPANY] ([COMPANY], through their [NAME] [COMPANY], applied to the Tribunal for a determination of liability to pay and reasonableness of service charges under Section 27A of the Act.

17. Formal Directions were issued and the matter was progressed to final hearing as below.

THE LEASE

18. A specimen Lease is provided at Page 22 of the bundle.

19. Under paragraph 2 of the Fourth Schedule, the [NAME] covenants to pay: ‘...a proportion of the maintenance cost in accordance with the provisions of the Sixth Schedule hereto…’

20. Under paragraph 1 of the [NAME] covenants to: - ‘...well and substantially...repair, uphold, maintain, cleanse, amend and keep in good and substantial repair and condition…’ (including washing and painting where appropriate) a) ‘the external walls ...and the roof…’ (including the roof structures.) b) ‘the external surfaces of the doors, windows and window frames...’ c) ‘the gutters, pipes conduits…’ etc. d) ‘the water pipes, ducts, sewers, drains…’ etc., and e) ‘the electric wires ducts and cables…’ excluding those of the above which were dealt with separately under the demise.

21. [NAME] also has a duty to maintain the ‘Amenity’ areas or common parts, grounds of the property etc.

22. The Sixth Schedule Part I deals with the definition of the ‘Maintenance Cost’ to which the [NAME] is obliged to contribute. It refers to [NAME]’s costs of complying with their obligations under the Lease, as well as the fees payable to agents or other professionals who may have been required to assist in managing those obligations.

23. Part I of the Sixth Schedule also deals with the provision of a [NAME] for future expenditure.

24. Part II deals with the ‘Maintenance Account’ and requires [NAME] to provide estimated accounts (as to proposed expenditure for the coming year) to the [NAME] in advance for each 12-month period, together with a notice as to the required contribution payable.

25. Part III provides for the appropriate percentage share of the maintenance costs to be paid by the [NAME] in monthly instalments in advance. Balancing payments are dealt with at the end of each 12-month period.

RELEVANT LAW 26. See Appendix

ISSUES FOR DETERMINATION BY THE TRIBUNAL

27. The original Application is unclear as to exactly which service charge year or years are (or may be) in dispute. • At Section 7 of the application form [Page 6 of the bundle] under the heading: ‘Service charges to be considered…’ – ‘service charges for past years ...please list years for which a determination is sought...’ the Applicant has put ‘2025.’ • Under the heading:- ‘The year in question...’ [Page 11 of the bundle] the Applicant has put the year ‘2024’. • On the same page, under the heading: - ‘Items of service charge that are in issue (or relevant) and their value’ the Applicant has put: - ‘Drainage works - repair and update current drainage system including the installation of attenuation tanks to assist with the soakaway of water from the building.’ • The value is given as £236.573.48 • Beneath this entry is a box labelled: ‘Description of the question(s) you wish the Tribunal to decide’, and the Applicant has put: - ‘Is the cost(s) (sic) related to these works reasonable and payable under the lease?’

28. The issues raised by the Respondent Mr. [RESPONDENT] were as to: - • the reasonableness of the cost of the works, which had been increased as a result of the [NAME]’ failure to deal with the damp problems and delay in liaising effectively with the Environment Agency from the outset (or at least from 2020 onwards).

• the use of substantial amounts of money from the [NAME] to pay for professional fees without any Section 20 consultation.

HEARING

29. The hearing of the matter took place by video on the 20th of August 2025. A bundle of documents - comprising 444 pages and including correspondence, reports, witness statements and relevant exhibits – was provided to the Tribunal and to the Respondent.

30. The Tribunal heard witness evidence and oral submissions from both parties.

31. Mr [APPELLANT] of [APPELLANT] appeared on behalf of the [NAME] and made submissions and representations accordingly.

32. Mr. [RESPONDENT] appeared in person as Respondent to the Application.

APPLICANT’S CASE

33. The Applicant’s case is contained in their application form (as above), in their written Statement of Case dated the 12th of June 2025, and in the ‘Reply’ to the Respondent’s case dated the 1st of August 2025.

34. There were also supporting witness statements and oral evidence from Ms. [NAME] (of [COMPANY]) and Mr. [NAME] (of [NAME]).

35. Mr. [NAME] confirmed that the Application had been made in order to seek confirmation that the maintenance costs in question (namely those relating specifically to the ‘drainage works’ as referred to above) were properly claimed as service charges, and that all correct consultation procedures had been followed. The [NAME] was expecting to incur substantial expenditure on the works and they did not wish to undertake the project until they were reassured that the costs would be recoverable.

36. On behalf of the Applicants it was submitted that the Section 20 consultation requirements had been fully complied with. It was said that the relevant ‘Notice of Intention to carry out works’ was the one issued on the 13th of November 2020, and arguably there was no need for the ‘Notice’ dated 8th of February 2023 because there was no expiry date or ‘use by’ requirement on the original Notice and the works remained as described (in general terms) in the November version.

37. It was agreed by all parties that none of [RESPONDENT] had responded or made representations in respect of the November 2020 Notice, and no issue was taken with the Section 20 procedure. Some of [RESPONDENT] were concerned about the cost of the works but they did not raise formal objections and Ms. [NAME] gave evidence that they were reassured during the meeting between management and residents in November 2024.

38. Similarly, [RESPONDENT] (including the Respondent Mr. [RESPONDENT]) did not take issue with the necessity for the works, the principle of payability of the cost by way of service charges, or the apportionment between the properties (the total cost being simply divided equally between the 36 flats.)

39. In terms of the relevant year for the purposes of the application for Section 27A determination, the evidence from Ms. [NAME] was that the [NAME] had initially paid for all of the works themselves, and then the monies had been recovered from the [RESPONDENT] over a period, through a combination of service charge payments and transfers from the [NAME].

40. It was submitted that it was the total cost of those particular works (as set out in the Statement of Case at £236,573.48) which was in question, and a determination was sought as to whether that cost (spread over the years 2024 – 2025) was reasonable. None of the other elements of the service charges – either for 2024 or for 2025 – were disputed.

41. As to the matters raised by Mr. [NAME], it was argued on behalf of the Applicants that the difference between the estimates produced in 2021 and 2023 and those eventually agreed upon in 2024 was that the specification had changed dramatically as a result of the Environment Agency requirements. It could be seen from the contrast between the February 2021 plans and drawings (at Page 411) and the July 2024 plans (at Page 197) that the final system was far more complex than the original.

42. Although the purpose of the works was essentially the same in both scenarios, and it was designed to achieve the same result (i.e. better drainage and resolution of damp problems in the block), the cost was inevitably higher with the revised specification as approved by the Environment Agency.

43. Mr [NAME] (of [NAME]) gave evidence that there had indeed been liaison with the Environment Agency back in 2019, and that the representative from the Agency who visited the site at that time had expressed the view that a simple system (along the lines of the 2021 specification) could have been good enough. However, due to a lack of available funds the works were not undertaken immediately, and when the matter was referred to the Agency formally in 2023 the original design was said to be unsatisfactory. Further, more extensive measures were required, with a number of additional manholes, attenuation tanks etc.

44. The case of Daejan Properties Ltd. v. Griffin [2024] UKUT 0206 (LC) was cited by the Applicant’s representative in respect of the question of ‘historical neglect’ by a [NAME].

45. It was pointed out that the Upper Tribunal decided in the [NAME] case that the only route by which an allegation of historical neglect might provide a defence to a claim (for service charge contributions) would be if it could be shown that, but for a failure by the landlord to make good a defect at the time required by the covenant, part or all of the cost eventually incurred in remedying the defect(s) would have been avoided. In such circumstances, the tenant could have a claim in damages for breach of covenant and that claim could be set off against the same tenant’s liability to contribute to the cost of the remedial works. (See Paragraph 89 of the Judgement).

46. It was said that the value of damages which the tenant could claim in such circumstances would include the amount by which the cost of the remedial works had increased as a result of the landlord’s failure to carry out the work when it was obliged to do so.

47. The questions to be asked were therefore: - • If the work been carried out when it should have been, would the scope of works be the same, or were more extensive/additional works now required? • Would the works have cost less in the past when they should have been carried out?

48. In fact, the Tribunal heard evidence that the works were completed this year (2025), and despite inflation and increases in the cost of building materials, the final total expenditure on the project came out slightly lower than expected at £223,456.24.

49. On behalf of the Applicants it was accepted that there had been delay in carrying out the work and that some of that delay could perhaps have been avoided. However, it was said that the increase in cost could not be attributed to any fault on the part of the [NAME] or their agents, because it was not possible to compare the earlier estimates with the later, higher ones: the ultimate works were so much more extensive than had been envisaged originally.

50. As for the transfer of funds from the Reserves for payment of professional fees without consultation, Mr. [NAME] submitted that the Section 20 requirements applied to ‘qualifying works’ and not to professional services.

RESPONDENT’S CASE

[Note: Although some of the case documentation refers to ‘[RESPONDENT]’ as the Respondents, and although the original application form mistakenly names ‘[RESPONDENT] as Respondent, Mr. [RESPONDENT] confirmed that he was acting alone in response to the Application and that he did not represent any other parties.]

51. Mr. [NAME] case was set out in his Statement of Case dated 10th July 2025, and it was supported by oral evidence at the hearing and by documentation and correspondence as exhibited in the bundle.

52. Firstly, Mr. [NAME] submitted that the damp problems in the block, which were particularly significant for [RESPONDENT] of ground floor properties like himself, had been known for a considerable time. His evidence was that the mismanagement of the matter had led to increased costs for [RESPONDENT].

53. There was no dispute that the drainage works were necessary, and it was acknowledged that the Section 20 procedures had been followed correctly.

54. No suggestion was made that the works had not been done to a reasonable standard.

55. Mr. [NAME] also did not take issue with his obligation to pay maintenance costs under the covenants of the Lease but he submitted that, if the [NAME] had gone ahead with the works as per the original Statement of Estimates, the amount payable would have been considerably lower.

56. It was argued that the increase in the cost of the works was as a result of the delay, with inflation and increased labour costs playing a key role.

57. Mr [NAME] gave evidence that (using the Freedom of Information Act) he had investigated the [NAME]’ claims that some of the delay was because they were awaiting feedback from the Environment Agency, and he exhibited emails exchanged

between himself and the Agency which suggested that in fact time had been lost because the [NAME] had been slow to respond to questions and enquiries.

58. It was known from at least 2021 onwards that the Environment Agency might require certain modifications to the original specification before approval could be given, but [NAME] criticised [COMPANY] for not clarifying the position and getting the works done earlier.

59. Mr. [NAME] told the Tribunal that the [NAME] had also given misleading information to him and they had failed to answer clearly the queries which he raised.

60. In summary, Mr. [NAME] submitted that the higher costs (with the ‘Inflationary increase’, which he initially calculated at £26,997.60) resulting from the [NAME]’ delay in taking proper action should not be passed on to [RESPONDENT] by way of service charges.

61. As a further point, Mr. [NAME] submitted that a sum of £24,858.68 had been transferred from the [NAME] in 2021 [Page 374], apparently to cover costs listed in the service charge accounts as ‘Professional services’. This item appeared to be outside the scope of the quotations for the ‘drainage works’, and he argued that because the cost amounted to more than £250 per flat the Section 20 consultation process should have been followed.

TRIBUNAL FINDINGS AND DETERMINATION

62. As to the service charge year which fell to be considered, the Tribunal found that the specific costs in question were spread over more than one year, and it was logical to determine whether the total figure was reasonable regardless of exactly when and how it was paid.

63. The Tribunal confirmed that there was no issue in this case as to compliance with the consultation requirements of Section 20 of the Act, and no challenge as to Mr. [NAME] liability to pay service charges in the manner and on the dates as set out under the terms of the Lease.

64. The Tribunal found that the relevant document for the purpose of starting the consultation process in this case was indeed the ‘Notice of Intention to carry out works’ of 13th November 2020, and it was further confirmed that there was no time -limit on when the proposed ‘drainage works’ should commence.

65. As for the argument that the greater cost of the works in 2024 (as compared to the estimates of 2021 and 2023) was as a result of the delay in taking action, the Tribunal looked carefully at the evidence.

• Firstly, there was no evidence that the condition of the property and/or its drainage systems had deteriorated during the relevant period (2021 -2024). It was not asserted by any of the parties that the extensive remodelling of the systems was wholly or partly required because of any recent decline.

• Secondly, there was no evidence as to what the cost would have been if the works had been done in 2021 in accordance with the detailed specification as ultimately required by the Environment Agency. It was impossible to determine

whether the scope of the works would have been less, or whether they could have been carried out at a lower cost, if they had been completed in 2021.

• Thirdly, bearing in mind the judgement in the Daejan case (as cited by the Applicant) Mr. [APPELLANT] was unable to show that, but for the failure by the landlord to make good the defective drainage at the time required by the covenant in the lease, (i.e as soon as it was identified) all or part of the cost eventually incurred in remedying that defect (and/or any consequential defects) could have been avoided.

66. In answer to the two key questions from the Daejan case as above, the Tribunal found as follows: -

• If the work been carried out when it should have been, would the scope of works be the same, or were more extensive/additional works now required? The evidence was that the Environment Agency had not been consulted in detail about the proposed works back in 2019/2020, and it was not possible to say whether the scope of those works would have been the same if they had been carried out at that time. Conversely, there was no evidence to suggest that the works had become more extensive as a result of the delay.

• Would the works have cost less in the past when they should have been carried out? It was not possible to speculate that works would have cost less if the landlords and their agents had acted more swiftly, because of the difference between the specification in 2021 and the specification in 2024.

67. Having considered the available evidence the Tribunal did not therefore find that the increase in costs resulted from delay on the part of the landlord [NAME] and/or their agents.

68. As for the transfer of funds from the Reserves for payment of professional fees without consultation, Mr. [NAME] submitted that the Section 20 requirements applied to ‘qualifying works’ and not to professional services. The Tribunal found that this was correct and no consultation was required in this instance.

69. In the light of all of the above the Tribunal determined that the total cost of the ‘drainage works’ was reasonable and payable under the terms of the lease.

Right to Appeal

1. A person wishing to appeal this decision to the Upper Chamber must seek permission to do so by making written application to the First-tier Tribunal at the [NAME] 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.

© CROWN COPYRIGHT

APPENDIX – Applicable law.

HAV/24UD/LSC/2024/0639

OAKDENE GARDENS

The Landlord and Tenant Act 1985

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 superior landlord, in connection with the matters for which the service charge is payable.

(3) For this purpose – (a) “costs” includes overheads, and (b) costs are relevant costs in relation to a service charge whether they are incurred, or to be incurred, in the period for which the service charge is payable or in an earlier or later period.

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 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.

Section 20 (1) Where this section applies to any qualifying works or qualifying long term agreement, the relevant contributions of tenants are limited in accordance with subsection (6) or (7) (or both) unless the consultation requirements have been either— (a) complied with in relation to the works or agreement, or (b) dispensed with in relation to the works or agreement by (or on appeal from) the appropriate tribunal.

(2) In this section “relevant contribution”, in relation to a tenant and any works or agreement, is the amount which he may be required under the terms of his lease to contribute (by the payment of service charges) to relevant costs incurred on carrying out the works or under the agreement.

(3) This section applies to qualifying works if relevant costs incurred on carrying out the works exceed an appropriate amount.

(4) The Secretary of State may by regulations provide that this section applies to a qualifying long term agreement— (a) if relevant costs incurred under the agreement exceed an appropriate amount, or (b) if relevant costs incurred under the agreement during a period prescribed by the regulations exceed an appropriate amount.

(5) An appropriate amount is an amount set by regulations made by the Secretary of State; and the regulations may make provision for either or both of the following to be an appropriate amount— (a) an amount prescribed by, or determined in accordance with, the regulations, and (b) an amount which results in the relevant contribution of any one or more tenants being an amount prescribed by, or determined in accordance with, the regulations.

(6) Where an appropriate amount is set by virtue of paragraph (a) of subsection (5), the amount of the relevant costs incurred on carrying out the works or under the agreement which may be taken into account in determining the relevant contributions of tenants is limited to the appropriate amount.

(7) Where an appropriate amount is set by virtue of paragraph (b) of that subsection, the amount of the relevant contribution of the tenant, or each of the tenants, whose relevant contribution would otherwise exceed the amount prescribed by, or determined in accordance with, the regulations is limited to the amount so prescribed or determined.

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 – (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.