Tenant Entitled to Clear and Reasonable Service Charge Calculation for Major Works

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : LON/00AM/LSC/2018/0382 Property : 12 [ADDRESS] [POSTCODE] Applicant : [redacted] Representative : Mr [COUNSEL] [NAME] with the Applicant Respondent : [redacted] : N/A Type of [NAME] : Section 27A Landlord and Tenant Act 1985 Tribunal Members : Judge Carr Mr S Mason BSc FRICS FCIArb

Date and venue of Hearing : 10 [ADDRESS] [POSTCODE] Date of Decision : 7th March 2o19

DECISION

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Decisions of the tribunal (1) The tribunal determines that the following sums are payable by the Respondent; a. £2,244.46 which is the Respondent’s share of a total estimated costs of works of £22,990.67 plus £194.08 balance from previous major works b. [NAME] fee of £105. (2) The Applicant agreed that it would not charge interest or county court costs on the sums claimed. It also agreed that it would extend to the Respondent the benefit of its payment plan. (3) The tribunal makes the determinations as set out under the various headings in this decision

The [NAME] 1. The Applicant seeks a determination pursuant to s.27A of the Landlord and Tenant Act 1985 (“the 1985 Act”) as to the amount of service charges payable by the Respondent in respect of the service charge relating to major works carried out at the property.

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2. Proceedings were originally issued in the County Court Hearing Centre under claim no. E3QZ2POM on 28th August 2018. The claim was transferred to the County Court at Clerkenwell and Shoreditch and then to this tribunal, by order of District Judge Swan on 10th October 2018.

3. The relevant legal provisions are set out in the Appendix to this decision. The hearing 4. The Applicant was represented by Mr [APPELLANT] at the hearing and the Respondent appeared in person. Ms [RESPONDENT] [APPELLANT], Income and Dispute Resolution Officer with the Applicant also attended and gave evidence.

3 The background 5. The property which is the subject of this [NAME] is a two bedroom flat in a small local authority owned block. There are a total of 12 flats, all equal in size, in the block.

6. The Respondent holds a long lease of the property which requires the landlord to provide services and the tenant to contribute towards their costs by way of a variable service charge. The specific provisions of the lease and will be referred to below, where appropriate. The issues 7. At the start of the hearing the Tribunal identified the issue between the parties as The payability and/or reasonableness of service charges relating to major works . In particular the Respondent is concerned that she was told that the estimated charges for the most recent major works totalled £17,439.57. but the claim against her is her proportion of £22,990.67.

8. The Applicant thought that the issue was the apportionment of the charges between the residents of [ADDRESS]. However the Respondent made it clear, and the Tribunal agreed, that throughout the claim she has asked for clarity on the disparity between the estimate of £17,439.57 and the final claim. She was satisfied that the apportionment was reasonable; there were 12 flats of equal size in her block and the total major works were divided equally between all the flats.

9. Having heard evidence and submissions from the parties and considered all of the documents provided, the tribunal has made determinations on the various issues as follows. The amount of the claim 10. Ms [NAME] asked for clarity on the amount of the claim, in particular in connection with the total estimated costs of the most recent major works. On 31st August 2017 she received a s.20B notice which stated as follows: ‘The total costs incurred to date by the Council to your block, to which leaseholders will be required to contribute by way of service charge are: £17,439.57.

11. This figure would mean that Ms [NAME] was liable for one twelfth of that amount – £1453.30 and not one twelfth of £22,980.87 which means

4 that her liability for those estimated costs is £2,040.42 plus an additional 10% administration fee and professional fees.

12. However the Applicant states that the correct total amount is £22,980.87. This was the amount of the original invoice dated 15th Jan 2016, a figure repeated in an invoice dated 26th June 2017 and the amount of the county court claim. The Applicant’s argument is that it was entitled to sue on the original information.

13. The Tribunal asked why a s.20B notice was served which was for less money than the preceding invoice. There was no coherent explanation for this. The Tribunal understood why the Respondent was confused. The tribunal’s decision 14. The tribunal determines that the amount payable in respect of the estimated costs of the most recent major works is £2,244.46. Reasons for the tribunal’s decision 15. There is no doubt that Ms [NAME] was confused about the disparity between the estimated costs set out in the s.20B notice served and the claim.

16. The Tribunal considered that her confusion was understandable and indeed that it was itself confused about difference between the two figures as the Applicant was unable to explain what expenses had been incurred after the s.20B notice prior to the claim.

17. However the Applicant agreed that it would not charge interest or its costs on the amount claimed. The only additional sum it would charge was the [NAME] fee. It also agreed that it would give the Respondent access to its payment plan facilities to assist her in paying the money.

18. On that basis, and on the basis that in any event the Respondent is liable to pay the final account which should be finalised in the very near future.

Name: Judge Carr Date: 7th March 2019

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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 ([NAME]), 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] 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 ([NAME]).

6 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 [NAME] 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,

7 (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 [NAME] 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 [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, 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. 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—

8 (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 20B (1) If any of the relevant costs taken into account in determining the amount of any service charge were incurred more than 18 months before a demand for payment of the service charge is served on the tenant, then (subject to subsection (2)), the tenant shall not be liable to pay so much of the service charge as reflects the costs so incurred. (2) Subsection (1) shall not apply if, within the period of 18 months beginning with the date when the relevant costs in question were incurred, the tenant was notified in writing that those costs had been incurred and that he would subsequently be required under the terms of his lease to contribute to them by the payment of a service charge. Section 20C (1) A tenant may make an [NAME] for an order that all or any of the costs incurred, or to be incurred, by the landlord in connection with proceedings before a court, residential property tribunal or the Upper Tribunal, or in connection with arbitration proceedings, are

9 not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the tenant or any other person or persons specified in the [NAME]. (2) The [NAME] shall be made— (a) in the case of court proceedings, to the court before which the proceedings are taking place or, if the [NAME] is made after the proceedings are concluded, to a county court; (aa) in the case of proceedings before a residential property tribunal, to that tribunal; (b) in the case of proceedings before a residential property tribunal, to the tribunal before which the proceedings are taking place or, if the [NAME] is made after the proceedings are concluded, to any residential property tribunal; (c) in the case of proceedings before the Upper Tribunal, to the tribunal; (d) in the case of arbitration proceedings, to the arbitral tribunal or, if the [NAME] is made after the proceedings are concluded, to a county court. (3) The court or tribunal to which the [NAME] is made may make such order on the [NAME] as it considers just and equitable in the circumstances. Commonhold and Leasehold Reform Act 2002 Schedule 11, paragraph 1 (1) In this Part of this Schedule “administration charge” means an amount payable by a tenant of a dwelling as part of or in addition to the rent which is payable, directly or indirectly— (a) for or in connection with the grant of approvals under his lease, or applications for such approvals, (b) for or in connection with the provision of information or documents by or on behalf of the landlord or a person who is party to his lease otherwise than as landlord or tenant, (c) in respect of a failure by the tenant to make a payment by the due date to the landlord or a person who is party to his lease otherwise than as landlord or tenant, or (d) in connection with a breach (or alleged breach) of a covenant or condition in his lease. (2) But an amount payable by the tenant of a dwelling the rent of which is registered under Part 4 of the Rent Act 1977 (c. 42) is not an administration charge, unless the amount registered is entered as a variable amount in pursuance of section 71(4) of that Act.

10 (3) In this Part of this Schedule “variable administration charge” means an administration charge payable by a tenant which is neither— (a) specified in his lease, nor (b) calculated in accordance with a formula specified in his lease. (4) An order amending sub-paragraph (1) may be made by the appropriate national authority. Schedule 11, paragraph 2 A variable administration charge is payable only to the extent that the amount of the charge is reasonable. Schedule 11, paragraph 5 (1) An [NAME] 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. (2) Sub-paragraph (1) applies whether or not any payment has been made. (3) The jurisdiction conferred on the appropriate tribunal in respect of any matter by virtue of sub-paragraph (1) is in addition to any jurisdiction of a court in respect of the matter. (4) No [NAME] under sub-paragraph (1) may be made in respect of a matter which— (a) has been agreed or admitted by the tenant, (b) has been, or is to be, referred to arbitration pursuant to a post-dispute arbitration agreement to which the tenant is a party, (c) has been the subject of determination by a court, or (d) has been the subject of determination by an arbitral tribunal pursuant to a post-dispute arbitration agreement. (5) But the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment. (6) An agreement by the tenant of a dwelling (other than a post-dispute arbitration agreement) is void in so far as it purports to provide for a determination— (a) in a particular manner, or

11 (b) on particular evidence, of any question which may be the subject matter of an [NAME] under sub-paragraph (1).