Tenant's Service Charge Challenge Rejected by Tribunal

OUTCOME: Dismissed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case references : BIR/00GG/LIS/2024/0015

Property : [ADDRESS] [POSTCODE] Applicant: [redacted]

Respondent : [redacted] applications : An application in respect of the liability to pay and reasonableness of service charges under section 27A of the Landlord and Tenant Act 1985 (1) An application for an Order under section 20C of the Landlord and Tenant Act 1985 (2) An application for an Order under paragraph 5A of Schedule 11 of the Commonhold and Leasehold Reform Act 2002 (3) Tribunal members : Judge C [NAME] [NAME] and place of hearing : Paper hearing Date of decision 17 March 2025

DECISION

© CROWN COPYRIGHT 2025

2 Background

1. Mr [NAME] applied on 31 July 2024 for a determination of the payability of service charges arising from his ownership of a leasehold apartment on the ground floor of 99 Cartway, Bridgnorth. His obligation of pay service charges comes from his lease, which is dated 31 October 2019. He has to pay a fair and reasonable proportion of the costs incurred by the Respondent in providing services, which include the costs of repairing and replacing the roof, and the costs of cleaning and maintaining the common parts, maintaining the landscaped and grassed areas, and providing any other services the Respondent reasonably decides to provide for the benefit of the tenants and occupiers of the building.

2. The application form challenged service charges levied in 2020, 2021, 2022, and 2023 but the challenges were not specific, and included some challenges that the tribunal has no jurisdiction to determine. Of note, there have been previous proceedings in the county court concerning the Applicant’s service charge liability. Under section 27A(4)(c) of the Landlord and Tenant Act 1985 (“the Act”) it is provided that no application to this tribunal can be made in respect of a matter which has been determined by a court.

3. [NAME] therefore held a case management conference in September 2024 as a result of which directions were issued. These required the Applicant to:

“Set out their substantiated reasons why any of the specific costs (specifically excluding costs that were the subject of the judgement in the County Court) are not reasonable, due and payable. These reasons should be set out in written statement (paginated and indexed) which is cross referenced with a “Scott Schedule” (draft provided) on which the disputed invoices are identified by completing columns 1, 2, 3 and 4. The Applicant should also state the amount considered reasonable for that item and justify that comment. One schedule should be completed for each item with disputed charges identified on a year-by-year basis.”

4. The Applicant provided a Scott Schedule and a statement of case. The Respondent has not provided a statement of case. It’s position, confirmed in emails, is that the application is misconceived and should be struck out.

5. The Tribunal has decided to make a final determination of the application on the basis of the Applicant’s case as contained in the documents provided following the case management conference.

6. The determination is made on the basis of written representations and without a hearing.

3 Law

7. In addition to the important provision referred to above in section 27A(4)(c) of the Act, this case also raises the question of whether issues can be dealt with in a legal case if they could have been raised in an earlier case. The law on this issue was considered in Henderson v Henderson (1843) which determined that:

“where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of a matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case.”

8. The modern statement of this principle can be found in the speech of [NAME] of [NAME] in [NAME] v [NAME] & Co [2002] 2 AC 1 30H- 31F, where he said:

“The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the public interest in the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings, may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.”

Facts

9. We find the following facts which clearly emerge from the documents provided:

a. The Respondent has obtained the following quotes and paid the following invoices:

i. A roofing works invoice dated 13 July 2020 from [NAME] for £17,065.93.

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ii. Quote for roof works dated 9 May 2021 and subsequent invoice for the quoted sum from [NAME] dated 16 July 2021 for works to the roof and in some flats in the sum of £15,900.00.

iii. A scaffolding invoice dated 19 May 2021 from [NAME] for £1,800.00.

iv. Invoice for works to drains dated 16 November 2021 from [NAME] in the sum of £942.00.

b. Email correspondence from the Respondent to the Applicant dated 10 May 2021 informed the Applicant of the Respondent’s obligation to consult on roof works. However, the email stated that the consultation process is lengthy, and instead the Respondent was approaching the tenants directly to enquire whether they would agree to proceed with the quote from [NAME].

c. The Respondent has demanded service charges from the Applicant as follows:

i. An invoice dated 8 March 2021 demanded payment from the Applicant for a budgeted service charge for the period 1 January to 31 December 2021 in the sum of £490.00.

ii. An invoice dated 1 January 2022 for the period 1 January to 31 December 2022 demanded payment from the Applicant in the sum of £590.00, being ground rent of £100 and a claim for a budgeted service charge of £490.00.

iii. An invoice dated 17 March 2022 for the sum of £4,272.09 comprised a demand for £3,837.09 as a shortfall for the service charge year 2021 and an additional £435.00 as a budget adjustment for 2022.

iv. An invoice dated 1 January 2023 for £925.00 being a demand for a budgeted service charge payment for 2023.

d. Accounts for the service charge years in dispute show:

i. There are no accounts shown to us for 2020;

ii. For 2021, total expenditure in that year was £34,648.05 of which the Applicant’s share is stated to be £4,327.09. Some £14,500.00 of that expenditure was described as “[NAME] held over from 2020”. After credit for the budgeted service charge of £490.00 billed on 1 January 2022, the shortfall claim is for £3,837.09. There is then a line revising the budget for 2022

5 upwards to £925.00, resulting in a budget adjustment for that year of £435.00.

iii. For 2022, total expenditure was £1,991.90. The Applicants share would have been £170.10 ( and so more than covered by the demand for £925.00 made for that year as a budgeted demand). In fact, the Respondent decided to charge the Applicant (and the Applicant alone) an additional sum of £500 for “all the trouble and nuisance associated with the funding and chasing of the heavily delayed service charge invoicing from the previous year”. Somehow, the document setting out the 2022 results ends with an indication that the Applicant owes a further £390.10, but the figures make no sense to us.

e. County Court proceedings were brought by the Respondent against the Applicant on 4 November 2022 in respect of which:

i. The respondent claimed £6,131.45 for ground rent / service charges of £5,398.89 plus interest and costs.

ii. Judgment was entered for the sum of £6,178.43 on 25 November 2022 but this was set aside on 31 January 2023 conditional upon a defence being filed by 14 February 2023.

iii. The next step in the county court proceedings apparent in the documents we have is a county court order dated 7 June 2023 and issued on 19 June 2023 in which it was recited that the claim for service charges had been paid, and ordering the Applicant to pay interest of £56.78 and costs of £9,822.15. It is likely that a counterclaim was made by the Applicant as there is reference in the order to that counterclaim being withdrawn, but we have not seen it, nor any defence that might have been filed.

iv. A county court order dated 20 November 2023 and issued on 6 December 2023 recorded that an application to vary the order dated 7 June 2023 was abandoned and the Applicant was ordered to pay costs of £1,620.00.

The Applicants case

10. The Applicant’s statement of case raises two challenges. The first is to any costs included in the service charge for works on the roof of the Property on the grounds that there was no consultation under section 20 of the Landlord and Tenant Act 1985 (“the Act”) and therefore the cost claimed must be limited to £250.00.

6 11. The second ground is that the Respondent has not provided a summary of costs as required by section 21 of the Act, nor allowed inspection of the invoices under section 22 of the Act. The second challenge is not a challenge in respect of which this tribunal has any jurisdiction and accordingly, we can make no determination on that challenge.

12. In his Scott Schedule, the Applicant raised seven further challenges as follows:

a. To the service charge invoice for 2021 for £490.00 on the grounds that section 20 consultation was not adhered to;

b. To the service charge invoice for 2022 for £490.00 on the grounds that section 20 consultation was not adhered to;

c. To the service charge invoice for 2021 and 2022 in which the sum of £4,272.09 was demanded being a shortfall for 2021 of £3,857.09 and a 2022 budget adjustment of £435.00, on the grounds that section 20 consultation was not adhered to;

d. To the demand for £925.00 as a budgeted charge for 2023 on the grounds that he has not been supplied with copies of supporting accounts and invoices;

e. To a fee of £275.00 for setting aside judgment in the county court incurred on 1 December 2022;

f. To the court order dated 20 November 2023 requiring the Applicant to pay the Respondents costs in the sum of £1,620.00 on the grounds that section 20 was not followed;

g. To the court order dated 7 June 2023 ordering the Applicant to pay the respondents county court costs of £9,878.93 as section 20 was not followed.

Discussion

13. It is entirely apparent from the recitals of the facts above that significant expenditure was incurred in 2020 and 2021 on the roof of the Property, which was primarily accounted for in the 2021 accounts.

14. It is also entirely apparent that the county court case was (inter alia) for non-payment of the shortfall demand for the 2021 service charge year, which included the roof works.

15. It is clear that the Applicant had been informed of the section 20 requirements by the Respondent in 2021 (see paragraph 9b above), and so obviously well before the county court proceedings were commenced.

7 16. The Tribunal has not been provided with a copy of the Applicant’s county court defence. The Applicant is entirely right to say that unless consultation under section 20 took place or was dispensed with, or all tenants agreed that they would not require consultation, no sum above £250.00 could have been charged for the roof works. But the place for the section 20 defence to the charge for the roof works was in the county court, as it was seized of the issue via the debt claim.

17. So, not only because section 27A(4)(c) means that the application to challenge the lack of consultation on the roof works (if indeed there was no consultation on which we make no finding), but also because under the rule in Henderson v Henderson, the Applicant would be prevented from raising that issue before us in any event. It seems to us that it would be an abuse of process for the Applicant to be allowed to raise the consultation issue now when he did or should have known about it at the time of the county court proceedings. We are simply unable to make a determination on the single issue the Applicant raised in his statement of case and on the first three grounds set out in his Scott Schedule (paragraphs 12a – c above).

18. The challenge to the budgeted demand for 2023 (see paragraph 12d above) must fail. Any demand for a payment of a sum as a budget sum in anticipation of future expenditure by definition cannot be based on invoices or accounts. It is only when accounts for that year are produced (and invoices supplied) that a final figure can be calculated. When that happens, the Applicant has a right to challenge that final outcome under section 27A if he wishes and has grounds for doing so.

19. The challenges in the Scott Schedule to amounts which the Applicant has been ordered to pay or was required to pay by the county court (see paragraphs 12e – g above) are hopeless. This tribunal has no jurisdiction to consider these challenges. They are matters solely for the county court.

20. There remain more general challenges in the application form to the demands made of the Applicant to make a payment in advance for the 2022 and 2023 service charge years (see paragraph 12(c)(ii – iv) above. None of those demands are obviously compliant with paragraph 4.2 of Schedule 6 of the lease, nor do they obviously comply with the statutory requirements of the Act.

21. But we make no determination on them because the Applicant has not asked us to do so. This decision is limited to the matters raised in the Applicant’s statement of case and his Scott Schedule.

22. On the face of the accounts for 2022, the Applicant has clearly overpaid, if he paid the budget demands. As the demands were for sums described as budget sums, our view is that they were not final demands, and the Applicant may therefore still apply under section 27A(1) (as opposed to section 27A(3)) of the Act. He also still have a right to apply to challenge

8 the administration charge of £500 demanded (see paragraph 7c of the Directions dated 4 September 2024).

23. Whether the Applicant decides to pursue any of these points is for him to determine after taking competent legal advice.

Decision

24. There are no grounds on which we can make any orders in the Applicant’s favour which reverse or vary the current position relating to the payability of service charges by the Applicant. The application is therefore dismissed.

Costs orders

25. The Applicant applied for orders under s20C of the Act and paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002. Were we to grant these applications, the Applicant could not be charged any costs incurred by the Respondent in this case either to the Applicant’s service charge account (as a part contributor to the service charge along with all other service charge payers) or directly if the Respondent takes the view that there is a lease provision which entitles it to charge the whole cost to the Applicant. Our discretion to make these orders requires us to hold the view that it would be just and equitable to do so.

26. The outcome of this application however is that the Applicant has failed to persuade the tribunal to make any order in his favour. It would therefore be wrong for us to make any orders under these provisions. The application for these protective costs orders is dismissed.

Appeal

27. Any appeal against this decision must be made to the Upper Tribunal (Lands Chamber). Prior to making such an appeal the party appealing must apply, in writing, to this Tribunal for permission to appeal within 28 days of the date of issue of this decision (or, if applicable, within 28 days of any decision on a review or application to set aside) identifying the decision to which the appeal relates, stating the grounds on which that party intends to rely in the appeal, and stating the result sought by the party making the application.

Judge C [NAME] First-tier Tribunal (Property Chamber)