Tenant's Service Charge Challenge Struck Out by First-tier Tribunal

OUTCOME: Struck Out

© CROWN COPYRIGHT 2014

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00AH/LSC/2019/0086 Property : [ADDRESS] [POSTCODE] Applicant : [redacted] : Self Respondent : [redacted] : [COUNSEL] instructed by [COUNSEL] [NAME] of application : For the determination of the reasonableness of and the liability to pay a service charge Tribunal members : Judge Hargreaves Alison Flynn MA MRICS Date and venue of hearing : 10 [ADDRESS] [POSTCODE] 17th July 2019 Date of decision : 17th July 2019

DECISION

2

Decisions of the Tribunal (1) [NAME] [RESPONDENT] is substituted as Respondent in place of [APPELLANT]. (2) The Applicant’s case is struck out because there is no reasonable prospect of any part of the case succeeding (Tribunal Rule 9(3)(e). (3) The Applicant’s applications for an order under section 20C of the Landlord and Tenant Act 1985 and for an order under paragraph 5A Schedule 11 Commonhold and Leasehold Reform Act 2002 is dismissed.

REASONS 1. The Applicant seek a determination pursuant to s.27A of the Landlord and Tenant Act 1985 (“the 1985 Act”) as to the reasonableness of service charges in respect of the years from 2013 – 2020.

2. The relevant legal provisions are set out in the Appendix to this decision.

3. Page numbers refer to those in the trial bundle prepared by the Respondent.

4. The Applicant is the leaseholder of a one bedroomed flat in a retirement development managed by [RESPONDENT]. We have therefore substituted the correct landlord as the Respondent.

5. The 1988 lease is at p81 to be read with a November 2017 deed of variation at p67 (which inserts a liability for reasonably incurred costs and charges of legal proceedings). The relevant service charge provisions are contained in the Sixth and Seventh Schedules to the lease, and include provisions for charging on account, and for contributions to a reserve fund.

6. We are satisfied from the documents in the bundle that service charge invoices are in the proper form, that the accounts have been audited, and that all heads of claim for items in the service charge accounts are chargeable under the lease. In other words, all contractual aspects of the service charge regime are in order.

7. The Applicant filed a statement of case which is a generalised criticism of [NAME], about whom he has read negative accounts on-line and in consequence of various critical campaigns. The Respondent argued in

3 its statement of case that there was no case to answer but did not expressly make a Rule 9 application to strike out. It is fair to say that at no point in the process did the Applicant explain what was unreasonable about the service charges: he took the view that they are on the high side and it is up to the Respondent to justify them. As Mr [APPELLANT] submitted, the Applicant did not comply with the directions as to how he should put his case. The Applicant frankly admitted that he did not realise he had to.

8. In any event, the application came on for hearing. As a Tribunal, having given the Applicant the opportunity and considerable leeway to explain his case in more detail (against Mr [APPELLANT] urgings not to do so) we pressed the Applicant to explain, in relation to the management accounts, his case in relation to the unreasonableness of each item. He said he had not come prepared to do so and could not. He has made some individual allegations about incompetent workmanship but we are entirely unsure about how they support a claim of unreasonableness, and given the lack of detail (save as to photographs) it would be hard for the Respondent to respond properly. In relation to defective double-glazed windows, for example, it transpires that they are shortly being replaced by the supplier at no additional charge in any event, having been installed in about 2014-2015 but already showing sign of condensation between glass panels. That demonstrates some fairly pro-active management.

9. In the absence of the Applicant being able to promote a proper challenge on reasonableness, the application must be struck out, with consequential directions rejecting a s20C LTA 1985 application and a paragraph 5 Schedule 11 Commonhold and Leasehold Reform Act application.

Judge Hargreaves Alison Flynn MA MRICS 17th July 2019

4 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 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 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 - (a) the person by whom it is payable, (b) the person to whom it is payable, (c) the amount which is payable,

5 (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. 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—

6 (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 application 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

7 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 application. (2) The application shall be made— (a) in the case of court proceedings, to the court before which the proceedings are taking place or, if the application 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 application 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 application is made after the proceedings are concluded, to a county court. (3) The court or tribunal to which the application is made may make such order on the application 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.

8 (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 application 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 application 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

9 (b) on particular evidence, of any question which may be the subject matter of an application under sub-paragraph (1).