Tenant Successfully Challenges Service Charges Under Landlord and Tenant Act 1985

OUTCOME: Allowed

FIRST - TIER TRIBUNAL

PROPERTY CHAMBER

(RESIDENTIAL PROPERTY)

Case References : BIR/37UG/LIS/2020/0033

Property : [ADDRESS], [POSTCODE] Applicant: [redacted] Applicant’s : Mr [COUNSEL]. Counsel Representative

Respondent: [redacted]

Respondent’s : Mr [COUNSEL], [RESPONDENT].

Applications : Application for a determination of liability to pay and reasonableness of service charges pursuant to s27A Landlord and Tenant Act 1985

Date of Hearing : 12 January 2021

Tribunal : Tribunal Judge P.J.[NAME] of Decision : 17 February 2021

__________________________________________________________

DECISION __________________________________________________________

© CROWN COPYRIGHT 2021

1. The Tribunal has jurisdiction in relation to management charges and [NAME] for years 2005 to 2016

2. Effective Curative demands have been served for years 2012-2016

3. The amounts payable for service charge years 2012-2016 including the amount determined in the first decision (subject to reduction in [NAME] premium of 6.9%) are: Year Award

2012 £4171.38

2013 £4330.19 2014 £4344.82 2015 £2193.91 2016 £4571.09 4. The parties to file and serve statements of case with any supporting evidence within 28 days of the date of this Decision. They are also to state whether they are content with a paper determination. If not, they are to give dates when they are not available in March and April 2021

Introduction 1. This is a Decision on three preliminary points which have arisen in an application for determination of the reasonableness of and payability of service charges. The application was issued on 5 October, 2020 by [APPELLANT] seeking determination of the payability of service charges for the period 2004 to 2020. The Respondent is [RESPONDENT].

2. This is the second time the matter has been before the Tribunal. The 2017 matter BIR/37UG/2017/0035 (the 2017 Decision) was determined by a Decision of this Tribunal of 2 March, 2018. On 14 March, 2018 the Tribunal corrected paragraphs 84 and 103 under rule 50 Tribunal Procedure (2017-tier

Tribunal)(Property Chamber) Rules 2013 (the Tribunal Procedure Rules) and on 18 April, 2018 further amended the Decision to correct paragraph 85 under rule 50.

3. Notwithstanding the amendments the Respondent by her representative asked for a further “correction” in relation to paragraphs 85 and 103. In addition, further directions were sought in relation to the clarification to enhance the Decision which in its form offered the Parties’ “no finality”. By his direction of 27 June, 2019 Regional Judge David Jackson refused further amendments on the grounds that the Tribunal had determined the amount payable as it was required to do under section 27 A of the Landlord and Tenant Act 1985 (the 1985 Act) for all service charge years in dispute between 2004 and 2017.

4. By this new application the Applicant contends that the Tribunal in its 2017 Decision left open the issue of what management charges and [NAME] payments are still due from the Respondent and that it has jurisdiction to determine two unresolved matters namely [NAME] and management charges.

5. Directions were issued on 13 October, 2020 for a paper hearing. Following receipt of a submission from the Applicant dated 4 November, 2020 and by the Respondent of 24 November, 2020 the Tribunal gave further directions under Rule 6(3)(g) for an oral hearing for determination of the following preliminary issues:

1. Does the Tribunal have jurisdiction in relation to management charges and [NAME] for years 2005 to 2016? 2. Have curative demands been served for years 2012 to 2016 and if so, are those demands ineffective by reason of either s20B or s21B the 1985 Act? 3. In the event that the Tribunal does have jurisdiction the Parties’ must make submissions on the amount payable for [NAME] and management charges for years 2005 to 2016.

6. In accordance with the Tribunals Directions both sides had prepared submissions relating to the period between 2005 and 2016. Neither side had prepared evidence relating to service charge years 2017 to 2020. Accordingly, this Decision determines the preliminary issue decided by the Tribunal. Any dispute relating to service charge years 2017 to 2020 is a matter for a future hearing.

7. The hearing was held by video conference on 12 January, 2021. The Applicant was represented by Mr. [COUNSEL] of Counsel, he was unaccompanied. The Respondent was represented by Mr. [RESPONDENT] of [COMPANY]. Mr. [RESPONDENT] represented the Respondent in the earlier hearing.

The Property and Lease 8. There was no inspection of the property for this hearing, but a full description of the property is given in the 2017 Decision. The Tribunal does not intend to repeat that description.

9. The relevant terms of the lease are set out in the 2017 Decision at paragraphs 23 to 26. They are not repeated here but the relevant parts of clause 2 of the lease (relating to payment of service charges) are:

a. “2(2)(a) to pay and contribute to [NAME] ½ of i. 2/3 cost of insuring and keeping insured throughout the term hereby created the Buildings (including the demised premises) against a loss or damage by fire storm and tempest and if possible and aircraft and explosion and such other risks normally covered under a comprehensive [NAME] as [NAME] shall reasonably determine…. ii. Not relevant…… iii. Not relevant…… iv. Not relevant…… v. Not relevant……

vi. The proper and reasonable fees of the [NAME] and [NAME] for the general management of the property (including the Buildings) b. 2(2)(b) the amount of such contribution shall be ascertained and certified by [NAME] (whose certificate shall be final and binding on both parties hereto) once a year on the 31st of December in each year commencing on the 31st day of December 1988…….. And thereafter shall on the first day of January and the first day of July in each year pay a sum equal to one half of the amount payable by [NAME] for the preceding year under the provisions of this clause on account of such contribution and shall also pay on demand such further sum or sums as [NAME] shall reasonably require on account of such contribution and shall on demand pay the balance (if any) ascertained and certified as aforesaid or be credited with any amount by which the payments on account fall short of the actual expenditure for the year……

The Parties’ submissions Preliminary Point 1: Jurisdiction Applicant 10. Mr. [APPELLANT], who was not present at the earlier hearing, submitted that from a proper reading of the Decision it is apparent some matters were left open for further Decision namely the management charges and [NAME] for the subject years and that the effects of the admitted failure of the [NAME] agent to serve demands without the information prescribed by s21B of the 1985 Act all in accordance with the preliminary issues determined by the Tribunal.

11. He referred the Tribunal to [NAME] v Uphaven Enterprises Limited [2001]EWCA Civ 956 in which the Court of Appeal held that a Leasehold Valuation Tribunal may find it convenient to decide issues in stages, …by making provisional or preliminary rulings followed by one final Decision. Although the case related to a Leasehold Valuation Tribunal under rules of procedure in force for the time being Mr. [NAME] asserted he could find

nothing in the Tribunal procedure rules to prevent this Tribunal from proceeding at the same way.

12. He stated the reason why the matters of management charges and [NAME] were left open at the earlier hearing was because the Tribunal had not been given information upon which to make a Decision. It had left those matters to the Parties’ to agree between themselves. In the event that the Parties’ were not able to agree those amounts section 27 A Landlord and Tenant Act 1985 is available for them. For this reason, the Tribunal had jurisdiction to determine the issue now.

13. He also said that the effect of a curative demand was left open because at the time of the 2017 Decision the Tribunal found that no valid demands had been served and therefore there was no reason to decide the point.

14. In August 2019 the Applicant re-served the original demands albeit with a manuscript correction of the name of the landlord for the years 2005 to 2015. The correction was required because the name of the landlord at the time of service was this Applicant. The original landlord was [APPELLANT]. He died in April 2015 whereupon his widow, Mrs. [APPELLANT], the Applicant and the successor by survivorship, became the landlord. The new demands were computer generated giving the name of this Applicant as landlord. Somebody made a manuscript amendment to the name of the landlord by crossing out “[RESPONDENT] and re-writing “Mr [RESPONDENT]” so that the name of the landlord appeared as Mr. G [APPELLANT] for those re-served demands relating to the period before April 2015. Apart from this alteration, [NAME] asserted, the demands were the same as the original demands but this time they were accompanied by the requisite prescribed information.

15. Mr [NAME] then referred the Tribunal to Brent London Borough Council v [NAME] Association [2011]EWHC 1663 (Ch) and [NAME] v County Bideford limited [2012]UKUT457 (LC). He distinguished this case from the facts found in the [NAME] case by asserting that the original demands served by the landlord were valid. The demand itself is not a nullity or invalid

because prescribed information was not served. The effect of section 21 B is suspensory. The tenant is given a right not to pay the demand. Once the non- compliance is cured, then the demand is payable. He likened the situation in this case to that found in the [NAME] case.

16. The validity of a demand must be assessed by reference to the terms of the lease. Although it was not possible to calculate accurately the sum due, the demands were on account in the Applicant’s discretion as provided for in the lease at paragraph 2(2) b. A precise calculation was not required. An on- account demand was a valid demand. Each demand was expressed as a demand on account of service charges without giving any other information apart, in some cases, from a demand for ground rent. He agreed the demands were submitted quarterly.

17. The manuscript amendments to the fresh demands did not affect the validity of the demand. Section 47 Landlord and Tenant Act 1987 requiring information relating to the name and address of the landlord does not require the notice to be typed.

18. In relation to the sums due for [NAME] Mr. [NAME] agreed deductions are required from the global premium which includes cover relevant only to the commercial premises on the ground floor of the building. He explained the Applicant had deducted 6.9% from the total demand as a fair evaluation of the required allowance. The deduction was calculated by omitting the additional premium of 3.9% for loss of rent and making a further deduction 3% as appropriate portion of the finance charge levied by the [NAME].

19. The Applicant applying the principles outlined maintains the Tribunal has jurisdiction to resolve the outstanding issues.

Respondent 20. In response Mr. [RESPONDENT] stated that the Tribunal left open only the need for the Parties’ to file agreed schedules which quantified the value of the charges in accordance with principles determined by the Tribunal. He had tried to agree

schedules in accordance with the direction but there was no co-operation from the Applicant’s representatives. Mr [APPELLANT] asserted the delay in re-serving the demands and in making the application is inexcusable. He relied on the direction Regional Judge David Jackson that the Tribunal had discharged its statutory duty.

Preliminary Point 2: Have Curative Demands been Served. Effect of ss20B & 21B Applicant 21. Mr. [APPELLANT] repeated that the demands were properly served in the name of the landlord for each year in question. They were sent by email to an appointed representative of the tenant. The lease did not prescribe a particular method of serving demands. It was not necessary to type the name of the landlord although a summary of rights must be typed in the font and size as prescribed. The Applicant’s case is that they were validly served in accordance with the contractual duties imposed by the lease. He referred to the Decision of [NAME] where at paragraph 53 Mr. Justice Morgan said “the reference to a demand in section 20 B(1) presupposes that there has been a valid demand for payment of the service charge under the relevant contractual provisions”. He also referred to the Decision of [NAME] vs. County Bideford [2012]UKUT 457(LC) which held that service of statutory demands for service charges by a [NAME] had the effect of validating the earlier invalid demands.

22. He went on to assert that section 21 B is in effect suspensory in its terms because it distinguishes between the demand and what must be served. Subsection (3) sets out the consequences of failure to serve namely that the tenant may withhold payment which has been demanded of him if subsection (1) is not complied with in relation to the demand.

23. He referred to the statement of case of the Respondent which contended a finding that the Respondent was liable for the service charges would prejudice her. In answer Mr. [NAME] asserted that section 20 B should not be read as meaning that any demand is incomplete until statutory requirements are

satisfied as doing so operates harshly on the landlord. The tenant has had fore knowledge of the sum due because the service charge demands were validly served in accordance with the lease at clause 2(2)(b). The re-issued demands in the same sum but now with the right information ends the tenant’s right to withhold payments from 2005 to 2016. The demands are not ineffective because now the cure has been given and the right to withhold is at its end.

Respondent 24. In his submission Mr. [RESPONDENT] challenged the proposition that the demands were valid and that they were validly served. As far as the validity of service was concerned, he contended that sending them by e-mail was not valid service.

25. Mr [NAME] also stated the demands themselves were invalid because they were inaccurate. The demands had consisted of three elements all of which were wrong and therefore invalid. The first element was an [NAME] charge. The required policy cover was easily identified and calculated. The Applicant had consistently failed to make the correct apportionment. The second element was the management charge which was incurably wrong because the sum claimed was not consistent with the management agreement described in the 2017 Decision. The third element included a [NAME] charge which was made pursuant to a qualifying long-term agreement which had been made without consultation. Therefore, the maximum allowable was £250 pa but the full amount was wrongly charged.

26. He referred to the terms of the lease which provide for service charges to be served bi-annually but that the relevant demands were served quarterly.

27. He asserted that the purpose of section 20 B was to avoid a stale demand and it was therefore relevant to look at the prejudice that would be caused by serving late curative demands.

28. Mr. [NAME] referred to No1 [COMPANY] v [COMPANY] [UKUT] 2020 163 (LC) which he said, established that for a demand to be valid, it had to be accurate.

Preliminary Point 3: Parties’ submissions on the amount payable for [NAME] and management charges for years 2005 to 2016 Applicant 29. Mr [APPELLANT] submissions were quite short. He relied upon the Tribunals earlier finding that the management charge is 5% of rent collected. The lease provides that management charges are 50% of 5% of the rent collected from the premises. The [NAME] charge was determined in the earlier hearing subject to deductions for unnecessary cover. He asserted that the reduction admitted should be reduced by applying a broad-brush approach. There is no additional charge for plate glass relevant to the commercial premises, but loss of rent [NAME] is 3.9% of the premium. There is a finance charge in procuring [NAME] which can be passed on as it is for the benefit of the Respondent. The Applicant has taken a further 3% of that charge and together the total deduction for [NAME] is 6.9%. He concluded by inviting the Tribunal to use its own experience and expertise to determine the appropriate reduction from the [NAME] premium.

Respondent 30. Mr. [RESPONDENT] suggested there had been a number of changes to the management agreement between the Applicant and the [NAME] agent for the time being. It appeared to him that there had been different bases for charge. He objected to the approach of the current [NAME] agent which appeared to add additional charges without justification. He referred to the Tribunals 2017 Decision and his attempts to agree a suitable charge for the management structure as directed by the Tribunal which he claimed were without success.

31. As far as [NAME] was concerned, he objected to the allocation of any element of the finance charge which he said was not provided for by the lease. A finance charge is not part of the [NAME] premium. He was not satisfied

that the [NAME] demands described the relevant elements that enabled the Respondent to properly understand the claims. He asserted the finance fee was not benefiting the Respondent. Further the [NAME] premium could be calculated accurately as the elements relevant to the commercial premises could be identified and removed from the [NAME] claim.

32. The Tribunal asked both sides to explain their position in relation to the years 2005-2011 having regard to the previous Decision and that the Respondent had made and the Applicant had accepted payments for those years. Mr [APPELLANT] accepted that those payments might be determinative of the position for those years. Mr [NAME] contended the payments were made under duress because county court proceedings had been issued for them and default judgment obtained.

33. Mr [NAME] did not advance a positive case for determination of the management fee. His expressed doubt that 50% of 5% was the correct approach.

Decision 34. The Application, issued on 5 October 2020 sought a determination of the payability of service charges for the years 2004-2020. The unresolved issues arose because of the way in which the Applicant’s [NAME] agent had calculated management charges and the failure to apportion (if required) the [NAME] payments between the residential and commercial parts of the entire estate.

35. The hearing on 12 January was a preliminary hearing to dispose of issues identified by the Tribunal as:

a. The Tribunal’s jurisdiction in relation to management charges and [NAME] for years 2005 to 2016 b. Whether curative demands were served for years 2012 to 2016 and if so whether those demands are ineffective by reason of either s20B or s21B the landlord and tenant act 1985

c. If the Tribunal has jurisdiction the Parties’ were to make submissions on the amount payable for [NAME] and management charges for years 2005 to 2016. 36. In summary, it is this Tribunal’s decision that:

a. The Tribunal has jurisdiction in relation to management charges and [NAME] for years 2012 to 2016, b. Curative demands have been served for years 2012 to 2016 and if so, are those demands ineffective by reason of either s20B or s21B the 1985 Act

37. Having made those decisions, the Tribunal has heard the parties submissions in relation to the [NAME] and management charges for years 2005-2016 and made its determination.

38. At the hearing, the parties were not prepared to deal with the service charges in the third period. The Tribunal was asked not to consider those years but leave them outstanding for a later hearing. The Tribunal has given directions for that hearing in this Decision.

39. By Rule 9(2) of the Tribunal Procedure Rules the Tribunal must strike out the whole or a part of the proceedings or case if the Tribunal

(a)does not have jurisdiction in relation to the proceedings or case or that part of them; and (b)does not exercise any power under rule 6(3)(n)(i) (transfer to another court or tribunal) in relation to the proceedings or case or that part of them. By Rule 9(3)(c) the Tribunal may strike out the whole or a part of the proceedings or case if the proceedings or case are between the same parties and arise out of facts which are similar or substantially the same as those contained in a proceedings or case which has been decided by the Tribunal.

40. The Applicant contends that the 2017 Decision left open the issue of both management charges and [NAME] because the parties were unable to quantify either item of charge until the Tribunal had made its Decision. The Respondent contends that payments made in these years was made under duress. The sum paid was excessive and Mr [RESPONDENT] asserts the Respondent is entitled to a repayment.

41. At the 2017 hearing it was apparent that the Applicant through the [NAME] agent had rendered incorrect management charges and had not correctly apportioned the [NAME] premiums (paras 59 & 85). The Tribunal determined the correct method of calculating management charges (para 90) and directed the parties to file an agreed schedule to give effect to its determination. The correct method of calculating the management charges is in the 2017 Decision. The Tribunal will not revisit that issue. However, this Tribunal is aware that the management charges and [NAME] payments were not finally determined in 2017 but the Decision should have enabled the parties to settle the remaining issues. It was not explained why the parties had not complied with directions. Mr [APPELLANT] stated he had tried to agree matters with the Applicant but Mr [APPELLANT] was not in a position to say why there had been no progress so far as the Applicant was concerned.

42. In any event as the parties have not agreed the outstanding issues, the Tribunal respectfully agrees with the decision in [NAME] that it has jurisdiction in relation to management and [NAME] charges between 2005 and 2016.

43. The Applicant agreed that the [NAME] premiums were improperly calculated. The Tribunal determined the that 50% of two thirds of the premium was payable in each service charge year. The parties agreed to meet to identify the excess sum which had been charged (paragraph 85).

44. In the 2017 Decision the Tribunal determined the sums payable for the years 2004 - 2011 (see paragraphs 104-107 for the reasons) and found that as

payments were made sufficient to meet the demands the withholding effect of the operation of ss20B and 21B was irrelevant.

45. As far as the service charge years 2005-2011 is concerned, this Tribunal is asked to determine issues between the same parties that arise out facts which are similar or substantially the same as those contained in the 2017 proceedings decided by this Tribunal. Rule 9(3)(c) gives the Tribunal discretion whether to strike out this part of the application.

46. The Tribunal does propose to exercise its discretion in respect of these years. It has determined what sum is payable. The Applicant’s claim for these years is therefore struck out under rule 9(3)(c).

Service Charge Years 2012-2016

47. In Mrs [APPELLANT]’s statement of case filed in accordance with the Directions the Respondent accepted the Tribunal had jurisdiction to determine the issues relating to [NAME] and management charges but relied on rule 9(3)(c) in respect of all years between 2005 and 2017 because of the 2017 Decision.

48. The Tribunal did not decide what sum was payable for service charge years 2012-2016 in the 2017 Decision. The parties have not met to discuss [NAME] as the Applicant proposed nor has a schedule of management charges been agreed. Therefore, in the absence of an agreement on these issues the Tribunal will exercise its jurisdiction under s27A of the Landlord and Tenant Act 1985 (the Act) to decide the matters for the parties.

49. As far as management charges are concerned the Tribunal has already decided the correct approach to their quantification is to calculate 5% of rent collected and will not reopen that issue. Mr [NAME] made submissions objecting to that method but as it was settled by the Tribunal his submissions are not accepted.

50. In the 2017 hearing the Applicant accepted that service of prescribed information required by s21B of the Act had not been served. Demands were

re-served accompanied by the prescribed information in August 2015. Mr [NAME] challenged their validity on the grounds that the name of the landlord was incorrect. He also raised a question whether or not the address given for the landlord was correct. After Mr [RESPONDENT] made enquiries of his client, he was able to confirm the address was correct. The manuscript alterations to the demands corrected the name of the landlord at the date of the demand. The Tribunal finds that the demands were not in breach of s47 Landlord and Tenant Act 1987.

51. Although the demands were served quarterly rather than at half yearly intervals, the lease provided for on account demands. Mr [NAME] criticised the demands for their alleged inaccuracy rendering them invalid. The Tribunal finds that alleged inaccuracy does not invalidate the demands per se. Also, the Tribunal determined in the 2017 Decision that the failure to serve demands accompanied by prescribed information did not invalidate the demand but had a suspensory effect.

52. The relevant demands were all expressed as being quarterly service charges in advance.

53. Both sides referred to the Decision of Mr Justice Morgan in [NAME]. in which he considered s20B and the application of s20B(2) stating “the subsection appears to require [NAME] to identify the costs which have been incurred so that when one comes to apply section 20B(2) to the relevant notification one will be able to say whether the costs, which [NAME] wants to take into account in determining the service charge, were notified to [NAME].”

54. The lease provides for payment of service charges on demand on account of the service charges for the year. The demands were a summary statement of what was required on account. The Tribunal finds that they were a sufficient notification of a demand for the purpose of s20B(2).

55. The original demands were valid and contain information describing what the Respondent is expected to pay, s20B(2) provides that s20B(1) shall not apply. The Tribunal is satisfied that s21B, by re-service of the demands with the prescribed information, has cured the defect in the original demands. It follows that the suspension of the award for years 2012-2016 is lifted by the curative effects of the re-served demands.

56. The Tribunal’s 2017 Decision identified the sum payable for [NAME] as payable subject to the issue of prescribed information. In formulating this application, the Applicant has accepted that determination and formulated a claim for management charges. She has accepted the finding of the Tribunal of 50% of 5% of rent collected ascertained from the rent roll.

57. The Tribunal has decided the Applicant’s claim for management charge is reasonable as it follows the reasoning of the 2017 Decision.

58. The Tribunal was invited to exercise its discretion in relation to the proper apportionment of the [NAME] charge. Both sides were making estimates of what should be deducted. Although Mr [NAME] was unhappy with the suggestion that the proposed deduction was fair, he was unable to give satisfactory evidence of an alternative method of determining the deduction. The Applicant was candid with the explanation of the reason for the proposed deduction. The Tribunal from its experience was satisfied that the deduction of 6.9% in total was reasonable. The total sum payable for service and management charges including the amount determined in the first decision (subject to reduction in [NAME] premium of 6.9%) are:

Year Award

a. 2012 £4171.38

b. 2013 £4330.19 c. 2014 £4344.82 d. 2015 £2193.91 e. 2016 £4571.09

Service Charge years 2017-2020 59. The issued application also seeks a determination of the payability of service charges for the years 2017-2020. The Tribunal invited the parties to make submissions regarding those years but neither side was prepared because they had prepared their cases in accordance with the direction that the Tribunal would deal with the preliminary points. This Tribunal therefore proposes to issue directions for the determination of the remainder of this application.

60. The Tribunal directs the parties to file and serve statements of case with any supporting evidence within 28 days of the date of this Decision. They are also to state whether they are content with a paper determination. If not they are to give dates when they are not available in February and March 2021

Appeal 61. If either of the parties is dissatisfied with this decision they may apply to this Tribunal for permission to appeal on a matter of law to the Upper Tribunal (Lands Chamber). Any such application must be received within 28 days after these written reasons have been sent to them rule 52 of The Tribunal Procedure (First-tier Tribunal)(Property Chamber) Rules 2013).

Tribunal Judge Peter Ellis Chair

FIRST - TIER TRIBUNAL

PROPERTY CHAMBER

(RESIDENTIAL PROPERTY) Case References : BIR/37UG/LIS/2020/0033P

Property : [ADDRESS], [POSTCODE] Applicant: [redacted] Applicant’s : [NAME]

Respondent: [redacted]

Respondent’s : Mr [COUNSEL], [RESPONDENT].

Date of Hearing : 4 May 2021

Tribunal : Tribunal Judge P. J. Ellis

Tribunal Member [NAME] of Decision : 25 May 2021 __________________________________________________________

DECISION ________________________________________________________

© CROWN COPYRIGHT 2021

Introduction 1. This is the Decision of the Tribunal concerning the reasonableness and payability of service charges for the years 2017-2020 in respect of leasehold property known as [ADDRESS], Balderton, Newark, Nottinghamshire. The parties are [APPELLANT] (the Applicant) who owns the freehold. The Respondent leaseholder is [RESPONDENT].

2. [ADDRESS] is a mixed development comprising shops and other commercial premises at ground floor and residential accommodation on first and second floors. All residential accommodation has been let typically on long leases by the Respondent. It is not necessary to go into the sub-letting arrangements.

3. The Respondent is head [NAME] of all residential accommodation. The shops and other commercial properties are let by the Applicant to third parties. This dispute is concerned with the service charge liability for the residential properties let to the Respondent.

4. It is the third occasion on which the parties have referred their dispute over service charges to the Tribunal.

5. The first application (BIR/37UG/2017/0035, the 2017 Decision) was determined by a Decision of this Tribunal of 2 March, 2018. On 14 March, 2018 the Tribunal corrected paragraphs 84 and 103 under rule 50 Tribunal Procedure (2017-tier Tribunal)(Property Chamber) Rules 2013 (the Tribunal Procedure Rules) and on 18 April, 2018 further amended the Decision to correct paragraph 85 under rule 50.

6. The application was issued on 5 October, 2020 by [APPELLANT] seeking determination of the payability of service charges for the period 2004 to 2020. The apparent overlap with the first application arose because the parties were unable to agree on matters which were not finally determined in that application.

7. By its Decision of 17 February 2021 (the February Decision) the Tribunal determined the issues of payability for the years 2004-2016. The Tribunal then gave Directions for determination of the remaining years in dispute from 2017- 2020.

8. The parties complied with the Directions of 17 February 2021 with their respective submissions. The parties agreed the matter could be dealt with on the papers but at first appointment to determine the outstanding issue the Tribunal agreed with the Respondent’s request that the Applicant give further particulars of the make up and calculation of her claim. Also, as the Applicant

had included a claim for a contribution to a [NAME], the Tribunal gave leave for both parties to make submissions on whether on a true construction of the lease the Applicant was entitled to include a demand for a payment to a [NAME].

9. The Applicant served further particulars of her claim and both sides made submissions on the payability of a contribution to a [NAME].

The Claims 10. For each of the years 2017-2020 the Applicant claims:

a. A contribution to the [NAME] premium for the property calculated in accordance with the terms of the lease b. Reimbursement of costs incurred in connection with [NAME] c. Management charges, and d. For years 2019 and 2020, a contribution to the [NAME]. e. There are claims for [NAME] costs but following the first Decision of the Tribunal, the [NAME] claims are limited to £250.00

11. The sums claimed under each item of claim are set out in the Decision Table below.

12. The Respondent throughout this matter complained, with some justification, that the information supplied by the Applicant’s agent was inadequate. The Respondent passes on her liability for service charges to her lessees. Delay and provision of inadequate information by the Applicant’s agent is prejudicial to the Respondent who is unable to recover some of the charges due to inadequate description of the work or service the subject of the charge.

13. In response to the claims the Respondent asserts that:

a. The [NAME] claims were not properly calculated because there was no separation of the elements of the premium between residential and commercial occupancy b. The [NAME] and maintenance work was undertaken without consent to the appointment of trades people with long term qualifying agreements c. The [NAME] agent changed without consultation in either 2016 or 2020 d. The lease makes no provision for a [NAME] No.1 - [NAME]

14. The Respondent challenged the sum claimed for years 2017-2019 on the basis that the premiums were calculated on the basis that cover extraneous to residential property was included.

15. The Applicant served further particulars of the [NAME] policy. It is a property owners policy with a loss of rent clause but no cover for either business interruption or plate glass. The Applicant makes no claim for finance charges as the premium is paid in full on demand. The claim is for 50% of 2/3rds of the premium for the entirety of [ADDRESS]. The Applicant has applied a discount of 8.6% for the loss of rent cover which is relevant only to the commercial premises.

16. In respect of year 2020 the Respondent asserted the sum claimed was excessive in addition to the assertions made in respect of service e charge years 2017- 2019. The Respondent did not adduce any evidence of suitable alternative policies at a lower premium.

Issue No. 2 - [NAME]

17. The Applicant asserted in her Statement of Case merely that the sums claimed were 50% of the total expenditure for each of the relevant service charge years without giving any information about the make up of the charge. The Respondent sought clarification of the work done to justify such claims. The Tribunal directed the Applicant to give further information about the work and the subject of the claims.

18. By her further particulars the Applicant described the works as follows:

a. 2017 [NAME] Slabs

£120.00 Entire Facilities Repairs to sunken slabs

£594.00 Via Highways Agency

£42.00

Total

£756.00

Respondent’s Share 50% of Total £378.00

b. 2018 [NAME] £54.00 Mr [NAME] [NAME] £492.00 [COMPANY] £108.00

Total

£654.00

Respondent’s Share 50% of Total £327.00

c. 2019 [NAME] £1483.80 Mr [NAME] [NAME] £854.00

Total

£2337.80 Respondent’s Share 50% of Total £1168.90

d. 2020 The Applicant admits maintenance charges are not yet finalised

for this year but asserts it is reasonable to charge £3000.00 on

account of maintenance expenses. £3000.00 is 50% of the total

budget for 2020 including the commercial element.

19. The Applicant admitted that no invoices were available to support the claims for 2017. The best evidence available to her were ledger entries in the accounts of her then [NAME] agent [NAME]. According to her Further Particulars, the supporting invoices were lost when another agent was appointed as manager of [ADDRESS]. No more information appears in the ledger than set out above.

20. Invoices for the works in 2018 are produced. They show that the work of [COMPANY] was to update the sign of [NAME], [NAME]. The work of [NAME] is described as a call out to repair a leak above a salon. The work of [NAME] ([COMPANY] is described as manhole cover removal and replacement.

21. In 2019 there is a substantial account from [NAME] for repairs to a balcony leak and from [COMPANY] for guttering repair and cleaning including equipment hire.

22. The Applicant did not produce any evidence of either of consultations regarding the substantial items of work or any agreement to provide maintenance services.

Issue No. 3 - Management Charges 23. The Applicant asserts the Management Charges for the years 2017-2019 were calculated in accordance with the First Decision of the Tribunal. The calculation used to deduce the management charge in each of these years was 5% of 50% of the rent collected from the occupiers of [ADDRESS].

24. In 2020 the Applicant entered a new management agreement with [NAME] trading as [NAME], its residential property management business. The management charge for that year was 50% of the management agreement between the Applicant and [NAME] discounted for a handover period

of 1 January-1 May for which period the Applicant did not seek recovery otherwise the management charge would have been £2880.00.

25. It is apparent from the Applicant’s claims that the new agent has introduced charges not seen before. There is a claim for £400.00 accounting fee and an out of hours fee of £230.40. The Applicant admits that neither charge forms part of the standard management agreement but both are considered necessary. The accounting fee, because the lease anticipates accounts will be prepared by the [NAME] agent. The out of hours fee is regarded as a necessary part of providing the landlord’s services described at clause 2(2) of the lease.

26. The Respondent contends there was a change of [NAME] agent with effect from 2016 when the agency changed from [NAME] to [NAME]. At that time there should have been consultations with [NAME] regarding the new [NAME] agent contract.

27. The Applicant asserts that in 2016 [NAME] was taken over by [NAME] who continued to act as agent in accordance with the original contract described in the Tribunal’s first Decision. The Respondent’s representative was not convinced by the explanation and produced copies of company documents of [NAME] indicating its continued existence under a new name, [NAME]. Mr [NAME] refers to the RICS guidance and asserts that the change in 2016 was such as to require a new management agreement.

28. The Applicant admits that the effect of the change in 2020 was a new agreement resulting in the appointment of [NAME] to manage the residential properties and [NAME] to manage the commercial properties at [ADDRESS].

29. The charges raised for each of the relevant service charge years are set out in the Decision Table.

Issue No. 4 - [NAME] 30. In 2019 and 202o the Applicant made a claim for £2500 and £2000 respectively for a [NAME]. Both sides agree the lease does not expressly provide for a [NAME].

31. The Applicant avers that the terms of the lease implicitly authorise the establishment of such a fund. The Respondent’s case is that the terms of the lease are specific as to what services are provided by the landlord and a proper construction of the lease excludes a [NAME].

The Lease 32. It is for the tribunal to decide whether or not the lease allows the landlord to impose the charge which will be credited to a [NAME] or a reserve fund.

33. For this reason, it is necessary to recite in full the relevant clause in the lease which is clause 2:

“[NAME] for itself and its assigns to the intent that the obligations may continue throughout the term hereby created hereby covenants with [NAME] as follows:- (1) To pay the reserved rent at the times and in the manner aforesaid (2) (a) to pay and contribute to [NAME] one half of (i) Two thirds of cost of insuring and keeping insured throughout the term hereby created the Buildings (including the demised premises) against loss or damage by fire storm and tempest and (if possible) aircraft and the explosion and such other risks normally covered under a comprehensive [NAME] as [NAME] shall reasonably determine…….. (ii) The water rates accessed on the buildings (so long as the demised premises shall not be separately accessed) (iii) The reasonable and proper cost of maintaining repairing redecorating and renewing (a) The structure of the buildings including the main walls drains roofs foundations chimney stacks gutters and rainwater pipes and all other conduits as hereinbefore defined (b) The gas and water pipes electric cables and wires in under or upon the Buildings (iv) The reasonable and proper costs of maintenance and upkeep of the Common Parts (v) That reasonable and proper cost of and incidental to compliance by [NAME] and with any notices regulations or orders of any competent local or other authority in respect of the property or any part or parts thereof (only those affecting the demised premises) (vi) The proper and reasonable fees of [NAME] for the general management of the property (including the buildings) (b) the amount of such contribution shall be ascertained and certified by [NAME] (whose certificate shall be final and binding on both parties hereto) once a year on the 31st day of December in each year…….. [NAME] ……. Shall on the first day of January and the first day

of July in each year pay a sum equal to ½ amount payable by [NAME] for the preceding year under the provisions of this clause on account of such contribution and shall also pay on demand such further sum or sums as [NAME] shall reasonably require on account of such contribution and shall on demand pay the balance(if any) ascertained and certified as aforesaid or be credited with any amount by which the payments on account fall short of the actual expenditure for the year 34. The text omitted relates to the service charges payable in the first year of the lease. The other provisions of clause 2 are not relevant to the calculation of the service charge. The Decision 34. It is regrettable that the parties seem unable to resolve their differences. The Tribunal is surprised they chose not to refer the matter to mediation. If there are disputes in connection with the future years’ service charges the Tribunal hopes the parties will attempt resolution through mediation when it is offered.

35. [ADDRESS] is described in the 2017 Decision (BIR/37UG/2017/0035). It was built by the late husband of the Applicant who inherited the property on his death. The Tribunal accepts and understands that the Applicant has relied heavily on the agent appointed to manage the property. In the 2017 Decision the Tribunal determined that the residential flats at [ADDRESS] have the effect of making the property subject to the scheme of regulation imposed by the Landlord and Tenant Act 1985 and associated legislation. The Tribunal recited the relevant legislation in the 2017 Decision. It does not propose to repeat that recital in this Decision.

36. The Tribunal heard the parties submissions in connection with the Preliminary Issues (the February Decision) and considered their respective Statement Of Case with supporting documents and further submissions. The Tribunal has made its Decision in respect of each item of claim set out in the Decision Table.. The remainder of this Decision explains the reasons for those determinations.

37. [NAME]: S20(3) Landlord and Tenant Act 1985 applies to qualifying works if relevant costs incurred on carrying out the works exceed an appropriate amount. For the purposes of subsection (3) of section 20 the appropriate amount is an amount which results in the relevant contribution of any tenant being more than £250.

38. In each of the service charge years from 2017-2019 the Applicant incurred charges which exceed the sum of £250. There was no consultation with the Applicant about the relevant work. The Applicant has not put forward any explanation for the failure to consult in these proceedings. Although the

Applicant and her agent may have operated under a misapprehension that the relationship with the Respondent was not governed by the Landlord and Tenant Act 1985, that misapprehension was cured by the First Decision.

39. The Tribunal was not satisfied with the evidence supplied relating to either work done or charges rendered. The best evidence from the Applicant were unsubstantiated ledger entries naming payees without more.

40. The charge for work by [NAME] in 2018 is capped at £250.00. The claim for £108.00 for [COMPANY] is disallowed entirely as it does not relate to the residential property.

41. The charges of [NAME] in 2019 are also capped at £250.00 for each claim.

42. The proposed charge of £3000.00 for 2020 is an on account charge. The lease permits such a claim. The Applicant has stated an intention to consult about the work proposed but has given very little information regarding the proposed work other than to refer to estate road and roof repairs required. As the Applicant has only the Respondent to deal with rather than all the residents in [ADDRESS] it is unreasonable to demand such a large sum on account without a better indication of what work is required. However, as work is anticipated for which the Respondent may be ultimately responsible it is reasonable for her to make a contribution on account. The average of maintenance charges for 2017-2019 was £855.00. The Respondent should contribute that sum.

43. [NAME]: The Tribunal is satisfied with the explanation given for the [NAME] premium claims which do not include plate glass or finance charges. Commission has been accounted for. A reasonable discount has been applied for non-residential cover. Although the Respondent is suspicious of the [NAME] claims the Tribunal considers the claims reasonable.

44. Management Charges: Although the Respondent reasonably felt that the Applicant had permitted the agent to make unreasonable charges, in the First Decision the Tribunal determined how the management charge should be calculated. The charges for years 2017-2019 were calculated in accordance with the Decision. There was a change of owner of the assets of the original [NAME] agent ([NAME]) including the contract for [ADDRESS] when [NAME] [NAME] acquired its business. Mr [NAME] maintained that the change was such as to require the Applicant to consult with the Respondent about the contract with the agent in accordance with RICS guidance. However, as it was an asset acquisition by [NAME] they are simply carrying on with the agreement signed by

[NAME] and [NAME]. There is no evidence that the method of calculating management charges changed from the method determined by the Tribunal. The charges for 2017-2019 are reasonable.

45. In 2020 a new management agreement was made with [NAME], the residential property [NAME] arm of [NAME]. There was no consultation with the Respondent about the new contract. It has resulted in significant new additional charges which were not raised before.

46. The Respondent has good cause for protesting about this new arrangement. It is a long-term qualifying agreement for services which will result in the Respondent facing charges in excess of £100.00. The consultation duties imposed on a landlord by the relevant legislation were laid out in the 2017 Decision. The Applicant’s claim for management charges is capped at £250.00.

47. [NAME]: The terms of the lease describe the parts of the property for which the tenant is liable to pay a reasonable and proper contribution to the cost of “maintaining repairing redecorating and renewing”. For the first time the Applicant’s [NAME] agent has included a sum for a [NAME] in the claim for years 2019 and 2020. The Applicant has not seen such a demand before and strongly objects to the demand now. The Respondent avers that where the landlord seeks to recover money from the tenant, on ordinary principles there must be clear terms in the contractual provisions said to entitle him to do so and refers to Gilje v Charlgrove [2001] EWCA Civ 1777

48. The issue for the Tribunal is whether on a true construction of the lease the landlord is entitled to require contributions to a [NAME]. The lease entitles the landlord to require a payment on account of service charges at paragraph 2(2)(b) but that clause does not extend to a [NAME]. The Applicant’s representative, quite fairly, concedes that the lease could be clearer but contends the wording is sufficient to include a [NAME]. The Respondent’s representative refutes that contention and asserts that if the Tribunal was dealing with an application to amend a lease it would be opposed on the grounds that there is no ambiguity in the lease.

49. In Arnold v Britton [2015]UKSC 36 [NAME] quoting in part Lord [NAME] said:

“When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to “what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean”, to quote [NAME] in [COMPANY] v [COMPANY] [2009] UKHL 38, [2009] 1 AC 1101, para 14. And it does so by focussing on

the meaning of the relevant words, in this case clause 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party’s intentions.” per [NAME], and the survey of more recent authorities in Rainy Sky, per [NAME] at paras 21-3”.

50. He then went on to enunciate seven factors to assist interpretation, the first of which was “the reliance placed in some cases on commercial common sense and surrounding circumstances (eg in Chartbrook, paras 16-26) should not be invoked to undervalue the importance of the language of the provision which is to be construed”. In That case the court was concerned with construing words which were in the lease. In this case the Tribunal is asked to imply something which is not there, namely the right of the landlord to require a contribution to a [NAME].

51. At clause 2(2)(a) the lease describes the services the landlord will provide for which the tenant must “pay and contribute one half”. There is no mention of a [NAME]. The method of calculating the sum payable for service charges each year is defined in clause 2(2) (b). It requires a payment on 1 January and 1 July each year a payment of 50% of the sum payable for the preceding year on account of the contribution in the current year and on demand “such further sum or sums as [NAME] shall reasonably require on account of such contribution”. The words “such contribution” are defined as being ascertained and certified by the [NAME]. The power to require an anticipatory payment is restricted to being contribution to expected expenses in the current year.

52. The terms of this lease are different from those in the cases of [NAME] v Master LRX/175/2007 Lands Tribunal and [COMPANY] v Balchin [2014] UKUT 0407 (LC) where clauses which provided for recovery of the cost of services “….to be incurred by [NAME] in observing and performing its duties” and to “demand by way of service charge the due proportion as hereinafter defined of expenditure incurred or to be incurred by the [NAME]” respectively were held to permit the creation of a reserve fund notwithstanding the absence of an express power to do so in the lease. Moreover the relevant clause does not cover charges of a regularly recurring nature which were considered in Rendale v Modi [2010]UKUT 346 LT and by the Court of Appeal in [COMPANY] v [COMPANY] and Others [2003] 1 EGLR 41.

53. In this case the lease is a bilateral contract joining only [NAME] and [NAME]. The residents of [ADDRESS] are tenants of the Respondent, as is known to the Applicant. Any charges which are imposed on the Respondent are passed on to her tenants. Any claim now for a contribution to a [NAME] affects the residents who will have the right to challenge the need for a [NAME] and their duty to contribute to one where their leases do not impose a duty to contribute to such a fund.

54. There have only ever been two parties involved in the head lease of [ADDRESS] namely the Applicant’s late husband and herself as successor on the one part and the Respondent on the other.

55. The Tribunal is satisfied the lease did not anticipate the need for a [NAME] because the wording of the lease provides for the delivery of services by the landlord and the recharge of those services through the charging provision of clause 2(2)(b) which allows for some anticipatory element if the budget for the services in any year includes services to be delivered in that year.

56. Moreover, the Applicant has not specified what work will be done or when, other than to make an unparticularised assertion that some work is required on the roof and the estate road. The Applicant has conceded consultation is required before such work can be undertaken. As the only party to consult with in connection with the residential leases is the Respondent, it is right for that consultation to take place first so that the Respondent may know how to pass on the requirement to her lessees.

57. In his submission on behalf of the Respondent Mr [RESPONDENT] claimed that the demand for a contribution to a [NAME] is in fact an overclaim which would nullify the service charge demand for the relevant year’s contrary to ss18(2) and 19 Landlord and Tenant Act 1985. The Tribunal does not consider the demand for a contribution to a [NAME] was a deliberate act but a misapprehension of the Applicant’s rights under the lease.

58. Account Fee and Out of Hours Fee: Charges raised for an accounts fee and an out of hours fee are not allowable. The Applicant justified them as being incidental to the services which the landlord is obliged to provide but as they were not raised under the old contract it appears these are new charges which come with the new contract. They were not raised under the original contract. They cannot be severed and introduced now as new items.

59. In conclusion the Tribunal determines that the sums payable for each of service charge year 2017, 2018, 2019 and 2020 is that sum set out in the Table below:

Item & Year Applicant Respondent Decision 2017 Management Charge 1539.53 100 1539.53 [NAME] 2818.13 2818.13 [NAME] 250 250 250 Maintenance 378 250

Nil Total claim for 2017 4985.66

Allowed £4607.66 2018 Management Charge 1356.2 100 1356.2 [NAME] 3149.93 3149.93 [NAME] 275.83 250 250 Maintenance 327 250 304 Total claim for 2018 5108.96

Allowed £5060.13 2019 Management Charge 1738.02 100 1738.02 [NAME] 3331.54 3331.54 [NAME] 250 250 250 Maintenance 250 250 500 [NAME] 2500

Nil

Nil Total claim for 2019 8069.56

Allowed £5819.56 2020 Management Charge 1680 100 250 [NAME] 3573.96 3573.96 [NAME] 300 250 250 Maintenance 3000 250 250 SinkingFund 2000 Nil Nil

Accounting Fee 400 Nil Nil Out of Hours Fee 230.4 Nil Nil Total Claim for 2020 11184.36

Allowed £4323.96 Respondent Offers 2400 Applicant's Claim 29348.54 Tribunal Decision

£19811.31

Appeal 60. If either of the parties is dissatisfied with this decision they may apply to this Tribunal for permission to appeal to the Upper Tribunal (Lands Chamber). Any such application must be received within 28 days after these written reasons have been sent to them rule 52 of The Tribunal Procedure (First-tier Tribunal)(Property Chamber) Rules 2013).

61. If the application to appeal is not made within the 28-day time limit, such application 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 application for permission to appeal to proceed despite not being within the time limit.

62. The application for permission to appeal must state the grounds of appeal, and state the result the party making the application is seeking. All applications for permission to appeal will be considered on the papers. Any application to stay the effect of the decision must be made at the same time as the application for permission to appeal.

Tribunal Judge P. J. Ellis

FIRST - TIER TRIBUNAL

PROPERTY CHAMBER

Property : [ADDRESS], [POSTCODE] Applicant: [redacted] Applicant’s : [COUNSEL] Solicitors Representative

Respondent: [redacted]

Respondent’s : Mr [COUNSEL], [NAME] [RESPONDENT] : Application for a determination of liability to pay and reasonableness of service charges pursuant to s27A Landlord and Tenant Act 1985

Date of Hearing : 4 May 2021

Tribunal : Tribunal Judge P. J. Ellis

Tribunal Member [NAME] of Amended Decision : 28 July 2021 __________________________________________________________

AMENDED DECISION ________________________________________________________

© CROWN COPYRIGHT 2021 The Tribunal exercises its powers under Rule 50 to correct the clerical error in the Decision Table and heading of the matter. The amendments are shown in red. The Decision is amended because of a spelling error and an arithmetical error. Introduction 1. This is the Decision of the Tribunal concerning the reasonableness and payability of service charges for the years 2017-2020 in respect of leasehold property known as [ADDRESS], Balderton, Newark, Nottinghamshire. The parties are [APPELLANT] (the Applicant) who owns the freehold. The Respondent leaseholder is [RESPONDENT].

8. The parties complied with the Directions of 17 February 2021 with their respective submissions. The parties agreed the matter could be dealt with on the papers but at first appointment to determine the outstanding issue the Tribunal agreed with the Respondent’s request that the Applicant give further particulars of the make up and calculation of her claim. Also, as the Applicant had included a claim for a contribution to a [NAME], the Tribunal gave leave for both parties to make submissions on whether on a true construction of the lease the Applicant was entitled to include a demand for a payment to a [NAME].

13. In response to the claims the Respondent asserts that:

Issue No. 2 - [NAME]

a. 2017 [NAME] Slabs

£120.00 Entire Facilities Repairs to sunken slabs

£594.00 Via Highways Agency

£42.00

Total

£756.00

Respondent’s Share 50% of Total £378.00

Total

£654.00

Respondent’s Share 50% of Total £327.00

c. 2019 [NAME] £1483.80 Mr [NAME] [NAME] £854.00

Total

£2337.80 Respondent’s Share 50% of Total £1168.90

budget for 2020 including the commercial element.

19. The Applicant admitted that no invoices were available to support the claims for 2017. The best evidence available to her were ledger entries in the accounts of her then [NAME] agent [NAME] and [NAME]. According to her Further Particulars, the supporting invoices were lost when another agent was appointed as manager of [ADDRESS]. No more information appears in the ledger than set out above.

20. Invoices for the works in 2018 are produced. They show that the work of [COMPANY] was to update the sign of [NAME]. The work of [NAME] is described as a call out to repair a leak above a salon. The work of [NAME]. [NAME] ([COMPANY] is described as manhole cover removal and replacement.

24. In 2020 the Applicant entered a new management agreement with [NAME] trading as [NAME], its residential property management business. The management charge for that year was 50% of the management agreement between the Applicant and [NAME] discounted for a handover period of 1 January-1 May for which period the Applicant did not seek recovery otherwise the management charge would have been £2880.00.

28. The Applicant admits that the effect of the change in 2020 was a new agreement resulting in the appointment of [NAME] to manage the residential properties and [NAME] [NAME] to manage the commercial properties at [ADDRESS].

“[NAME] for itself and its assigns to the intent that the obligations may continue throughout the term hereby created hereby covenants with [NAME] as follows:- (1) To pay the reserved rent at the times and in the manner aforesaid (2) (a) to pay and contribute to [NAME] one half of (i) Two thirds of cost of insuring and keeping insured throughout the term hereby created the Buildings (including the demised premises) against loss or damage by fire storm and tempest and (if possible) aircraft and the explosion and such other risks normally covered under a comprehensive [NAME] as [NAME] shall reasonably determine…….. (ii) The water rates accessed on the buildings (so long as the demised premises shall not be separately accessed) (iii) The reasonable and proper cost of maintaining repairing redecorating and renewing (a) The structure of the buildings including the main walls drains roofs foundations chimney stacks gutters and rainwater pipes and all other conduits as hereinbefore defined (b) The gas and water pipes electric cables and wires in under or upon the Buildings (iv) The reasonable and proper costs of maintenance and upkeep of the Common Parts (v) That reasonable and proper cost of and incidental to compliance by [NAME] and with any notices regulations or orders of any

competent local or other authority in respect of the property or any part or parts thereof (only those affecting the demised premises) (vi) The proper and reasonable fees of [NAME] for the general management of the property (including the buildings) (b) the amount of such contribution shall be ascertained and certified by [NAME] (whose certificate shall be final and binding on both parties hereto) once a year on the 31st day of December in each year…….. [NAME] ……. Shall on the first day of January and the first day of July in each year pay a sum equal to ½ amount payable by [NAME] for the preceding year under the provisions of this clause on account of such contribution and shall also pay on demand such further sum or sums as [NAME] shall reasonably require on account of such contribution and shall on demand pay the balance(if any) ascertained and certified as aforesaid or be credited with any amount by which the payments on account fall short of the actual expenditure for the year 34. The text omitted relates to the service charges payable in the first year of the lease. The other provisions of clause 2 are not relevant to the calculation of the service charge. The Decision 34. It is regrettable that the parties seem unable to resolve their differences. The Tribunal is surprised they chose not to refer the matter to mediation. If there are disputes in connection with the future years’ service charges the Tribunal hopes the parties will attempt resolution through mediation when it is offered.

38. In each of the service charge years from 2017-2019 the Applicant incurred charges which exceed the sum of £250. There was no consultation with the Applicant about the relevant work. The Applicant has not put forward any explanation for the failure to consult in these proceedings. Although the Applicant and her agent may have operated under a misapprehension that the relationship with the Respondent was not governed by the Landlord and Tenant Act 1985, that misapprehension was cured by the First Decision.

44. Management Charges: Although the Respondent reasonably felt that the Applicant had permitted the agent to make unreasonable charges, in the First Decision the Tribunal determined how the management charge should be calculated. The charges for years 2017-2019 were calculated in accordance with the Decision. There was a change of owner of the assets of the original [NAME] agent ([NAME]) including the contract for [ADDRESS] when [NAME] acquired its business. Mr [NAME] maintained that the change was such as to require the Applicant to consult with the Respondent about the contract with the agent in accordance with RICS guidance. However, as it was an asset acquisition by [NAME] they are simply carrying on with the agreement signed by [NAME]. There is no evidence that the method of calculating management charges changed from the method determined by the Tribunal. The charges for 2017-2019 are reasonable.

48. The issue for the Tribunal is whether on a true construction of the lease the landlord is entitled to require contributions to a [NAME]. The lease entitles the landlord to require a payment on account of service charges at paragraph 2(2)(b) but that clause does not extend to a [NAME]. The Applicant’s representative, quite fairly, concedes that the lease could be clearer but contends the wording is sufficient to include a [NAME]. The Respondent’s representative refutes that contention and asserts that if the Tribunal was

dealing with an application to amend a lease it would be opposed on the grounds that there is no ambiguity in the lease.

“When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to “what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean”, to quote [NAME] in [COMPANY] v [COMPANY] [2009] UKHL 38, [2009] 1 AC 1101, para 14. And it does so by focussing on the meaning of the relevant words, in this case clause 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party’s intentions.” per Lord [NAME], and the survey of more recent authorities in Rainy Sky, per Lord [NAME] at paras 21-3”.

Nil Total claim for 2017 4985.66

Allowed £4607.66 2018 Management Charge 1356.2 100 1356.2 [NAME] 3149.93 3149.93 [NAME] 275.83 250 250 Maintenance 327 250 304 277 Total claim for 2018 5108.96

Allowed

£5060.13 £5033.13 2019 Management Charge 1738.02 100 1738.02 [NAME] 3331.54 3331.54 [NAME] 250 250 250

Maintenance 250 250 500 [NAME] 2500

Nil

Nil Total claim for 2019 8069.56

Allowed £5819.56 2020 Management Charge 1680 100 250 [NAME] 3573.96 3573.96 [NAME] 300 250 250 Maintenance 3000 250 250 SinkingFund 2000 Nil Nil Accounting Fee 400 Nil Nil Out of Hours Fee 230.4 Nil Nil Total Claim for 2020 11184.36

£19811.31 £19784.31

62. The application for permission to appeal must state the grounds of appeal, and state the result the party making the application is seeking. All applications for permission to appeal will be considered on the papers. Any application to stay

the effect of the decision must be made at the same time as the application for permission to appeal.

Tribunal Judge P. J. Ellis