Tenant Successfully Challenges Service Charges Under Lease

OUTCOME: Allowed

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Case Reference : CHI/23UE/LAM/2018/0006

CHI/23UE/LSC/2018/0077

Property : [NAME] [POSTCODE]

Applicant: [redacted]

Respondent: [redacted] : Dr [COUNSEL] of Application : Landlord and Tenant Act 1987, Section 24

[NAME], Section 27A

[NAME], Section 20C

Commonhold and Leasehold Reform Act 2002, paragraph 5A of Schedule 11

Tribunal Members : Judge M [NAME]

Mrs JE [NAME] of hearing

: 7 November 2018

Date of Decision with reasons : 20 November 2018

© CROWN COPYRIGHT 2018

FIRST - TIER TRIBUNAL [NAME] (RESIDENTIAL PROPERTY)

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[NAME] 27 A

The Tribunal’s determinations with regard to the payability and reasonableness of the service charge for the years 2016 to 2018 are set out in the Reasons given below,

Landlord and Tenant Act 1987 In accordance with section 24(1) Landlord and Tenant Act 1987, [NAME] [APPELLANT] of [NAME], 134, [ADDRESS] [POSTCODE] (“the Manager”) is appointed as manager of the building known as [NAME], [ADDRESS] [POSTCODE] (“the Building”). Section 20C [NAME] and Paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002

The Tribunal orders under section 20C of the 1985 Act and paragraph 5A of Schedule 11 to the 2002 Act that none of the costs incurred by the Landlord in connection with these proceedings shall be treated as relevant costs for the purpose of any future service charge or administration charge demand. The Tribunal orders under Rule 13(2) of the Tribunal Procedure (First-tier Tribunal) ([NAME]) Rules 2013 that the Respondent reimburse the Applicant fees paid to the tribunal in respect of the Applications.

REASONS

The Applications

1. By an application dated 4 June 2018, [NAME] [APPELLANT] (“the Applicant/Tenant”), being the leaseholder of premises (“the Property”) at [NAME], [ADDRESS] [POSTCODE] (“the Building”) applied to the First-tier Tribunal ([NAME]) (“the Tribunal”),

3 under section 24 of the Landlord and Tenant Act 1987 for the appointment of a Manager of the Property (“the AOM Application”). By a further application dated 03 August 2018 the Applicant applied to the Tribunal, under section 27A of the [NAME] (“the 1985 Act”), for a determination as to the payability and reasonableness of service charges under his lease of the Property in respect of the period from 30 September 2016 to 2018 (“the Section 27A Application”). The Applicant also seeks an Order under Schedule 11 of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”) as to whether administration charges are payable by him to the Landlord. The Applicant (by applications dated 4 June and 03 August 2018) further seeks orders under section 20C of the [NAME] and paragraph 5A of Schedule 11 to the 2002 Act preventing the Landlord from recovering the whole or part of the costs of these proceedings by way of a future service charge or administration charge demand.

2. The Respondent to the Applications is [RESPONDENT]. (“the Landlord”) the [NAME] landlord of the Building of which the Property forms a part. A procedural chair, [NAME], issued [NAME] in respect of the AOM Application and a case management hearing was held on 4 July 2018 following which further [NAME] were issued on 4 and 10 July and 14 August 2018. [NAME] [NAME] issued [NAME] on 14 August 2o18 with regard to the Section 27A Application and directed that both Applications would be heard together.

The subject property

3. The Building, a brick and stone-faced property in the centre of Gloucester, was constructed in 1895. It has been converted to two retail units on the ground floor and nine residential studio units on the first and second floors. The Applicant’s lease (“the Lease”) is dated 30 September 2016 and relates to the first and second floors and front door hallway and stairs of the Building (“the Property”). The Respondent granted the Lease to the Applicant for a term of 999 years in consideration of a premium of £1 and an annual rent of £400 increasing by £200 on the 25th anniversary of the date of the lease and every 25th anniversary thereafter. Although the Tribunal was not shown any further title documentation, the parties told us that, in 2015, Dr [APPELLANT] acquired by purchase the residue of an earlier 999 year lease of the Property. He then by licence converted the first and second floors of the Building into 9 modern bedsitting units, following which his lease was replaced by the Lease of 30 September 2016 under which he now holds the Property. He lets each of the 9 units on [NAME] under the Housing Act 1988. The two retail units are owned by the [NAME] Respondent and are the subject of business tenancies or licences granted by the Respondent. [NAME] 1 is has been let but is empty pending refitting and and [NAME] 2 is used as a barber’s shop.

4. The two commercial Units, each with its own front door, are on either side of a separate entrance to the Building. [NAME] 1 to the left has been

4 recently let for use as a tattooist shop and [NAME] 2 to the right is let and used as a barber’s shop. Access to the Property, which is the subject of the Applicant’s Lease, is by the central entrance door beyond which are the hall and stairs to the two upper floors. At the rear of the hall (and included in the Property) there is a small area, which contains communal laundry facilities for the use of the occupants of the residential units. Beyond that area is a rear yard and Refuse Area (which are owned by the Respondent).

5. The Tribunal considered the Applications on 07 November 2018 following its inspection of the Building and consolidated Hearing on the same day. Both parties had previously made written submissions. The inspection was attended by the following:

[APPELLANT] (the Applicant),

Dr [APPELLANT] Ms [APPELLANT] (Directors of the Respondent,

[APPELLANT].),

Ms. [APPELLANT] (Tenant of [NAME] 1)

[NAME] [APPELLANT] (the Applicant’s proposed Manager).

All of the attendees, save Ms [NAME], attended the Hearing, together

with [NAME] [APPELLANT] [NAME] (the Applicant’s builder).

6. The Tribunal inspected, on the ground floor, the entrance hall, rear laundry rooms, and the rear yard area, where scaffolding had been erected against the rear of the Building. Mrs [NAME] also viewed from a ladder the gutter and downpipes at the rear of the property. On the first and second floors the Tribunal inspected internally studios 1, 3 and 7. The Tribunal was also shown the shop [NAME] 1 where there was evidence of water ingress that is said to have occurred during heavy rain on the previous weekend. A considerable number of polystyrene ceiling tiles had collapsed and the floor was wet. The [NAME] also reported that there had been water ingress to his shop [NAME].

The Section 27A Application

7. The issues identified by the Tribunal in the [NAME] of 14 August 2018 as having been raised by the section 27A Application and to be determined by the Tribunal were:

8. 2016-2017

• [NAME] costs (£776.09).

2017-2018

• [NAME] 6 October 2017 to 6 October 2018 (£817) • [NAME] 11 June 2018 to 19 May 2019 (£1988.37)

5 • Service Charges (£5961.60) • Unknown (damages from blocked drain) • Unknown (damages from blocked gutter) • Unknown (surveys for Landlord’s finance company)

In making its decision the Tribunal to consider

Whether the works are within the Landlord’s obligations under the

Lease

• Whether the costs are payable by reason of section 20B of the 1985 Act • Whether the Landlord has complied with the consultation requirements under section 20 of the 1985 Act • Whether the costs of the works are reasonable, in particular in relation to the nature of the works, the contract price and the supervision and management fee • Whether any [NAME] premium demanded is net of any commission paid to the Landlord in accordance with Clause 1.1(a) of the Lease • Whether an Order should be made under section 20C of the 1985 Act. • Whether an order for reimbursement of the application/hearing fees should be made.

The Lease

9. Clause 5 of the Lease obliges the Tenant to observe and perform the covenants set out in Schedule 4 to the Lease. Paragraph 2 of that Schedule obliges the Tenant “To pay to the Landlord the Service Charge demanded by the Landlord under paragraph 4 of Schedule 6 by the date specified in the Landlord’s notice.” Paragraph 3.1 of Schedule 4 to the Lease obliges the Tenant to pay to the Landlord “(a) the [NAME] rent demanded by the Landlord under paragraph 2 of Schedule 6 by the date specified in the Landlord’s notice……..”

10. Clause 1.1 of the Lease defines

“Commercial Premises” as: “the premises on the ground floor of the

Building from time to time.”

“Common Parts” as: “the parts of the Building edged blue on Plan 1 and

that are not part of the Property or the Commercial Premises and which

are intended to be used by the tenants and occupiers of the Building and

separately the rear yard and Refuse Area of the Building and

(a) the external paths, driveways, yard and Refuse Area at the

Building.”

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“[NAME]” as:

(a) “the Tenant’s Proportion of the cost of any premiums (including any IPT) that the Landlord expends (after any discount or commission is allowed or paid to the Landlord) and any fees and other expenses that the Landlord reasonably incurs, in effecting and maintaining [NAME] of the Building in accordance with its obligations in paragraph 2 of schedule 6 including any professional fees carrying out any [NAME] valuation of the Reinstatement Value;

(b) the cost of any additional premiums (including any IPT) and loadings that may be demanded by the Landlord’s insurer as a result of any act or default of the Tenant any undertenant, their workers, contractors, or agents or any person at the Property with the express or implied authority of any of them.”

“Insured Risks” as:

“Fire, explosion, lightning, earthquake, storm, flood, bursting and

overflowing of water tanks, apparatus or pipes, escape of water or oil,

impact by aircraft and articles dropped from, impact by vehicles,

riot, civil commotion, malicious damage, theft or attempted theft, falling

trees and branches and aerials, subsidence, heave, landslip, collision,

accidental damage to underground services, public liability to anyone

else and any other risks which the Landlord decides to insure against

from time to time and Insured Risk means any one of the insured risks.”

“Retained Parts” as “all parts of the building other than The Property

and the Commercial Premises including

(a) the main structure of the Building including the roof and roof structures, the foundations, the external walls and internal load- bearing walls, the structural timbers, the joists and the guttering; (b) all parts of the Building lying below the floor surfaces or above the ceilings; (c) all external decorative surfaces of the Building but not the doors, door frames and window frames whether external or internal; (d) the Common Parts; (e) the Loft Space; (f) the Service Media at the Building which do not exclusively serve either the Property or the Commercial Premises; and (g) all boundary walls fences and railings of the Building.”

“Service Charge” as “The Tenant’s Proportion of the Service Costs”

“Service Costs” as “the total of

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(a) all of the costs properly incurred or to be incurred and

estimated by the Landlord of:

(i) providing the Services; and (ii) complying with all laws relating to the Retained Parts

(b) the reasonably and properly incurred costs fees and

disbursements of any managing agent or other person retained

by the Landlord to act on the Landlord’s behalf in connection

with the Building or the provision of the Services; and

(c) all rates, taxes and impositions payable in respect of the

Common Parts, their use and any works carried out on them

(other than any taxes payable by the Landlord in connection

with any dealing with or disposition of its reversionary interest

in the Building.”

“Services” as

(a) “cleaning and maintaining, decorating, repairing and renewing or replacing the Retained Parts; (b) cleaning and maintaining the Common Parts and Refuse Area (c) cleaning the outside of the windows of the Building (d) any other service or amenity that the Landlord may in its reasonable discretion (acting in accordance with the principles of [NAME]) provide for the benefit of the tenants and occupiers of the Building.”

“The Tenant’s Proportion” as: “84% or such other percentage as the

Landlord may notify the Tenant from time to time.”

11. By paragraph 2 of Schedule 6 to the Lease the Landlord covenants

2.1 to effect and maintain [NAME] of the Building

against loss or damage caused by any of the Insured Risks

with reputable insurers, on fair and reasonable terms that

represent value for money, for an amount not less than

the Reinstatement Value subject to

(a) any exclusions, limitations, conditions or

excesses that may be imposed by the

Landlord’s insurer and (b) [NAME] being available on reasonable

terms in the [NAME] market

2.2 To serve on the Tenant a notice giving full particulars of

the gross cost of the [NAME] premium payable in

respect of the Building (after any discount or commission

but including IPT). Such notice shall state:

8 (a) the date by which the gross premium is

payable to the Landlord’s insurers and (b) the [NAME] payable by the Tenant,

how it has been calculated and the date by

which it is payable.

2.3 In relation to any [NAME] effected by the Landlord

under this clause, the Landlord shall

(a) at the request of the Tenant supply the Tenant with:

(i) a copy of the [NAME] policy and schedule; and (ii) a copy of the receipt for the current

year’s premium

(b) notify the Tenant of any change in the scope, level or terms of cover as soon as reasonably practicable after the Landlord has become aware of the change:

(c) use reasonable endeavours to procure that the [NAME] policy contains a non-invalidation provision in favour of the Landlord in respect of any act or default of the Tenant or any other occupier of the Building and;

(d) procure that the interest of the Tenant and its mortgagees are noted on the [NAME] policy, either by way of a general noting of tenants’ and mortgagees’ interests under the conditions of [NAME] policy or (provided that the Landlord has been notified of any assignment to the Tenant pursuant to Paragraph 9.6 of Schedule 4) specifically.

12. By Paragraph 4 of Schedule 6 to the Lease the Landlord

covenants

4.1 Subject to the Tenant paying the Service Charge to

provide the Services

4.2 to serve on the Tenant a notice giving full

particulars of the Service Costs and stating the Service

Charge payable by the Tenant and the date on which it is

payable as soon as reasonably practical after incurring,

making a decision to incur, or accepting an estimate

relating to, any of the Service Costs.

4.3 to keep accounts, records and receipts relating to the

Service Costs incurred by the Landlord and to permit the

Tenant, on giving reasonable notice, to inspect the

accounts, records and receipts.

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The disputed charges – the Applicant’s case

Service charge

13. On 3 February 2018 [NAME] wrote to Dr [APPELLANT] in the following terms. That the Lease made provision for a service charge in respect of the Building and that these monies when received by the Landlord would be paid into a separate account. This account would be reconciled on 30 September each year and a statement of the account would be sent to the Tenant annually. At the time of every annual reconciliation any amount in excess of £1500 would be refunded to the Tenant or carried over to the following year. The service charge fund would be used to maintain the main structure of the Building including cleaning, cleaning the outside of the windows, repairing and renewing or replacing items in the Retained Parts, clearing the gutters, maintaining the loft space and any other issues that may arise relating to the Common Parts of the Building. Dr [APPELLANT] further stated that Dr [APPELLANT] owed by way of service charge an amount of £4,968 plus VAT (i.e. £5,961.60) in respect of the period from 30 September 2016 to 31 March 2018. This demand was reiterated in a further letter dated 11 March 2018 from [NAME] to Dr [APPELLANT]. On 23 March 2018 [NAME] wrote to Dr [APPELLANT] stating that if by 30 March 2018 Dr [APPELLANT] did not make full payment of the sums demanded the Landlord would take court proceedings for their recovery. Dr [APPELLANT] disputes the payability and reasonableness of the sums demanded.

14. Dr [APPELLANT] submits that since he took his Lease the Landlord has provided no services to the Building. Indeed Dr [APPELLANT] says that he paid for a fire alarm inspection and a professional clean of the Common Parts of the Building. After he completed the development Dr [APPELLANT] wrote to [NAME] on 30 March 2016 and 13 April 2016 in order to set up appropriate service charge arrangements but this did not produce any response. Dr [APPELLANT] also submits that the service charge demands he has received were not accompanied by a formal summary of the Tenant’s rights and obligations. He further states that the arrangement with regard to the creation and operation of a service charge fund proposed by Dr [NAME] in his letters of 3 February and 11 March 2018 was not consistent with the service charge provisions of the Lease. In any event Dr [APPELLANT] had never received any statements or reconciliations from the Landlord.

The survey costs

15. On 30 March 2017 [NAME] wrote to Dr [APPELLANT] stating that his lender, [APPELLANT], had recommended that he look at the fire risks of all his properties. He indicated that this would cost £680 in respect of the Building and he would be proposing that Dr [APPELLANT] pay this sum. On 5 November 2017 [NAME] wrote to Dr [APPELLANT] stating that he had been advised to carry out a structural survey of the Building and that Dr [APPELLANT] would be responsible for his share of the cost of this survey. On 19

10 November 2017 [NAME] wrote to Dr [APPELLANT] stating that the survey had been required by [NAME]. On 9 June 2018 [NAME] wrote to Dr [APPELLANT] stating that [NAME] had required a fire safety inspection for all of the Landlord’s properties together with an asbestos survey for those properties.

16. Dr [APPELLANT] disputes that he is liable for any of these costs. He submits that they are finance costs and that the Lease does not make provision for recovery of such costs from the Tenant. Furthermore, Dr [APPELLANT] had commissioned a fire risk assessment at another property in Gloucester which he owns and which also contains nine studio units. He says that this was carried out at a cost of £210 inclusive of VAT. He therefore failed to understand why the cost of £680 had been benchmarked at [NAME].

[NAME]

17. On 25 October 2016 [NAME] wrote to Dr [APPELLANT] providing the cost of the [NAME] of the Building (£1124.77) and the documentation relating to a policy covering the period 6 October 2016 to 6 October 2017 (“Policy 1”). However, he gave no indication of the [NAME] payable under the Lease nor how it was being calculated or the date on which it was payable. He simply stated, “Your share as discussed earlier will be per rota in relation to the square footage from [NAME].” Dr [APPELLANT] wrote to [NAME] on 26 October 2016 pointing out errors in the documentation. Despite many reminders sent from Dr [APPELLANT] to [NAME] it was not until 19 January 2017 that Dr [NAME] wrote to the [COMPANY] giving permission to discuss the error with Dr [APPELLANT] to enable it to be corrected. The error was then duly corrected.

18. On 3 October 2017 Dr [APPELLANT] wrote to [NAME] asking for confirmation that the [NAME] for the coming year had been renewed. On 10 October 2017 Dr [APPELLANT] forwarded the [NAME] documentation to Dr [APPELLANT] (“Policy 2”). The premium payable was £1184. Once again there was no indication of the [NAME] payable under the Lease or how it was being calculated or the date on which it was payable. Dr [APPELLANT] was not noted on this policy. By a letter to Dr [APPELLANT] dated 11 October 2017 Dr [APPELLANT] raised a number of queries which he asked to be resolved and stated that “I will arrange for my contribution towards the [NAME] to be paid in the next few days and confirm when that has been done.” In fact payment was not made until 10 January 2018 when Dr [APPELLANT] wrote to [NAME] stating that he had paid his contribution of £817 (£1184 x 0.69). Nevertheless, Dr [APPELLANT] continued to have concerns with regard to the [NAME] cover and he raised those concerns in a series of letters to Dr [NAME] dated 13 and 14 February, 28 March and 27 April 2018.

19. On 14 February 2018, [NAME] wrote to Dr [APPELLANT] stating that he was not happy with the [COMPANY] and that he was looking at upgrading the policy with another provider. He stated that the current [NAME] policy would remain in place until the change was made. On 9

11 June 2018 Dr [APPELLANT] forwarded to Dr [APPELLANT] new [NAME] documentation (“Policy 3”). On 11 June 2018 Dr [APPELLANT] wrote to [NAME] pointing out a number of concerns, including the fact that the claims history seemed not to have been disclosed and that he had not been noted on the policy. On 11 June 2018 Doctor [NAME] broker [NAME] [APPELLANT] [NAME], of [NAME], provided Dr [APPELLANT] with updated documents with Dr [APPELLANT] noted on the policy. This policy was to cover the period from 11 June 2018 to 19 May 2019. The Certificate Schedule states that the reason for issue was “Change to Interested Party”. On the same day Dr [APPELLANT] had a telephone conversation with [NAME] [APPELLANT]. This revealed that [NAME] [NAME] was unaware of any claim at the property or that it had been refused. He was under the impression that the ASTs at the property were between the Landlord and the under-tenants. Dr [APPELLANT] says that the fact that the under-tenancies were between Dr [APPELLANT] and the under-tenants may have meant that the policy was invalid. [NAME] [APPELLANT] was also unaware that the tenant mix should include students and [COMPANY] tenants and that if any such tenants were living at the property the policy may be invalid. In fact Dr [APPELLANT] was able to ascertain that all the under-tenants at the property were currently professionals or self-employed. However, despite subsequent correspondence between Dr [APPELLANT] and [NAME], Dr [APPELLANT] says that many of the errors in the [NAME] documentation remained unaddressed by 22 June 2018.

20. The sums in question with regard to the [NAME] are £776.09 (Policy 1); £817 (Policy 2); £1,988.37 (Policy 3). Dr [APPELLANT] seeks determinations from the Tribunal as to (1) whether Policies 1 and 2 were consistent with the requirements of the Lease (2) whether Policy 3 should have been placed (3) whether Policy 3 provides value for money given the significant increase in cost and (4) whether the Landlord has complied with the requirements of the Lease to serve notices on the Tenant with regard to [NAME]. He asks that if the Tribunal finds in his favour it order repayment to him of any sums paid in respect of [NAME] and to order that any sums demanded be irrecoverable.

Two risk events

21. Dr [APPELLANT] also raises the matter of two damage events to the Building. The first involved the escape or overflow of water from sewage pipes within the building resulting from a blocked drain in the courtyard (“the blocked drain event”). The second involved the escape or overflow of water from a blocked gutter and downpipe running within the building (“the blocked gutter event”). Dr [APPELLANT] believes that the blocked drain event occurred on 21 August 2017. His builder and handyman, [NAME] [NAME], dealt with the blockage, which was attributable to a tight bend in the secondary sewer that has now been rectified. On 2 October 2017 Dr [APPELLANT] telephoned Dr [APPELLANT] and told him that water ingress had damaged the empty and derelict retail [NAME]

2. On 8 October 2017 [NAME] wrote to Dr [APPELLANT] and stated that the damage was not covered by the [NAME]. Over the following months Dr [APPELLANT] asserted that Dr [APPELLANT] should have insured against damage to the rest of the

12 Building caused by water ingress from the Property. Dr [NAME] insisted that the water had entered the retail [NAME] as a result of a broken pipe, blocked drainage or deliberate action by one of the under-tenants of the residential units. Dr [NAME] said that the [NAME] policy did not cover the loss because of the retail [NAME] being vacant at the time. He said that his solicitor had advised him that if the Landlord did not make an [NAME] claim, Dr [APPELLANT] would be responsible for 84% of the cost of the repairs.

22. Dr [APPELLANT] said that he had already paid £120 to unblock the drain. He asserts that the cost of making good the ceiling in the empty shop [NAME] 2 and the clearing up of the floor below would be no more than £200 and denies that there was more extensive damage to the roof walls and floors of the retail [NAME] as alleged by Dr [NAME]. He therefore submits that the reasonable cost of effecting the necessary repairs would be no more than £320 (of which he has already paid £120).

23. Dr [APPELLANT] said that the blocked gutter event occurred over the weekend commencing 1 June 2018. It affected studios 2,3 and 7. The gutter was blocked by a bird’s nest and associated debris. It was cleared on 2-4 June 2018 by Dr [APPELLANT]’s builder. On 7 June 2018 Dr [APPELLANT] claimed that the incident had caused water ingress to the retail [NAME]

2. In a letter to Dr [APPELLANT] dated 8 June 2018, Dr [APPELLANT] refuted this suggestion and asserted that the repair and maintenance of the guttering was the Landlord’s obligation under the Lease and that no such maintenance or repair had taken place since Dr [APPELLANT] acquired his interest in the Property in late 2015. No [NAME] claim was made in respect of damage arising from this event. Dr [APPELLANT] said that any increase in [NAME] premiums resulting from refused claims should not be reflected in [NAME] payable by the Tenant. Indeed Dr [APPELLANT] contends that the Landlord is liable to him for his loss and that a fair and reasonable estimate of his loss would be £2,307.79. This is calculated as follows:

Unblocking the gutter

£100

A&E Fire Security callout

£129.17

A&E FS replace fittings

£381.82

A void caused by flood

£1,091.80

To repair damage to units

And common parts

£650 (estimate)

The disputed charges – the Respondent’s case

Service Charge

24. Dr [RESPONDENT] states that he has not received any service charge payments

from the Tenant since the Lease commenced. He says that the Lease

fixes the Tenant’s proportion at 84% and the Tribunal has no power to

vary this amount. He says he does not accept that he has failed to

provide services in accordance with the Lease.

13 25. At the start of the hearing Dr [NAME] produced for the first time a

document dated 23 October 2018. It consisted of an invoice from a

company called [NAME] of Stonehouse, Gloucestershire,

in respect of rubbish removal, window cleaning, gutter clearance and

gutter repair for the Building. The invoice referred to a schedule of works

to take place from 25 – 28 October 2018 and was for a total sum of

£2,580. Dr [NAME] said that repair and replacement of roof tiles was

pending at an estimated cost of £500. Dr [NAME] deduced from these

sums that an amount of £2,500-£4000 per annum would need to be

spent on Services. By a statement to which the invoice was attached Dr

Dr [NAME] said that the service charge was

“8.6%, Ground floor retail [NAME] 1 ([NAME]): £350 + vat per

annum (£29.17 + vat per month)

7.4%, Ground floor retail [NAME] 2 ([NAME]) £300 + vat per

annum (£25 + vat per month)

84% [NAME] (Upper floor 9 flats): £3,412.5 + vat per annum

(£284.37 + vat per month).”

The Survey costs

26. Dr [NAME] said that his former lender [NAME] had required an

Asbestos and Fire Safety Survey, which was not carried out by [RESPONDENT] despite the Landlord having signed a contract for

the same with that company on 20 March 2017. The cost of £1,300 plus

VAT covered two of the Landlord’s properties and therefore he had

apportioned the cost equally, producing a sum of £650 in respect of the

Building, 84% of which amounted to £546 plus VAT. As to the structural

survey that he had proposed he said that he did not require any

contribution from the Applicant, unless he sought a copy of the report.

The purpose of the survey was to satisfy the landlord that the Building

was structurally sound and to properly identify the cause of water

ingress.

The damage events

27. Dr [NAME] submits that the cost of damage caused by water ingress to the

Property and the commercial [NAME] should be borne by each party. He

asserted that the last water ingress would not have occurred if the

Applicant had paid the service charge.

[NAME]

28. Dr [NAME] submission with regard to [NAME] relates solely to Policy 3,

which commenced in July 2018. He says that the vacancy in

commercial [NAME] 1 caused the increase in premium to the [NAME]. Dr [APPELLANT] states that the Applicant is noted on the policy about

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which he was consulted. At the hearing Dr [NAME] produced a letter from

the insurers confirming that as from 5 November 2018 the premium

would actually be £1180.32 on the basis that there was now a tenancy of

[NAME] 1. This takes effect as a new policy from 5 November 2018 to 5

November 2019.

Consideration Service charge demands 29. This case involves a dispute that has arisen between two investors in three storey premises known as [NAME], [ADDRESS], Gloucester (“the Building”). One is the [NAME], who owns the Retained Parts (principally the structure and exterior of the Building) and two commercial units in the Building, and the other is the Applicant Tenant, who has a long lease (“the Lease”) of the ground floor (part) and the upper floors (“the Property”), which contain 9 studio units let on [NAME]. The value of their respective investments depends on the observance by both Landlord and Tenant of their respective covenants under the Lease, with particular reference to [NAME] and the service charge provisions, including those relating to the management of the Building.

30. Sadly, in many ways this has not happened. Although the Landlord is a [COMPANY] it operates through its Director Dr [NAME] who believes that he is able to determine a monthly sum to be payable by the Tenant by way of service charge. He reasons that this would provide him with funds to spend on providing the Services that he is obliged to provide under the Lease. Negotiations between Landlord and Tenant to set up a viable service charge arrangement at the beginning of the Lease or shortly thereafter came to nought. Eventually, by letters dated 3 February, 11 March and 23 March 2018 Dr [APPELLANT] demanded payment by Dr [APPELLANT] of service charge sums amounting to £4,968 plus VAT (i.e. £5,961.60) in respect of the period from 30 September 2016 to 31 March 2018. However, as Dr [APPELLANT] has rightly submitted, Dr [APPELLANT] is unable to point to any provisions in the Lease that justify his demands.

31. Clause 5 of the Lease obliges the Tenant to observe and perform the

covenants set out in Schedule 4 to the Lease. Paragraph 2 of that

Schedule obliges the Tenant “To pay to the Landlord the Service Charge

demanded by the Landlord under paragraph 4 of Schedule 6 by the date

specified in the Landlord’s notice.” Paragraph 4.2 of Schedule 6 requires

the Landlord to serve on the Tenant a notice giving full particulars of the

Service Costs and stating the Service Charge payable by the Tenant

and the date on which it is payable as soon as reasonably practical

after incurring, making a decision to incur, or accepting an estimate

relating to, any of the Service Costs. Paragraph 4.3 obliges the Landlord

to keep accounts, records and receipts relating to the Service Costs

incurred by the Landlord and to permit the Tenant, on giving reasonable

notice, to inspect the accounts, records and receipts.

15 32. The demands made in February and March 2018 do not meet these

requirements. There is no reference to costs incurred or to be incurred

and the Landlord has disclosed no accounts, records or receipts relating

to costs allegedly incurred. Furthermore, the demand was not

accompanied by the summary of rights and obligations required by the

Service Charges (Summary of Rights and Obligations, and

Transitional Provision) (England) Regulations 2007. In these

circumstances the Tribunal finds that it has not been established that

any Services have been provided, or costs incurred or expected at the

time of the demand to be incurred by the Landlord and therefore the

sums demanded are neither payable nor reasonable.

Survey charges

33. The Tribunal considers that quite irrespective of whether the Landlord’s

then lender [NAME] required the Landlord to carry out a Fire

and Asbestos Survey, there are statutory obligations on the Landlord to

carry out the same. However, the Tenant can only be required to

contribute to the cost if the Lease so provides. It is common for leases

to place an obligation on the landlord to comply with any statutory

requirements and to recover the cost from the tenant by way of

service charge. In the present case there is no such express provision in

the Lease. However, the definition of Services in the Lease extends to

“(d) any other service or amenity that the Landlord may in its

reasonable discretion (acting in accordance with the principles of [NAME]) provide for the benefit of the tenants and occupiers

of the Building.” It is clearly in the interest of [NAME]

to carry out a fire and asbestos survey. On balance the Tribunal

finds that such a survey would fall within paragraph (d) and the

reasonable costs of the same, when incurred, would fall within the

Service Charge. The Tribunal also finds that the obligation on the

Landlord to maintain the Retained Parts would include the carrying out

at reasonable cost of any necessary survey to assess the existing state of

repair.

34. However, with regard to the Landlord’s proposed structural survey, Dr

[RESPONDENT] has confirmed that the Landlord does not require any financial

contribution from the Applicant and the Tribunal has accordingly not

made any determination with regard to such costs.

[NAME]

35. At the hearing Dr [APPELLANT] said that he did not wish to pursue the matter

of the amount of the [NAME] premiums. Indeed he has not produced

evidence of alternative quotes for [NAME] of the Building. His primary

concern is to ensure that the current [NAME] is appropriate to cover

the relevant risks in respect of the Building. The Tribunal does not

therefore make a determination with regard to the payability of or

reasonableness of the sums demanded and paid in respect of Policies 1

and 2. Dr [APPELLANT] paid his agreed share of the premiums under both of

16

these policies albeit that he had numerous queries as to the extent of

the cover that were not fully resolved to his satisfaction. With regard to

Policy 3 this was taken out to over the period 11 June 2018 to 19 May

2019. What is unclear is whether the previous [NAME] has been

cancelled. On 11 June 2018 Dr [APPELLANT] raised a number of other issues

with Dr [APPELLANT] and the broker [NAME] [NAME] of [NAME] with

regard to the new [NAME] and these were only finally resolved save for

one matter on 21 June 2018. The unresolved matter was the important

one of whether there had been accurate disclosure to the insurer of the

date when a claim with regard to the blocked drain flooding had had

been refused under the previous policy.

36. The Tribunal agrees with Dr [APPELLANT] that his concerns with regard to the

matter of [NAME] of the Building were and are serious and genuine.

The Lease requires the Landlord to insure the Building (as defined in the

Lease) and for the Tenant’s interest to be noted on the policy. It also

requires the Landlord to serve on the Tenant a notice giving full

particulars of the gross cost of the [NAME] premium payable in

respect of the Building (after any discount or commission but including

IPT). The notice must state: (a) the date by which the gross premium is

payable to the Landlord’s insurers and (b) the [NAME] payable by

the Tenant, how it has been calculated and the date by which it is

payable. We are told that the premium is now £1180.32 although it is not

clear whether this excludes any commission paid to the Landlord.

37. The Tribunal determines that no sum will be payable by way of

[NAME] in respect of the current [NAME] policy until the

Landlord gives notice in due form under the Lease of the sum

demanded and is able to confirm that the Building is insured in

accordance with the terms of the Lease. The Tribunal also finds that the

due Proportion payable by the Tenant is 84% unless the Landlord has

notified some other proportion. At the hearing the Tribunal was told by

Dr [APPELLANT] that the parties had agreed, on the basis of a report from an

architect, a [NAME] [NAME], that the [NAME] and service charges

were to be calculated on the basis of square footage of the Property as a

proportion of the whole Building. This factor came to 0.69 the

remainder being attributable to the Landlord in respect of the

Commercial Property. The Tribunal further determines that

proportionate credit should be given to the Tenant for any refund

made to the Landlord following earlier cancellation of the previous

policy.

The two damage events

38. The Tribunal determines that the terms of the Lease are clear in so far as

it is the responsibility of the Landlord to insure the Building as defined

in the Lease. This includes the Commercial Premises, the Common Parts,

the Retained Parts and the Property. Contrary to the Landlord’s belief,

there is no obligation on the Tenant to effect separate [NAME] of the

17

Property. Indeed the Tenant has covenanted “Not to insure the

Building or the Property against any of the Insured Risks in such a

manner as would permit the Landlord’s insurer to cancel the

Landlord’s [NAME] or to reduce the amount of any money payable to

the Landlord in respect of any [NAME] claim.” Escape of water is an

Insured Risk.

39. The Landlord Covenants, set out in Schedule 6 to the Lease, do not

contain any express repairing obligation with regard to the Retained

Parts. However, paragraph 4 of that Schedule obliges the Landlord to

provide the Services. The Services include “cleaning and maintaining,

decorating, repairing and renewing or replacing the Retained Parts.” The

Retained Parts are defined in so far as relevant as (a) “all parts of the

Building other than the Property and the Commercial Premises

including the main structure of the Building including the roof and

roof structures, the foundations, the external walls and internal load-

bearing walls, the structural timbers, the joists and the guttering: (b) all

parts of the Building lying below the floor surfaces or above the

ceilings all external decorative surfaces of the Building.” It follows that

the only repairs carried out by the Landlord the costs of which can be

recovered by the Service Charge are repairs to the Retained Parts.

These do not include the Commercial Premises. However, under

paragraph 5.1 of Schedule 6 the Landlord covenants that

“until such time as the Landlord grants leases of the Commercial

Premises to maintain and repair the Commercial Premises to the extent

that no physical damage is caused to the Property. For the avoidance of

doubt, this covenant will automatically lapse once a lease of the

Commercial Premises has been granted or a tenant has entered into

possession or occupation of the Commercial Premises, provided that

the Landlord shall then use reasonable endeavours to enforce the

repairing obligations in such a lease or leases of the Commercial

Premises.”

40. The Tenant’s obligations as to repair are set out in paragraph 10 of

Schedule 4 to the Lease which contains a covenant “to keep the

Property in good repair and condition throughout the Term provided

that the Tenant shall not be liable to repair the Property to the extent

that any disrepair has been caused by an Insured Risk and unless

and to the extent that the policy of [NAME] of the Property (sic) has

been vitiated or any [NAME] proceeds withheld in consequence of any

act or omission of the Tenant, any undertenant or their respective

workers, contractors or agents of any person at the Property with the

express or implied authority of any of them.”

41. It follows that it is the Landlord’s obligation to promptly make a claim

under the [NAME] policy for the Building if any part of the Building

is damaged or destroyed by an Insured Risk and to use the [NAME]

monies to repair the damage. Thus if the flooding to the [NAME] 2 was caused by the defective drain and this was an [NAME]

the Landlord should make a claim. If the damage is excluded by the

18

[NAME] policy the Landlord would need to look to the terms of the

Lease if he seeks to make the Tenant liable.

42. With regard to any water damage to the [NAME] 2 caused by

the blocked gutter the Landlord would need to claim on the [NAME].

If the Tenant wishes to recover the cost incurred in repairing and

remedying damage attributable to blocked gutters this would again be a

matter of enforcing the Landlord’s covenant to repair the Retained Parts.

The Appointment of Manager Application.

43. The Applicant, by way of an application to the Tribunal under section

24 of the Landlord and Tenant Act 1987 (“the 1987 Act”) seeks the

appointment of [NAME] [NAME] of [NAME], 134,

[ADDRESS] [POSTCODE] as manager of the Building.

The Applicant has served a valid preliminary notice on the Landlord

under section 22 of the 1987 Act. 44. With regard to the present case, the relevant circumstance in which an

order can be made are where the Tribunal is satisfied that (1) that the

Landlord either is in breach of any obligation owed by him to the

Tenant under his tenancy and relating to the management of the

premises in question or any part of them or (2) that unreasonable

service charges have been made, or are proposed or likely to be

made or (3) that unreasonable variable administration charges have

been made, or are proposed or likely to be made or (4) that the

Landlord has failed to comply with any relevant provision of a

Code of Practice approved by the Secretary of State under section 87

of the Leasehold Reform, Housing and Urban Development Act 1993

(codes of management practice), or (5) where the tribunal is satisfied

that other circumstances exist which make it just and convenient for

the order to be made. In cases (1) to (4) above there is also the

additional requirement that it is just and convenient to make the

order in all the circumstances of the case 45. The Applicant relies principally on two grounds. The first relates to the

[NAME] of the Building and the second relates to the operation of the

service charge. The Applicant submits that a reasonable landlord

would have been able to satisfactorily demonstrate that the required

buildings [NAME] was in place, that he had complied with the

covenants of the Lease in terms of the buildings [NAME] and explain

why any [NAME] claim had been rejected. 46. The Applicant also submits that any reasonable landlord would

ensure that services are provided for their property, maintain accounts

and receipts and be able to make these available to their tenants as

required by the lease. He says that it was not reasonable for the

Landlord to backdate services charges for services that were simply

not provided. No service charge accounts or any formal demands for

payments have been provided. The Applicant believes that the

19

working relationship between himself and the Landlord has broken

down and that the current situation cannot be resolved other than by

the appointment of a manager by the Tribunal. The Applicant says that

he sought to put into place a workable service charge regime with the

Landlord at the beginning of the Lease but this did not happen because

of intransigence or inaction on the part of the Landlord. The Applicant

also submits that the Landlord has exaggerated the extent of the

damage from the blocked drain events this being inconsistent with

information given by him on reporting the matter to the [COMPANY] when reinsuring the property in June 2018. The Applicant

also says that the Landlord has behaved unreasonably in refusing to

provide satisfactory answers to reasonable questions with regard to

the nature and extent of [NAME] cover. 47. The Applicant produced extensive correspondence with the Landlord,

which evidenced his willingness to resolve the outstanding issues with

regard to the management of the Building and the services by

agreement, without the need to resort to the remedy of appointment

of a manager or an application to the Tribunal. The Landlord did not

take up these offers. More specifically the Landlord has rejected

offers by the Tenant to seek mediation. This is a case where the

business relationship between the parties began on amicable terms but

that foundation has been gradually eroded to the point where the

relationship has more or less broken down. 48. The Tribunal finds that in these circumstances the Applicant has made

out a ground, under section 24(2)(a) (ab) (ac) and (b) of the 1987 Act

for the appointment of a manager of the Building and that it is just and

convenient to make the Order. The [COMPANY] has not

managed the Building in accordance with the terms of the Lease. It

demanded backdated service charges without producing any evidence

of expenditure or planned expenditure on relevant services under the

Lease. It also failed to demand [NAME] in accordance

with the terms of the Lease or demonstrate that a claim had been

made and/or rejected in respect of a Risk Event. The Applicant

Tenant has made numerous attempts from the beginning of his

Lease to put the operation of the service charge provisions of the Lease

on a satisfactory footing but the Landlord has not responded in any

meaningful way to those overtures or accepted offers by the Tenant to

settle the matter without the need to resort to the Tribunal.

Furthermore, at the hearing, Dr [NAME] agreed that a manager should

be appointed. However, he opposed the appointment of [NAME] [NAME]

on the ground that his proposed management fee was too high. Dr

[NAME] did not propose a suitable alternative manager. 49. As noted above Dr [NAME] produced a planned maintenance programme

at the eleventh hour on the day of the hearing having engaged a

window cleaning company to provide not only window cleaning

services but also to repair and maintain the guttering. This was the

first indication of any expenditure or proposed expenditure on services

by the Landlord. However, not only was this document not part of the

20

hearing bundle (the [NAME] having stipulated that all documents to

be relied on should be included in that bundle) it also revealed that

works had been commissioned without regard to the consultation

requirements in section 20 of the 1985 Act. It also reiterated the

Landlord’s insistence on payment of a monthly service charge contrary

to the terms of the Lease. This only strengthens the case for

appointment of a manager.

50. At the hearing the Tribunal questioned [NAME] [NAME] as to his qualifications; his willingness to act and the terms on which he would manage the Building were he to be appointed. The Tribunal was satisfied from his answers that it would be appropriate to appoint [NAME] [NAME] as manager. The proposed management fee was £2200 per annum calendar plus VAT and an initial setting up fee of £220 plus VAT. [NAME] [NAME] indicated that this was at the top end of his fee range for managing this type of Building. However he explained that there would be more work involved in the first year. The Tribunal considers the proposed fee to be fair and reasonable and consistent with what a reasonable landlord might expect to be charged by a manager for managing the Building. It is to be fixed for the term of the appointment. The Order is set out in Annex 1 to these Reasons. The Tribunal has framed the Order so as to permit a proper scheme of management to be put into operation and to that extent its power so to order is not constrained by the terms of the Lease. The Section 20C and paragraph 5A Schedule 11 Applications 51. The Applicant having been successful in respect of both Applications the Tribunal determines that Orders be made under section 20C of the [NAME], and paragraph 5A of Schedule 11 to the 2002 Act preventing the Landlord from recovering under the Lease any costs incurred in connection with these proceedings by way of any future service charge or administration charge demand. The Applicant’s fees 52. For the same reasons the Tribunal orders under Rule 13(2) of the Tribunal Procedure (First-tier Tribunal) ([NAME]) Rules 2013 that the Respondent reimburse the Applicant fees paid to the tribunal in respect of the Applications.

Costs 53. At the end of the hearing it became clear that one or both parties

was/were seeking to recover costs under Rule 13(1) of the Tribunal

Procedure (First-tier Tribunal) ([NAME]) Rules 2013. The

Tribunal indicated that any such applications should be made

separately to the Tribunal together with any representations, which

should be copied to the other party.

21 Right to appeal

1.

A person wishing to appeal this decision to the Upper Tribunal (Lands Chamber) must seek permission to do so by making written application to the First-tier Tribunal at the Regional Office, which has been dealing with the case.

2.

The application must arrive at the Tribunal within 28 days after the Tribunal sends to the person making the application written reasons for the decision.

3.

If the person wishing to appeal does not comply with the 28 day time limit, that person shall include with the application for permission to appeal a request for an extension of time and the reason for not complying with the 28 day time limit; the Tribunal will then decide whether to extend time or not to allow the application for permission to appeal to proceed.

4.

The application for permission to appeal must identify the decision of the Tribunal to which it relates, state the grounds of appeal, and state the result the party making the application is seeking.

[NAME] of the Tribunal

22 Annex 1

Appointment of Manager Order

1. In accordance with section 24(1) Landlord and Tenant Act 1987, [NAME] [APPELLANT] of [NAME], 134, [ADDRESS] [POSTCODE] (“the Manager”) is appointed as manager of the building known as [NAME], [ADDRESS] [POSTCODE] (“the Building”).

2. The Order shall continue for a period of two years from 26 November 2018. If any party or parties interested wish to apply for an extension of the Order they are encouraged to do so at least three months before the Order expires.

3. The Manager shall manage the Building in accordance with (a) the [NAME] and schedule of functions and services attached to this Order; (b) save where modified by this Order, the respective obligations of the Landlord and the Lease whereby the Property is demised by the Respondent and in particular with regard to repair, decoration, provision of services and [NAME] of the Building; and (c) the duties of a manager set out in the Service Charge Residential Management Code (“the Code”) or such other replacement code published by the Royal Institution of Chartered Surveyors and approved by the Secretary of State pursuant to section 87 Leasehold Reform Housing and Urban Development act 1993 4. The Manager shall register the Order against the Landlord’s registered

title as a restriction under the Land Registration Act 2002 or any

subsequent Act.

23

[NAME]

1. From the date of the appointment and throughout the appointment the Manager shall ensure that he has appropriate professional indemnity cover in the sum of at least £1 million and shall provide copies of the current cover note upon request being made by any Lessee of all or part of the Building, the Respondent or the Tribunal. (References to a Lessee in these [NAME] shall not include any under tenant of the units within the Applicant’s lease).

2. That no later than four weeks after the date of this Order the parties to this Application shall provide all necessary information to and arrange with the Manager an orderly transfer of responsibilities. No later than this date, the Respondent shall transfer to the Manager all the accounts, books, records and funds relating to the Service Charge and [NAME] of the Building.

3. The rights and liabilities of the Respondent arising under any contracts of [NAME], and/or any contract for the provision of any services to the Building shall upon the date of the appointment become rights and liabilities of the Manager.

4. The Manager shall account forthwith to the Respondent for the payment of ground rent received by him and shall apply the remaining amounts received by him (other than those representing his fees) in the performance of the Respondent’s covenants contained in the said leases.

5. The Manager shall be entitled to remuneration, which for the avoidance of doubt shall be recoverable as part of the service charges of leases of the property in accordance with the Schedule of Functions and Services attached.

6. By no later than one year from the date of appointment the Manager shall prepare and submit a brief written report for the Tribunal on the progress of the management of the property up to that date.

7. Within 28 days of the conclusion of the management Order the Manager shall prepare and submit a brief written report for the Tribunal on the progress and outcome of the management of the Building up to that date, to include final closing accounts. The Manager shall also serve copies of the reports and accounts on the Landlord and Lessees who may raise queries on them within 14 days. The Manager shall answer such queries within a further 14 days. Thereafter the Manager shall reimburse any unexpended monies to the paying parties, or, if it be the case any new Tribunal appointed manager or, in the case of dispute, as decided by the Tribunal upon application by any interested party.

24 8. The Manager shall be entitled to apply to the Tribunal for further [NAME].

SCHEDULE OF FUNCTIONS AND [NAME]

(1) Maintain appropriate [NAME] for the Building. (2) Ensure that the Manager’s interest is noted on the [NAME] policy

Service charge

(3) Prepare an annual service charge budget, and make provision for interim payment in advance, and a balancing payment by, or credit made to, the Tenant at the end of the year as appropriate; (4) Administer the service charge. (5) Demand and collect ground rent, service charges, [NAME] and any other payment due from the Tenant under the Lease. (6) Demand and collect his own service charge which shall be payable by the Respondent Landlord as if he were a Tenant in respect of any parts of the Building which are retained by the Respondent. (7) Notwithstanding the provisions of the Lease, the respective service charge and [NAME] contributions of the Respondent and the Tenant shall be apportioned on the basis of the square footage of their respective property interests in the Building as determined by the Manager; (8) Place, supervise and administer contracts and check demands for payments of goods services and equipment supplied for the benefit of the Property with the service charge budget.

Accounts

(9) Prepare and submit to the Respondent and the Tenant an annual statement of account detailing all monies received and expended. The accounts to be certified by the external auditor if required by the Manager;

(10) Maintain efficient records and books of account, which are open to inspection by the Landlord and Tenant. Upon request, produce for inspection, receipts or other evidence of expenditure.

(11) Maintain on trust an interest bearing account at such bank or building society, as the Manager shall from time to time decide, into which ground rent, service charge contributions, [NAME] and all other monies arising under the Lease shall be paid.

25

(12) All monies collected will be accounted for in accordance with the accounts regulations as issued by the Royal Institution of Chartered Surveyors.

Maintenance

(13) Deal with routine repair and maintenance issues and instruct contractors to attend and rectify problems. Deal with all building maintenance relating to the services and structure of the Retained Parts.

(14) The consideration of works to be carried out to the Retained Parts of the Building in the interest of [NAME] and making the appropriate recommendations to the Respondent and the Tenant.

(15) The setting up of a planned maintenance program to allow for the periodic re-decoration and repair of the Retained Parts of the Building.

Fees

(16) The Manager’s fee for the above-mentioned management services will be a basic fee of £2,200 per annum payable monthly in arrears plus an initial setting up fee of £220. Those services to include the services set out in the Service Charge Residential Management Code published by the RICS.

(17) If major works are carried out to the Building (where it is necessary for the Manager to issue consultation notices to the lessees, appoint builders, surveyors, architects, or other professionals and generally to administer the project) an additional fee of 6% of the cost will be payable to the Manager.

(18) VAT to be payable on all the fees quoted above were appropriate at the rate prevailing on the date of invoicing.

26 Annex 2: The relevant statute law

[NAME] 18(1) defines a “service charge” as:

“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 [NAME] or the landlord’s costs of management, and (b) the whole or part of which varies or may vary according to the relevant costs.”

Section 19(1) provides that:

“Relevant costs shall be taken into account in determining the amount of a service charge payable for a period-

(a) only to the extent that they are reasonably incurred, and (b) where they are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard; and the amount payable shall be limited accordingly”.

“Relevant costs” are defined for these purposes by section 18(2) of the 1985 Act as “the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a [NAME], in connection with the matters for which the service charge is payable.

Section 27A provides that (1) An application may be made to the appropriate tribunal for a determination whether a service charge is payable and, if it is, as to—

(a) the person by whom it is payable,

(b) the person to whom it is payable,

(c) the amount which is payable,

(d) the date at or by which it is payable, and

(e) the manner in which it is payable. (2) Subsection (1) applies whether or not any payment has been made.

27 Section 20C provides that

(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 the First-tier Tribunal are not to be regarded as relevant costs to be taken into account when determining the amount of service charge payable by the tenant or any other person or persons specified in the application. ………………….

(4) the tribunal to which the application is made may make such order on

the application as it considers just and equitable in the circumstances.

Landlord and Tenant Act 1987

21 Tenant’s right to apply to [tribunal] for appointment of manager.

(1) The tenant of a flat contained in any premises to which this Part applies may, subject to the following provisions of this Part, apply to the appropriate tribunal for an order under section 24 appointing a manager to act in relation to those premises. (2) Subject to subsection (3), this Part applies to premises consisting of the whole or part of a building if the building or part contains two or more flats. (3) This Part does not apply to any such premises at a time when—

(a) the interest of the landlord in the premises is held by (i) an [NAME] or a [NAME], or (ii) the [NAME] in their new towns residuary

capacity, or

(b) the premises are included within the functional land of any

[NAME]. (3A) But this Part is not prevented from applying to any premises because the interest of the landlord in the premises is held by a [NAME] if at least one-half of the flats contained in the premises are held on long leases which are not tenancies to which Part 2 of the Landlord and Tenant Act 1954 (c. 56) applies. (4) An application for an order under section 24 may be made—

(a) jointly by tenants of two or more flats if they are each entitled to

make such an application by virtue of this section, and

(b) in respect of two or more premises to which this Part applies; and, in relation to any such joint application as is mentioned in paragraph (a), references in this Part to a single tenant shall be construed accordingly. (5) Where the tenancy of a flat contained in any such premises is held by joint tenants, an application for an order under section 24 in respect of those premises may be made by any one or more of those tenants. (6) An application to the court for it to exercise in relation to any premises any jurisdiction to appoint a [NAME] or manager shall not be made by a tenant (in his capacity as such) in any circumstances in which an application

28 could be made by him for an order under section 24 appointing a manager to act in relation to those premises. (7) References in this Part to a tenant do not include references to a tenant under a tenancy to which Part II of the Landlord and Tenant Act 1954 applies. (8) For the purposes of this Part, “appropriate tribunal” means—

(a) in relation to premises in England, the First-tier Tribunal or,

where determined by or under Tribunal Procedure Rules, the

Upper Tribunal; and

(b) in relation to premises in Wales, a leasehold valuation tribunal.

22 Preliminary notice by tenant. (1) Before an application for an order under section 24 is made in respect of any premises to which this Part applies by a tenant of a flat contained in those premises, a notice under this section must (subject to subsection (3)) be served by the tenant on—

(i) the landlord, and

(ii) any person (other than the landlord) by whom obligations relating to the management of the premises or any part of them are owed to the tenant under his tenancy. (2) A notice under this section must—

(a) specify the tenant’s name, the address of his flat and an address

in England and Wales (which may be the address of his flat) at

which any person on whom the notice is served may serve

notices, including notices in proceedings, on him in connection

with this Part;

(b) state that the tenant intends to make an application for an order

under section 24 to be made by the appropriate tribunal in

respect of such premises to which this Part applies as are

specified in the notice, but (if paragraph (d) is applicable) that

he will not do so if the requirement specified in pursuance of

that paragraph is complied with;

(c) specify the grounds on which the tribunal would be asked to

make such an order and the matters that would be relied on by

the tenant for the purpose of establishing those grounds;

(d) where those matters are capable of being remedied by any

person on whom the notice is served, require him, within such

reasonable period as is specified in the notice, to take such steps

for the purpose of remedying them as are so specified; and

(e) contain such information (if any) as the Secretary of State may

by regulations prescribe. (3) The appropriate tribunal may (whether on the hearing of an application for an order under section 24 or not) by order dispense with the requirement to serve a notice under this section on a person in a case where it is satisfied that it would not be reasonably practicable to serve such a notice on the person, but the tribunal may, when doing so, direct that such other notices are served, or such other steps are taken, as it thinks fit. (4) In a case where—

(a) a notice under this section has been served on the landlord, and

(b) his interest in the premises specified in pursuance of subsection

(2)(b) is subject to a mortgage,

29 the landlord shall, as soon as is reasonably practicable after receiving the notice, serve on the [NAME] a copy of the notice.

23 Application to court for appointment of manager. (1) No application for an order under section 24 shall be made to the appropriate tribunal unless—

(a) in a case where a notice has been served under section 22,

either—

(i) the period specified in pursuance of paragraph (d) of

subsection (2) of that section has expired without the

person required to take steps in pursuance of that

paragraph having taken them, or

(ii) that paragraph was not applicable in the circumstances of

the case; or

(b) in a case where the requirement to serve such a notice has been

dispensed with by an order under subsection (3) of that section,

either—

(i) any notices required to be served, and any other

steps required to be taken, by virtue of the order

have been served or (as the case may be) taken, or

(ii) no direction was given by the tribunal when

making the order. (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24 Appointment of manager by tribunal. (1) The appropriate tribunal may, on an application for an order under this section, by order (whether interlocutory or final) appoint a manager to carry out in relation to any premises to which this Part applies—

(a) such functions in connection with the management of the

premises, or

(b) such functions of a [NAME],

or both, as the tribunal thinks fit. (2) The appropriate tribunal may only make an order under this section in the following circumstances, namely—

(a) where the tribunal is satisfied—

(i) that any relevant person either is in breach of any

obligation owed by him to the tenant under his tenancy

and relating to the management of the premises in

question or any part of them or (in the case of an

obligation dependent on notice) would be in breach of

any such obligation but for the fact that it has not been

reasonably practicable for the tenant to give him the

appropriate notice, and

(ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(iii) that it is just and convenient to make the order in all the

circumstances of the case;

(ab) where the tribunal is satisfied—

(i) that unreasonable service charges have been made, or are

proposed or likely to be made, and

(ii) that it is just and convenient to make the order in all the

circumstances of the case;

30

(aba) where the tribunal is satisfied—

(i) that unreasonable variable administration charges have

been made, or are proposed or likely to be made, and

circumstances of the case;

(ac) where the tribunal is satisfied—

(i) that any relevant person has failed to comply with any

relevant provision of a code of practice approved by the

Secretary of State under section 87 of the Leasehold

Reform, Housing and Urban Development Act 1993

(codes of management practice), and

circumstances of the case; or

(b) where the tribunal is satisfied that other circumstances exist

which make it just and convenient for the order to be made. (2ZA) In this section “relevant person” means a person—

(a) on whom a notice has been served under section 22, or

(b) been dispensed with by an order under subsection (3) of that

section. (2A) For the purposes of subsection (2)(ab) a service charge shall be taken to be unreasonable—

(a) if the amount is unreasonable having regard to the items for

which it is payable,

(b) if the items for which it is payable are of an unnecessarily high

standard, or

(c) if the items for which it is payable are of an insufficient standard

with the result that additional service charges are or may be incurred. In that provision and this subsection “service charge” means a service charge within the meaning of section 18(1) of the [NAME], other than one excluded from that section by section 27 of that Act (rent of dwelling registered and not entered as variable). (2B) In subsection (2)(aba) “variable administration charge” has the meaning given by paragraph 1 of Schedule 11 to the Commonhold and Leasehold Reform Act 2002. (3) The premises in respect of which an order is made under this section may, if the tribunal] thinks fit, be either more or less extensive than the premises specified in the application on which the order is made. (4) An order under this section may make provision with respect to—

(a) such matters relating to the exercise by the manager of his

functions under the order, and

(b) such incidental or ancillary matters, as the tribunal thinks fit; and, on any subsequent application made for the purpose by the manager, the tribunal may give him [NAME] with respect to any such matters. (5) Without prejudice to the generality of subsection (4), an order under this section may provide—

(a) for rights and liabilities arising under contracts to which the

manager is not a party to become rights and liabilities of the

manager;

(b) for the manager to be entitled to prosecute claims in respect of

causes of action (whether contractual or tortious) accruing

31

before or after the date of his appointment;

(c) for remuneration to be paid to the manager by any relevant

person, or by the tenants of the premises in respect of which the

order is made or by all or any of those persons;

(d) for the manager’s functions to be exercisable by him (subject to subsection (9)) either during a specified period or without limit of time. (6) Any such order may be granted subject to such conditions as the tribunal thinks fit, and in particular its operation may be suspended on terms fixed by the tribunal. (7) In a case where an application for an order under this section was preceded by the service of a notice under section 22, the tribunal may, if it thinks fit, make such an order notwithstanding—

(a) that any period specified in the notice in pursuance of

subsection (2)(d) of that section was not a reasonable period, or

(b) that the notice failed in any other respect to comply with any

requirement contained in subsection (2) of that section or in any

regulations applying to the notice under section 54(3). (8) The Land Charges Act 1972 and the Land Registration Act 2002 shall apply in relation to an order made under this section as they apply in relation to an order appointing a [NAME] or sequestrator of land. (9) The appropriate tribunal may, on the application of any person interested, vary or discharge (whether conditionally or unconditionally) an order made under this section; and if the order has been protected by an entry registered under the Land Charges Act 1972 or the Land Registration Act 2002, the tribunal may by order direct that the entry shall be cancelled. (9A) The tribunal shall not vary or discharge an order under subsection (9) on the application of any relevant person unless it is satisfied—

(a) that the variation or discharge of the order will not result in a

recurrence of the circumstances which led to the order being

made, and

(b) that it is just and convenient in all the circumstances of the case

to vary or discharge the order. (10) An order made under this section shall not be discharged by the appropriate tribunal by reason only that, by virtue of section 21(3), the premises in respect of which the order was made have ceased to be premises to which this Part applies. (11) References in this Part to the management of any premises include references to the repair, maintenance, improvement or [NAME] of those premises.

Commonhold and Leasehold Reform Act 2002

Paragraph 5A of Schedule 11 provides that

(1) A tenant of a dwelling in England make apply to the relevant court or tribunal for an order reducing or extinguishing the tenant’s liability to pay a particular administration charge in respect of litigation costs (2) The relevant court or tribunal may make whatever order on the application it considers to be just and equitable

32 (3) In this paragraph (a) “litigation costs” means costs incurred, or to be incurred, by the landlord in connection with proceedings of the kind mentioned in the table and (b) “the relevant court or tribunal” means the court or tribunal mentioned in the table in relation to these proceedings

Proceedings to which costs relate “the relevant court or tribunal” Court proceedings The court before which the proceedings are taking place or, if the application is made after proceedings are concluded, the county court First-tier Tribunal proceedings The First–tier Tribunal Upper Tribunal proceedings The Upper Tribunal Arbitration proceedings The arbitral tribunal or, if the application is made after the proceedings are concluded, the county court