Tenant Wins Challenge Against Unreasonable Service Charges

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : HAV/29UB/LSC/2025/0746 Property : [ADDRESS], [POSTCODE] Applicant : [redacted] : None Respondent : [redacted] :

Mr [COUNSEL] [NAME] [NAME] [NAME] of [NAME] : Determination of liability to pay and reasonableness of service charges under section 27A of the Landlord and Tenant Act 1985

Tribunal Members : [NAME] [NAME] Judge D Gethin Venue : Ashford Tribunal Centre Date of Hearing : 29 April 2026 Date of Decisions : 17 June 2026

DECISION

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Summary of Decisions

(1) The Tribunal determined the sums that the Applicant is liable to pay for the [NAME] for the respective years are as follows:

24 June 2024 to 23 June 2025 £333.33

24 June 2025 to 23 June 2026 £333.33

(2) The Tribunal determines that the Respondent shall pay the Applicant £341 within 28 days of this Decision, in respect of the reimbursement of the Tribunal’s fees incurred by the Applicant.

(3) The Tribunal makes an order under section 20C of the Landlord and Tenant Act 1985 so that none of the Respondent’s costs arising from this [NAME], if any, may be passed to the Applicant through any service charge.

(4) The Tribunal makes an order under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 so that none of the Respondent’s costs arising from this [NAME], if any, can be sought from the Applicant.

Introduction 1. The Applicant seeks a determination pursuant to s.27A of the Landlord and Tenant Act 1985 (“LTA 1985”) and Schedule 11 to the Commonhold and Leasehold Reform Act 2002 (“CLRA 2002”) as to the amount of service charges and (where applicable) administration charges payable by the Applicant in respect of the service charge years 2024-2025 and 2025-2026.

2. The Applicant also seeks an order for the limitation of the Respondent’s costs in the proceedings under section 20C of the Landlord and Tenant Act 1985.

3. Further to this the Applicant also seeks an order for the limitation of the Respondent’s costs in the proceedings under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002.

4. The Tribunal had the benefit of a 200-page (albeit index numbered 1 - 155) PDF Hearing Bundle. PDF page references to the hearing bundle are [XX], whilst the index page references are denoted I[XX].

The Background

5. The subject property is known as Flat 37, Bluebell House, 29 – 51 [ADDRESS] [POSTCODE] (“the Property”). It is a flat situated within a four-storey block of 12 flats built around 2015.

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6. Neither party requested an inspection and the Tribunal did not consider that one was necessary, nor would it have been proportionate to the issues in dispute.

7. Mr [NAME] holds a long lease of [ADDRESS]. It is a tripartite lease, in which the original parties were [APPELLANT] and Mr [APPELLANT], the Applicant, and [APPELLANT], the Respondent.

8. The Tribunal notes the service charge year runs from 24 June in any year to 23 June in the following year.

9. [COMPANY] acquired the freehold of the Property on or around 21 December 2022.

10. Historically the Respondent sourced the [NAME] for the block.

11. The Applicant states in his [NAME] that the insurance cost for 2023/24 was £2,000. Albeit, as set out below in paragraph 39, this was a misunderstanding which the Applicant accepted in the hearing.

12. On or around 22 December 2022 [RESPONDENT], as freeholder, wrote to the Respondent, at their managing agent [RESPONDENT], stating that they should either amend their existing policy to make [RESPONDENT] and the Respondent the named parties on the policy or to use their broker, [NAME], to place cover with Covea, their approved insurer.

13. Thereon in it was [NAME] broker who placed the [NAME] cover for the periods 2024/25 and 2025/26.

14. Following this, the insurance premiums were indicated in the service charge budget at £5,500 for 2024/25 and £7,000 for 2025/26. Albeit these were budgeted figures and the actual premiums varied from this.

15. The Applicant challenged the sums and the level of cover with [APPELLANT] and, unsatisfied with the response, the Applicant brought this [NAME] to challenge the [NAME] premium for the service charge years 2024/25 and 2025/26.

16. The [NAME] was brought initially against [COMPANY] as the freeholder. For reasons set out below in paragraphs 25 - 28, the [NAME] should have been brought against [COMPANY].

The Lease

17. The Lease of Flat 37 [10-47] I[6a-6am] is a tripartite lease, as set out above. It is dated 28 October 2015 and grants a term of 125 years, from 1 June 2014. A rent is reserved at £250 per annum.

18. Cause 7-2.1 of Schedule 7: Insurance [41] I[6af] sets out the following:

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“The Management Company covenants with the Tenant to insure the Building in the name of the Landlord unless the Insurance is vitiated by any act of the Tenant or by anyone at the Building expressly or by implication with his authority and under his control.”

19. [NAME] at, paragraph 4-19 of Schedule 4 of the lease [31] I[6v], covenants to pay the Service Charge which comprises The Building Fund Area Due Proportion and The Estate Fund Due Proportion (as defined at clause 1.1.25 [16] I[6g] and clauses 1.1.3 and 1.1.9 [14] I[6e]).

20. The Building Fund Due Proportion means a one twelfth proportion of The Building Fund Expenses (see clauses 1.1.3 and 1.1.5 [14] I[6e]).

21. The Estate Fund Due Proportion means a reasonable proportion of The Estate Fund Maintenance Expenses which means the monies expended by the Respondent in providing services specified in Schedule 6 paragraph 6-3 (see clauses 1.1.9 and 1.1.10 [14] I[6e]).

22. Those Services include at Schedule 6 paragraph 6.3.16 “performing the Landlord’s and Management Company’s other obligations in this Lease…” which includes the Management Company’s covenant “with the Tenant to insure the Building in the name of the Landlord…” under Schedule 7 paragraph 7-2.1.

23. The Management Company’s Expenses are also defined to include the insurance for the building pursuant to clause 1.1.17.2 [15-16] I[6f-6g].

24. The parties agreed that the service charges demanded in relation to the insurance cost of the building were payable by the Applicant under the terms of the Lease. The Law Service charge s18 LTA 1985 25. LTA 1985 defines service charge in s18. 18 Meaning of “service charge” and “relevant costs” (1) In the following provisions of this Act “service charge” means an amount payable by a tenant of a dwelling as part of or in addition to the rent – (a) which is payable, directly or indirectly, for services, repairs, maintenance, improvements or insurance or the landlord’s costs of management, and (b) the whole or part of which varies or may vary according to the relevant costs.

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(2) The relevant costs are the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a superior landlord, in connection with the matters for which the service charge is payable. (3) For this purpose – (a) “costs” includes overheads, and (b) costs are relevant costs in relation to a service charge whether they are incurred, or to be incurred, in the period for which the service charge is payable or in an earlier or later period.”

Limitation of service charges: reasonableness s19 26. S19 of the LTA provides: (1) Relevant costs shall be taken into account in determining the amount of a service charge payable for a period— (a) only to the extent that they are reasonably incurred, and (b) where they are incurred on the 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. (2) Where a service charge is payable before the relevant costs are incurred, no greater amount than is reasonable is so payable, and after the relevant costs have been incurred any necessary adjustment shall be made by repayment, reduction or subsequent charges or otherwise.

27. In [NAME] v Hounslow LBC [2017] EWCA Civ 45, the Court of Appeal said that service charge costs must be judged by asking whether they were reasonable when looked at objectively. This means the tribunal should not simply replace the landlord’s decision with its own. If the landlord chose a sensible and reasonable way of doing the work, then the cost can still be considered reasonable even if there was another cheaper option that would also have been acceptable.

Procedure and The Hearing

28. The [NAME] was made on 5th August 2025.

29. The [NAME] brought relates solely to [ADDRESS], [POSTCODE].

30. In Directions dated 11 December 2025 the Tribunal stated, on examining the

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lease the Tribunal considers that the correct respondent may be [RESPONDENT], and it therefore added them as 2nd respondent.

31. The Directions also listed the matter for a Case Management and Dispute Resolution Hearing (CMDR) on 16 January 2026 at 2:00pm.

32. At the CMDR, upon hearing from Counsel for [NAME] that [COUNSEL] had no ability under the lease to demand a service charge, the Tribunal removed them as a respondent.

33. By letter dated 6 March 2026 the Tribunal notified the parties that the hearing was scheduled to take place on 29 April 2026 at Ashford Tribunal Hearing Centre.

34. A hearing bundle of 200 pages was filed with the Tribunal, which included the Applicant’s Statement of Case.

35. Mr [APPELLANT], the Applicant, represented himself.

36. The Respondent was represented by Mr [RESPONDENT] [NAME].

37. The Tribunal was grateful to both Mr [NAME] and Mr [NAME] for their clear and succinct submissions and their conduct throughout the hearing.

The Issues

38. At the hearing the Applicant and Respondent confirmed the only matter in issue was:

(i) The reasonableness of the [NAME] for service charge years 2024/25 and 2025/26.

39. Section 19 of the 1985 Act 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. Having heard evidence and submissions from the parties and considered all the documents provided, the Tribunal has made determinations set out below.

Insurance 2024/25 & 2025/26

40. As mentioned above, the Applicant in his [NAME] stated that the [NAME] premiums being challenged were for the following sums:

2024/25 - £5,500. 2025/26 - £7,000.

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The Tribunal’s decisions

41. The Tribunal determines that the amounts payable in respect of the B uildings’ Insurance charged are as follows:

2024/25 - £4,000. 2025/26 - £4,000.

Reasons for the Tribunal’s decisions

42. The Applicant initially submitted that the insurance premiums were as follows:

2023/24 - £2,000. 2024/25 - £5,500. 2025/26 - £7,000.

43. However, in his evidence Mr [NAME] explained that this was not the case and that these were budget figures and that the actual cost of the premiums differed. He stated the premium costs to be:

01/01/2023 – 31/12/2023 - £3,386.82 [59] I[17a]. 21/12/2023 – 21/12/2024 - £5,484.49 [60] I[18] 21/12/2024 – 20/12/2025 - £6,684.57 [61] I[19]. 2025 – 2026 - £5,193.95.

44. Mr [NAME] also set out how the insurance is due part way through the service charge year and therefore any given policy period straddles two service charge years. As a result, they do not know what the new quote will be at the time of producing the service charge budget for the year.

45. Mr [NAME] helpfully explained that where there is a shortfall, the practice has been to recover the shortfall through the demand for the following year, hence the reason the 2025/26 budget for insurance was significantly more than the 2025/26 premium amount, to account for the shortfall from the previous year. All of these submissions and explanations were accepted by the Applicant.

46. We would draw the parties’ attention to the fact that under paragraph 6.2-8 of Schedule 6, the Management Company is to provide to the tenants an account of the Service Charge payable for that financial year as soon as reasonably practicable after the end of each financial year. If there is a shortfall, the tenant shall pay it, and if there has been an overpayment, the tenant can elect for it either to be credited against future payments of Service Charge or to transfer the balance to the reserve fund.

47. Mr [NAME] did accept however upon [NAME] taking over the sourcing of the insurance that premiums did start to rise. When the Applicant raised these concerns, [APPELLANT] did take them to [NAME] and were told that they use their own broker and test the market. However, the Respondent, and their managing agent, should have been alive to the lease provisions, particularly that it was their obligation to insure the building, not the landlord’s and reverted accordingly to the letter of 22 December 2022.

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48. The Tribunal welcomed the submission from Mr [NAME] that following the above being highlighted to the parties by the Tribunal at the CMDR that the responsibility for sourcing the insurance is now back in the hands of [RESPONDENT], on behalf of the Respondent, and there was an expectation that premiums for future years would likely revert to market norms.

49. Mr [RESPONDENT] confirmed that the Respondent paid the insurance premium to the broker direct and not to [NAME].

50. The Applicant helpfully provided five quotations (dated around the end of July / beginning of August 2025) for suitable [NAME] cover for the block from reputable insurers [76 - 186] I[34 – 143], these quotes were:

£3,920.45 [81] I[39] £4,200.00 [90] I[48] £3,919.61 [137] I[94] £4,749.83 [156] I[113] £4,724.83 [182] I[139]

51. The Tribunal considered that these quotations were persuasive in demonstrating that there was a prima facie case that the insurance premiums charged were unreasonable.

52. The Respondent, not being the company that had sourced the insurance, but ultimately being the one that should have, was unable to provide details of the process undertaken, save that it had been completed through [NAME] broker. The Respondent was unable to demonstrate that, when viewed objectively, the process for sourcing insurance was a logical and reasonable one and in line with property management and market norms.

53. The Tribunal therefore found that, following [NAME], neither the processes nor the outcomes were reasonable.

54. The Tribunal, having considered the evidence at the hearing, the bundle and submissions from the parties determined that the reasonable sums for the insurance would be towards the lower end of the quotations provided.

55. Mindful that the market has been variable in recent years, and that following the Competition and Markets Authority’s recent report on the sector premiums have begun to reduce as a result, we applied our knowledge and expertise as a specialist Tribunal to decide what would have been a reasonable premium at the time. We decided that a premium of £4,000.00 per annum for both years under consideration would be reasonable.

56. It follows that the Applicant’s contribution towards the Buildings insurance in the relevant years would be £333.33 on the basis that he is required to pay a one twelfth contribution towards the costs of insuring the Building.

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[NAME] under s.20C, Sch 11 Para 5A and refund of fees

57. Section 20C of the 1985 Act enables a tenant to apply for an order that all or any of the costs incurred, or to be incurred, in connection with the proceedings before the Tribunal are not to be regarded as relevant costs to be taken into account in determining the amount of service charge payable by the tenant or any other person specified in the [NAME]. By virtue of section 20C (3) the Tribunal may then make such order as it considers just and equitable in the circumstances.

58. Further, Paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 permits a tenant to apply for an order reducing or extinguishing the tenant's liability to pay a particular administration charge in respect of litigation costs, including costs in proceedings in the First-tier Tribunal. The Tribunal may make whatever order on the [NAME] it considers to be just and equitable.

59. The Applicant indicated within their [NAME] form that they wished to apply for such orders.

60. The Tribunal has determined significant reductions to the service charges levied across the service charge items considered.

61. The Applicant has acted wholly reasonably in bringing the [NAME] and in doing so has highlighted failings on the part of the Respondent, and their managing agent, in terms of the administration of the lease obligation, in so far as they relate to the placing of the insurance of the building.

62. Therefore, The Tribunal finds in the circumstances that it is just, equitable, and reasonable to determine that the Respondent shall not seek to recover the costs incurred in relation to these proceedings from the Applicant as part of the service charge, or from the applicants by way of any administration charge.

63. At the end of the hearing, the Applicant made an [NAME] for a refund of the fees that he had paid in respect of the [NAME] and hearing. Having heard the submissions from the parties and taking into account the determinations above, the Tribunal orders the Respondent to refund any fees paid by the Applicant within 28 days of the date of this decision.

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Rights of Appeal By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the tribunal is required to notify the parties about any right of appeal they may have. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber), then a written [NAME] for permission must be made to the First- tier Tribunal at the regional office which has been dealing with the case. The [NAME] for permission to appeal must arrive at the regional office within 28 days after the tribunal sends written reasons for the decision to the [NAME]. If the [NAME] is not made within the 28-days’ time limit, such [NAME] must include a request for an extension of time and the reason for not complying with the 28-days’ time limit; the tribunal will then look at such reason(s) and decide whether to allow the [NAME] for permission to appeal to proceed, despite not being within the time limit. The [NAME] for permission to appeal must identify the decision of the tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal and state the result the party [NAME] the [NAME] is seeking. If the tribunal refuses to grant permission to appeal, a further [NAME] for permission may be made to the Upper Tribunal (Lands Chamber).