Tribunal Adjusts Service Charges for Tenants Based on Usage and Costs

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL [NAME] CHAMBER ([NAME]) Tribunal Case reference : LON/00BK/LSC/2024/0229 [NAME] : Apartments 2, 4 and 5, 14 [RESPONDENT] and Apartment 1, 8 [RESPONDENT], London [POSTCODE] Applicant : [redacted] [COUNSEL] of counsel Respondent: [redacted] [COUNSEL] of counsel Type of [NAME] : Service charges Tribunal : Judge Adrian Jack, Tribunal Member [NAME] (Hons), MSc Date of decision : 24th April 2025

DECISION

2

Procedural and background 1. 14 [RESPONDENT] is an address very familiar to lawyers in London. It used to be the Central London County Court and before that the Bloomsbury County Court. In the period leading up to 2019, the site was redeveloped. The Nash frontage was retained but behind it the building was completely rebuilt with six flats fronting onto [RESPONDENT] and three flats in the mews development at the back. In the basement at the front are premises available for use as social [NAME] with gym facilities. We shall come back to the issues surrounding [NAME]. 2. [NAME], the developers, at the same time refurbished adjacent premises, 92, 96 and [ADDRESS]. The concierge is and was shared between the [RESPONDENT] block and the [ADDRESS] properties. In addition, [NAME] had an interest in 8 [RESPONDENT].

3. The four applicants all hold subleases granted in 2019 for terms expiring in 2157. The freehold is held by the [NAME]. It granted a headlease to [RESPONDENT], who in turn granted a long lease to the respondent, whom we shall refer to as the landlord. The subleases are in similar form with standard provisions for the payment of service charges on account with a balancing exercise at the end of [NAME] service charge year. The service charge year is the calendar year. In issue before us are the final service charge accounts for 2021, 2022 and 2023 and the budgeted figures for 2024. The tenants in these proceedings seek a determination of payability of these monies pursuant to section 27A of the Landlord and Tenant Act 1985.

4. The residents in the block have also brought proceedings so that the management of the block is undertaken by a right-to-manage company controlled by them. The right to manage is contested by the landlord. The Upper Tribunal has granted the right to manage to the tenants: 14 [RESPONDENT] [COMPANY] v 14 [RESPONDENT] [COMPANY], sub nom. The [RESPONDENT] v Rockwell (FC103) [COMPANY] [2025] UKUT 39 (LC). The decision is, however, under appeal to the Court of Appeal. Nothing turns on this for the purposes of the current [NAME].

5. Pursuant to the Tribunal’s directions, the parties have completed a Scott schedule. We attach this to this decision as an annex with our determinations of the individual items in dispute. In addition, however, there are six discrete issues which we deal with below. These are (1) [NAME], (2) electricity, (3) management fees, (4) gas and heat metering, (5) the effect of section 20B, and (6) the section 20 consultation requirements.

6. We heard live evidence from [NAME] [NAME] of [NAME] ([COMPANY], who are the current managers of the block, and [NAME], an experienced manager who is advising the tenants. Mr [NAME] took over the running of the premises from [COMPANY] (“Bruton”) on 1st October 2023. He thus had no

3 personal knowledge of matters prior to that date. He is a very experienced manager and was clearly doing his best to assist the Tribunal insofar as he could. Mr [NAME] is employed by [APPELLANT], a company of which Mr [APPELLANT], the third applicant, is the beneficial owner and a director. Although not independent, we found his evidence balanced and helpful.

7. Three of the applicants made witness statements, but they did not appear before us and were therefore not cross-examined on their statements. Issue 1: [NAME] 8. [NAME] is a set of rooms with a spa, gym and jacuzzi and an area for socialising with a pool table as well as a small cinema. Coffee and tea are available, but otherwise there is no refreshment. [NAME] has no dedicated staff. Fobs for entry are given out by the concierge. The residents of the nine flats in the block are entitled to access to it, but in fact access is given to some residents from flats in the adjacent blocks, which were developed at the same time as 14 [RESPONDENT]. At present, four neighbours contribute £4,000 per annum to the running costs of [NAME] (although one of these neighbours, Mr [NAME] says, has now ceased to use [NAME], so that share of the £4,000 will presumably cease).

9. Originally there was an issue as to apportionment as between the tenants, but this has been resolved between the four applicants. The remaining issue is the extent to which credit should be given against the cost of [NAME] for use by [NAME], in practice, the neighbours from [ADDRESS] and 8 [RESPONDENT] with some possible staff use.

10. The evidence of use of [NAME] by [NAME] is limited. The applicants identify third party users of [NAME] (all from 8 [RESPONDENT]) as: [RESPONDENT] and [RESPONDENT] (the sons of [NAME], the chief executive officer of [NAME]) and their guests; [NAME]; [NAME[NAME]; a woman “[NAME]”; and [NAME]. These are only the people the applicants have been able to identify. The respondent has not produced any list of users, although one would expect some record of the issuance of fobs to exist. Nor have they analysed the CCTV footage which shows the use of [NAME]. The CCTV record is only kept for one month, but a sample analysis would have been possible.

11. In the 2022 budget, it was estimated that there would be income of £20,000 per annum from neighbours against a budgeted expenditure of £62,720. The applicants say £20,000 should be allowed against [NAME] expenditure; the respondent only concede £4,000.

12. We stand back and take a view on what usage there has been of [NAME] by [NAME]. The evidence supports the view that [NAME] has not been as much of a success as it was hoped to be. The footfall is less than would originally have been envisaged. The respondent has not gainsaid the applicants’ evidence of the six named people using [NAME]. Further

4 it is right to draw some adverse inference against the landlord from its failure to produce documentary evidence of the issuance of fobs. On the other hand, given the limited footfall, the estimate of £20,000 income made by [NAME] for 2022 has not in our judgment been made out.

13. In our judgment, it is right to give an allowance of £10,000 for income which should have been received from [NAME] for use of [NAME] by those [NAME] in [NAME] of the service charge years in dispute. Issue 2: electricity 14. There were four issues in relation to electricity. The first was a mathematical error in calculating the surplus in 2020. This predates the service charge years which are before us. The second was a complaint that there was a failure to control the use of electricity in [NAME], for example by putting timers on the air conditioning. The third was a complaint that the electricity was purchased on a variable contract rather than a fixed rate contract. A reduction of 20 per cent in the cost of electricity should be allowed. The last is the effect of section 20B of the 1985 on a demand for £76,035.12. We deal with this separately as the fifth issue, below.

15. As to the second point, Mr [NAME] says that there were in fact timers on the electrical equipment in [NAME]. We accept that evidence, which was not contradicted by Mr [RESPONDENT].

16. As to the third point, the respondent accepted that there should have been a fixed rate contract, but disputed the 20 per cent discount claimed by the applicants. Mr [NAME] obtained quotes from electricity suppliers, which he exhibits in a table at para 23 of his second witness statement. In his next paragraph, he says: “I have not been able to obtain the same data for the historic periods in question. However, what is clear is that fixed energy prices for these suppliers are between 19.89% and 38.2% cheaper than deemed rates. I have sought a 20% discount to the electricity costs based upon the Respondent’s failure to enter into a fixed contract, and this level of discount is supported by the above.” 17. There are two difficulties with this approach. Firstly, it is unsafe to assume that the historic rates would have been the same. Mr [NAME] attempted to seek historic rates, but the electricity brokers he contacted were unable or unwilling to provide this information. Secondly, it is within the Tribunal’s knowledge that the standing element of a fixed rate electricity contract is generally higher than with a variable rate contract. Mr [NAME] gives no evidence about what the standing charge would have been on the various quotations he obtained. We note further that in a competitive market, as the electricity supply market undoubtedly is, a difference of as much as 20 per cent is liable to be arbitraged away.

18. Again we stand back. We note Mr [NAME] concession that a fixed rate contract should have been sought. In our judgment, a saving of the order

5 of 5 to 10 per cent could have been made. Doing the best we can we reduce the electricity contribution payable by the tenants by 7½ per cent. Issue 3: management fees 19. The managing agents’ fees (including VAT) were £8,587.50 for May to December 2020, £12,626.46 for 2021, £20,796.92 for 2022 and £18,883.04 for the period to 30th September, when management passed to Mr [NAME] and [NAME]. In addition, [NAME] charged £6,000 per annum for managing [NAME]. Mr [NAME] charges £15,300 per annum plus £5,100 for [NAME] (both sums including VAT).

20. Two issues were raised on the management fees charged by [NAME]. The first is that the rate charged by [NAME] was too high. A reasonable figure would have been £10,000 plus VAT. The second is that [NAME] provided a poor service, so their charges should be reduced in any event.

21. As to the first issue, Mr [NAME] obtained a quotation from [NAME] after discussing the requirements of the block. The offered £9,000 to £10,000 plus VAT. After a meeting with Mr [NAME] on site on 25th March 2025, they firmed up their offer of £10,000 plus VAT. An offer by [NAME] [NAME] [NAME], the manager of a neighbouring block was similar.

22. Mr [NAME] said that £10,000 plus VAT was too little. He pointed out that the manager of the instant block must arrange for the concierge service and organise the payroll, which he pointed out was time intensive. It was unclear, he said, what information [NAME] had about the work required. We note that the quotation in [NAME] letter of 20th December 2024 does not refer to the concierge or the payroll.

23. We remind ourselves that this was a very up-market development with unusual features, like [NAME]. A high standard of service would properly be expected. The cost will be correspondingly high. In our judgment, if the standard of management was as high as it should have been, [NAME] fees (including the separate fee for [NAME]) would have been justified.

24. This leads to the second issue. Was the standard of [NAME] work adequate? The tenants say the following matters show a poor standard of work: “(a) Failure to apportion [NAME] costs fairly… (b) Failure to provide proper end of year accounts and certificates: the accounts (or annual summaries) for 2020 and 2021 were signed on 18 March 2023 and the summary for 2022 was signed on 9 May 2024. These were only supplied to the applicants when the respondent was compelled to do so by tribunal directions. (c) Failure to maintain accurate ledgers/cash sheets/monthly reconciliations and/or to provide the same to the applicants on

6 request. As an example of the same, the 2022 accounts showed an alleged surplus of £23,829.70. This figure was wrong because the 2022 expenditure of £152,211.07 erroneously omitted electricity costs of £76,035.12 allegedly incurred in 2022. The total income and expenditure ought to have been £228,249.19. (d) Reliance on estimated gas meter readings and failure to have actual meter readings taken, so that accurate accounts can be generated (despite having a continuous staff presence on site). (e) Failure to ensure heat meter readings were taken or utilised for the purposes of apportioning heating/hot water costs. (f) Failure to maintain an accurate visitor log in respect of [NAME] such that [NAME] (other than guests of leaseholders) can be charged for [NAME] use. (g) Failure to serve s.20 statutory consultation notices for expenditure levels in excess of the s.20 threshold. (h) Failure to monitor the costs of night security properly or at all. (i) Failure to recover from the superior landlord the costs associated with the development and completion of the premises, and which have been charged to the service charge account.” 25. (a) and (f) we have dealt with above. As we have found, [NAME] did not seek proper recovery of monies from third party users of [NAME]. 26. (b) is made out. We consider it particularly remiss of [NAME] not to operate the standard system of raising interim service charges and then to fail timeously to calculate the balancing charge or credit once the final accounts were prepared. The accounts have still not been formally served on the tenants; certification was long delayed. 27. (c) is also made out, but only in respect of the electricity charge identified. The accounts include an entry for the £76,035.12 in respect of electricity, but then does not include the figure in the subtotal for utilities, nor in the final total of expenditure. The result is a serious misstatement of the accounts for 2022. 28. (d) and (e) we deal with below. 29. (g) we discuss below. For the reasons we give, we consider the failure to carry out section 20 consultations is at most a venial sin and does not show any serious breach of [NAME] management duties. 30. (h) was not pursued. 31. (i) is made out. There was a leak from the roof into Flat 4 (see the email of 22nd August 2023 at electronic page 327 of the bundle). In a new-build

7 this would normally be a matter for the developer, but [NAME] instead appear to have put the remedial cost through the service charge (see the invoice of 6th September 2023 at electronic page 325).

32. In our judgment, [NAME] did provide a poor service. We have, however, to beware of double-counting. The £76,035.12 electricity sum will no longer be recoverable from the tenants, because of section 20B of the 1985 Act: see below. The £10,000 allowance we have given in respect of [NAME] also benefits the tenants. Insofar as the tenants have benefited from [NAME] inadequacies, they should not be given additional credit. However, [NAME] cannot in our judgment charge a much higher fee than the comparators identified by Mr [NAME] without providing the much higher service. In our judgment [NAME] fee stands to be reduced to £10,000 plus VAT per annum (suitably pro rata’d in 2023). We will not allow any separate fee in respect of the administration of [NAME]. Issue 4: gas and heat metering 33. There is a communal gas boiler which provides heating and hot water for the individual flats and [NAME] and heating for the common parts. The issue here is the recharging of the supply to individual flats. The accounts prepared by [NAME] show all of the gas supply going through the service charge account. This means that flat-owners are charged the fixed percentage of the service charge expenditure set out in the leases rather than their actual usage. [NAME] flat has a heat meter, which measures the actual supply of heating and hot water from the communal boiler.

34. What belatedly happened in 2023 was that [NAME] instructed [NAME] [NAME], a firm of gas suppliers, to take reading from the heat meters of individual flats. By doing this, it is possible to assess the usage of individual flats. What is not allocated to individual flats then reflects the use of gas for [NAME] and the common parts. Because there is always an inefficiency in the conversion of gas to heat (Mr [NAME] reckoned the efficiency of the system would have been about 70 per cent), the splitting of costs between the tenants on the one hand and [NAME] and the common parts on the other is not necessarily straightforward, but no issue was raised before us on this.

35. The exercise carried out by [NAME] resulted in the following bills being raised: [NAME], £3,091.86; [NAME], £4,418.68; [NAME], £819.29; and [NAME], £834.76. Bills will also have been raised against the other five flats, however, these sums are not in evidence. None of the monies raised have been credited to the service charge account, so far as the documentation produced by the landlord shows.

36. We note that it should be exceptionally easy for the landlord to show what [RESPONDENT] readings of the individual flats were and what period the readings cover. The complete failure to do so is lamentable. It means that we have no rational basis for determining what sums are

8 due for individual use of the communal system (which would be for [NAME] individual flat-owner’s account) and what is due for heating the common parts and providing heating and hot water to [NAME] (which would go through the service charge account). 37. [NAME] [NAME] did not put forward a figure which we should allow for gas and heating in the service charge accounts. In these circumstances, in our judgment, the only proper course is for us to disallow the figures for gas and heating in the accounts completely. Any figure which we allowed would, as Mr [NAME] fairly accepted in cross-examination by Mr [NAME], be a “guestimate”. Issue 5: section 20B 38. As we noted above under Issue 3, point (c), the 2022 accounts did not include electricity costs of £76,035.12 in the total amount due. The service charge budget prepared in November 2021 for the service charge year 2022 showed only two figures for electricity of £3,000 [NAME], a total of £6,000. This was the basis of the interim service charge demand which was raised. The figure of £76,035.12 first appears in the final accounts for 2022, but these were only signed off by the accountants on 9th May 2024 and only served on the tenants well after 1st July 2024 as part of the disclosure in the current case.

39. Mr [NAME] argues that section 20B of the 1985 Act precludes the landlord from recovering any more than the £6,000 recovered by way of interim service charges, so that £70,035.12 of the electricity bills for 2022 is irrecoverable from the tenants. 40. [NAME] [RESPONDENT] argues that the landlord on 28th June 2023 served a section 20B notice informing the tenants of expenditure totalling £233,097.68. This demand did not admittedly include any figure for electricity, but it showed the total amount due. The electricity figure was erroneously subsumed under an entry for “office sundries”. This, however, she submitted, is not fatal to the validity of the section 20B notice.

41. We disagree. In London Borough of [NAME] v [NAME] B Association Ltd [2011] EWHC 1663 (Ch), [2011] 1 WLR 3014 at para [65] Morgan J said that his “conclusion as to interpretation of section 20B(2) is that the written notification must state a figure for the costs which have been incurred by the lessor. A notice which so states will be valid for the purpose of subsection (2) even if the costs which the lessor later puts forward in a service charge demand are in a lesser amount.” In the current case the notice of 28th June 2023 did not state that any electricity costs had been incurred. Electricity costs cannot be considered to be “office sundries”. That in our judgment is fatal to the landlord being able to recover electricity costs more than eighteen months after the costs had been incurred.

42.

Accordingly, we disallow £70,035.12 in respect of electricity costs in 2022.

9 Issue 6: section 20 consultation 43. Section 20 of the 1985 Act and the Regulations made under it requires a landlord carrying out major works to carry out a consultation with the tenants liable to contribute to the cost of the works. If a landlord fails to do so, its recovery in respect of the cost of the works is limited to £250. It is, however, open to a landlord to apply for a dispensation from the consultation requirements under section 20ZA of the 1985 Act.

44. In the current case, it is accepted that there were various works carried out which fall within section 20. The landlord says that the works were urgent, for example, where a lift failed and needed to be repaired immediately, so that there was inadequate time to carry out a consultation. 45. [NAME] [NAME] invites us to carry out an informal section 20ZA assessment. She points out that [NAME] a formal section 20ZA [NAME] would be disproportionate. In one case the relevant tenant’s contribution to one set of major works would have been £250.97. It would have been ludicrous to make a formal section 20ZA [NAME] in order to recover 97 pence.

46. We see the practical force of what [NAME] [NAME] submits. Unfortunately in our judgment we have no jurisdiction to make a section 20ZA order unless a formal [NAME] is made for dispensation from the consultation requirements.

47. We note, however, that it is open to the tenants to waive the point. If they nonetheless insist on the landlord [NAME] a section 20ZA [NAME], it is open to the Tribunal hearing that matter to consider whether to make an order for costs against the tenants under rule 13(1)(b) of The Tribunal Procedure (First-tier Tribunal) ([NAME] Chamber) Rules 2013.

48. We declare that, unless and until dispensation is given under section 20ZA of the 1985 Act, the costs recoverable against a flat-owner in respect of major works which are subject to the consultation requirements of section 20 of that Act, are limited to £250 per flat. Costs 49. We have a discretion as to the costs payable to the Tribunal. These comprise the [NAME] fee of £110 and the hearing fee of £220 paid by the tenants 50. In our judgment the tenants are the substantial winners and the landlord should reimburse them these costs.

51. As to the [NAME] under section 20C of the 1985 Act and para 5A of the 2002 Act, the landlord wishes to make written submissions. We give them time to do so. Once we see its representations we will consider what, if any, further directions we should give.

10 DECISION (a) The individual items are allowed and disallowed as set out above and in the Scott schedule annexed hereto.

(b) The landlord shall reimburse the tenants £330 in respect of the fees paid to the Tribunal.

(c) The landlord may by May 2025 make representations as to whether or not the Tribunal should make an order under section 20C of the 1985 Act or para 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 so as to prevent the recovery of the costs of these proceedings by the landlord from the tenants by way of service charge or administration charge.

Signed: [NAME]: 24th April 2025

Rights of appeal

By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) ([NAME] 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 day time limit, such [NAME] must include a request for an extension of time and the reason for not complying with the 28 day time limit; the tribunal will then look at such reason(s) and decide whether to allow the [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 [NAME] 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).

11

SCHEDULE OF LEGISLATION Landlord and Tenant Act 1985 (as amended) Section 18 (1) In the following provisions of this Act "service charge" means an amount payable by a tenant of a dwelling as part of or in addition to the rent - (a) which is payable, directly or indirectly, for services, repairs, maintenance, improvements or insurance or the landlord's costs of management, and (b) the whole or part of which varies or may vary according to the relevant costs. (2) The relevant costs are the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a superior landlord, in connection with the matters for which the service charge is payable. (3) For this purpose - (a) "costs" includes overheads, and (b) costs are relevant costs in relation to a service charge whether they are incurred, or to be incurred, in the period for which the service charge is payable or in an earlier or later period. Section 19 (1) Relevant costs shall be taken into account in determining the amount of a service charge payable for a period - (a) only to the extent that they are reasonably incurred, and (b) where they are incurred on the provisions of services or the carrying out of works, only if the services or works are of a reasonable standard; and the amount payable shall be limited accordingly. (2) Where a service charge is payable before the relevant costs are incurred, no greater amount than is reasonable is so payable, and after the relevant costs have been incurred any necessary adjustment shall be made by repayment, reduction or subsequent charges or otherwise. Section 27A (1) An [NAME] 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,

12 (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. (3) An [NAME] may also be made to the appropriate tribunal for a determination whether, if costs were incurred for services, repairs, maintenance, improvements, insurance or management of any specified description, a service charge would be payable for the costs and, if it would, as to - (a) the person by whom it would be payable, (b) the person to whom it would be payable, (c) the amount which would be payable, (d) the date at or by which it would be payable, and (e) the manner in which it would be payable. (4) No [NAME] under subsection (1) or (3) may be made in respect of a matter which - (a) has been agreed or admitted by the tenant, (b) has been, or is to be, referred to arbitration pursuant to a post-dispute arbitration agreement to which the tenant is a party, (c) has been the subject of determination by a court, or (d) has been the subject of determination by an arbitral tribunal pursuant to a post-dispute arbitration agreement. (5) But the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment. Section 20 (1) Where this section applies to any qualifying works or qualifying long term agreement, the relevant contributions of tenants are limited in accordance with subsection (6) or (7) (or both) unless the consultation requirements have been either— (a) complied with in relation to the works or agreement, or (b) dispensed with in relation to the works or agreement by (or on appeal from) the appropriate tribunal . (2) In this section “relevant contribution”, in relation to a tenant and any works or agreement, is the amount which he may be required under the terms of his lease to contribute (by the payment of service charges) to relevant costs incurred on carrying out the works or under the agreement. (3) This section applies to qualifying works if relevant costs incurred on carrying out the works exceed an appropriate amount.

13 (4) The Secretary of State may by regulations provide that this section applies to a qualifying long term agreement— (a) if relevant costs incurred under the agreement exceed an appropriate amount, or (b) if relevant costs incurred under the agreement during a period prescribed by the regulations exceed an appropriate amount. (5) An appropriate amount is an amount set by regulations made by the Secretary of State; and the regulations may make provision for either or both of the following to be an appropriate amount— (a) an amount prescribed by, or determined in accordance with, the regulations, and (b) an amount which results in the relevant contribution of any one or more tenants being an amount prescribed by, or determined in accordance with, the regulations. (6) Where an appropriate amount is set by virtue of paragraph (a) of subsection (5), the amount of the relevant costs incurred on carrying out the works or under the agreement which may be taken into account in determining the relevant contributions of tenants is limited to the appropriate amount. (7) Where an appropriate amount is set by virtue of paragraph (b) of that subsection, the amount of the relevant contribution of the tenant, or [NAME] of the tenants, whose relevant contribution would otherwise exceed the amount prescribed by, or determined in accordance with, the regulations is limited to the amount so prescribed or determined. The Service Charges (Consultation Requirements) (England) Regulations 2003

SCHEDULE 4 PART 2

CONSULTATION REQUIREMENTS FOR QUALIFYING WORKS FOR WHICH [NAME] IS NOT REQUIRED

Notice of intention 1.—(1) The landlord shall give notice in writing of his intention to carry out qualifying works— (a) to [NAME]; and (b) where a recognised tenants’ association represents some or all of the tenants, to the association. (2) The notice shall—

14 (a) describe, in general terms, the works proposed to be carried out or specify the place and hours at which a description of the proposed works may be inspected; (b) state the landlord’s reasons for considering it necessary to carry out the proposed works; (c) invite the [NAME], in writing, of observations in relation to the proposed works; and (d) specify— (i) the address to which such observations may be sent; (ii) that they must be delivered within the relevant period; and (iii) the date on which the relevant period ends. (3) The notice shall also invite [NAME] and the association (if any) to propose, within the relevant period, the name of a person from whom the landlord should try to obtain an estimate for the carrying out of the proposed works. Inspection of description of proposed works 2.—(1) Where a notice under paragraph 1 specifies a place and hours for inspection— (a) the place and hours so specified must be reasonable; and (b) a description of the proposed works must be available for inspection, free of charge, at that place and during those hours. (2) If facilities to enable copies to be taken are not made available at the times at which the description may be inspected, the landlord shall provide to any tenant, on request and free of charge, a copy of the description. Duty to have regard to observations in relation to proposed works 3. Where, within the relevant period, observations are made, in relation to the proposed works by any tenant or recognised tenants' association, the landlord shall have regard to those observations. Estimates and response to observations 4.—(1) Where, within the relevant period, a nomination is made by a recognised tenants' association (whether or not a nomination is made by any tenant), the landlord shall try to obtain an estimate from the [NAME]. (2) Where, within the relevant period, a nomination is made by only one of the tenants (whether or not a nomination is made by a recognised tenants' association), the landlord shall try to obtain an estimate from the [NAME]. (3) Where, within the relevant period, a single nomination is made by more than one tenant (whether or not a nomination is made by a recognised tenants' association), the landlord shall try to obtain an estimate— (a) from the person who received the most nominations; or

15 (b) if there is no such person, but two (or more) persons received the same number of nominations, being a number in excess of the nominations received by any other person, from one of those two (or more) persons; or (c) in any other case, from any [NAME]. (4) Where, within the relevant period, more than one nomination is made by any tenant and more than one nomination is made by a recognised tenants' association, the landlord shall try to obtain an estimate— (a) from at least one person [NAME] by a tenant; and (b) from at least one person [NAME] by the association, other than a person from whom an estimate is sought as mentioned in paragraph (a). (5) The landlord shall, in accordance with this sub-paragraph and sub- paragraphs (6) to (9)— (a) obtain estimates for the carrying out of the proposed works; (b) supply, free of charge, a statement (‘the paragraph (b) statement’) setting out— (i) as regards at least two of the estimates, the amount specified in the estimate as the estimated cost of the proposed works; and (ii) where the landlord has received observations to which (in accordance with paragraph 3) he is required to have regard, a summary of the observations and his response to them; and (c) make all of the estimates available for inspection. (6) At least one of the estimates must be that of a person wholly unconnected with the landlord. (7) For the purpose of paragraph (6), it shall be assumed that there is a connection between a person and the landlord— (a) where the landlord is a company, if the person is, or is to be, a director or manager of the company or is a close relative of any such director or manager; (b) where the landlord is a company, and the person is a partner in a [NAME], if any partner in that [NAME] is, or is to be, a director or manager of the company or is a close relative of any such director or manager; (c) where both the landlord and the person are companies, if any director or manager of one company is, or is to be, a director or manager of the other company; (d) where the person is a company, if the landlord is a director or manager of the company or is a close relative of any such director or manager; or (e) where the person is a company and the landlord is a partner in a [NAME], if any partner in that [NAME] is a director or manager of the company or is a close relative of any such director or manager. (8) Where the landlord has obtained an estimate from a [NAME], that estimate must be one of those to which the paragraph (b) statement relates.

16 (9) The paragraph (b) statement shall be supplied to, and the estimates made available for inspection by— (a) [NAME]; and (b) the secretary of the recognised tenants’ association (if any). (10) The landlord shall, by notice in writing to [NAME] and the association (if any)— (a) specify the place and hours at which the estimates may be inspected; (b) invite the [NAME], in writing, of observations in relation to those estimates; (c) specify— (i) the address to which such observations may be sent; (ii) that they must be delivered within the relevant period; and (iii) the date on which the relevant period ends. (11) Paragraph 2 shall apply to estimates made available for inspection under this paragraph as it applies to a description of proposed works made available for inspection under that paragraph. Duty to have regard to observations in relation to estimates 5. Where, within the relevant period, observations are made in relation to the estimates by a recognised tenants' association or, as the case may be, any tenant, the landlord shall have regard to those observations. Duty on entering into contract 6.—(1) Subject to sub-paragraph (2), where the landlord enters into a contract for the carrying out of qualifying works, he shall, within 21 days of entering into the contract, by notice in writing to [NAME] and the recognised tenants' association (if any)— (a) state his reasons for awarding the contract or specify the place and hours at which a statement of those reasons may be inspected; and (b) there he received observations to which (in accordance with paragraph 5) he was required to have regard, summarise the observations and set out his response to them. (2) The requirements of sub-paragraph (1) do not apply where the person with whom the contract is made is a [NAME] or submitted the lowest estimate. (3) Paragraph 2 shall apply to a statement made available for inspection under this paragraph as it applies to a description of proposed works made available for inspection under that paragraph.

SCHEDULE DISPUTED SERVICE CHARGES S/C YEAR ENDED 2021 CASE: LON/00BK/LSC/2024/0229 PREMISES: Apts 1, 2 and 4, 14 [RESPONDENT] and Apartment 1 at 8 [RESPONDENT], London, [POSTCODE] ITEM COST TENANT'S COMMENTS APPLICANT PROPOSAL RESPONDENT'S COMMENTS R's Prospoal LEAVE BLANK FOR THE TRIBUNAL Employment Costs £21,926.40 No challenge, save as may be identified in any specific invoices below. £21,926.40 Agreed. Night security £22,971.87 Refer to witness statement. Challenged on the basis of reasonableness and cost-benefit of providing security services. 50% discount sought. £11,486.00 Refer to witness statement. The costs of night security were properly and reasonably incurred. Applicant Reply: No further comment. Item remains disputed. Agreed. Uniforms £133.33 No challenge, save as may be identified in any specific invoices below. £133.33 Agreed. Landline, lift line and broadband £297.48 No challenge, save as may be identified in any specific invoices below. £297.48 Agreed. Office sundries £760.36 No challenge, save as may be identified in any specific invoices below. £760.36 Agreed. Staff training £78.88 No challenge, save as may be identified in any specific invoices below. £78.88 Agreed. Gas £3,938.16 Refer to witness statement and statement of case. Costs not in dispute but basis of apportionment challenged. £3,938.16 Refer to witness statement and Statement of Case. The costs of gas were properly and reasonably incurred. Applicant Reply: No further comment. Item remains disputed. Refer also to Applicants Reply and/or Second Witness Statement of [NAME]. See general discussion. Cleaning £10,790.40 No challenge, save as may be identified in any specific invoices below. £10,790.40 Agreed. Window cleaning £1,102.50 No challenge, save as may be identified in any specific invoices below. £1,102.50 Agreed. Gardening £1,020.00 Refer to witness statement. Unable to identify any gardening invoices for 2021. There are no communal gardens at the [NAME] and the lease does not permit recovery of costs relating to gardening. Cost disputed in full. £0.00 Whilst the costs have been described as gardening in the accounts it is apparent from the supporting invoices (attached) that the costs relate to pressure washing the external parts of the Building and were therefore properly and reasonably incurred. Applicant Reply: If Respondent is correct then it raises the question of which invoices are comprised within the "Cleaning" cost above as Applicant is unable to determine this based upon the information supplied by the Respondent. Cost therefore disputed. Pressure washing is outside. This item is agreed. Mechanical and electrical repairs £1,608.90 No challenge, save as may be identified in any specific invoices below. £1,608.90 Agreed. Boiler maintenance £288.00 No challenge, save as may be identified in any specific invoices below. £288.00 Agreed. Television and satellite £140.11 No challenge, save as may be identified in any specific invoices below. £140.11 Agreed.

Lift repairs £5,052.55 Refer to witness statement. Challenged on the basis of numerous breakdowns to new lifts which ought to be covered under warranty. Additionally, one invoice for £1648.54 exceeds the s.20 threshold of £1185.56. 50% discount to repair costs (but not maintenance costs) proposed - a discount of £1563.78 £3,788.78 Refer to witness statement and Statement of Case regarding section 20 consultation. The Landlord seeks dispensation in relation to [NAME]' invoice dated 05/05/21 in the sum of £1,648.54. The cost of repairs were incurred after the defects period expired on 04/05/2021 and were not therefore covered - see comments in 2020. The costs were therefore properly and reasonably incurred as part of the service charge. Applicant Reply: No further comment. Item remains disputed. /636-644, warrantee liability expired after 4.5.2021. Some callouts for misuse and some for afterwards. Applicants say that builders were still on site, so misuse may have been the builders. [NAME] £2,385.47 No challenge, save as may be identified in any specific invoices below. £2,385.47 Agreed. [NAME] £698.98 No challenge, save as may be identified in any specific invoices below. £698.98 Agreed. [NAME] £1,260.00 Cost comprises 2 x invoices from [NAME]: (1) [NAME] for £780 and (2) [NAME] for £480. Unclear what "[NAME]" relates to therefore disputed £480. £780.00 [NAME] is the online compliance risk management system that affords the [NAME] Manager visibility of the [NAME] performance of the Building. Such costs were properly and reasonably incurred as part of the service charge. Applicant Reply: Applicant does not accept that the cost of software / compliance tools are recoverable. [NAME] is challenged. Respondents say the software is for this [NAME] only: /657. [NAME] £34.81 No challenge, save as may be identified in any specific invoices below. £34.81 Agreed. General repairs £156.00 No challenge, save as may be identified in any specific invoices below. £156.00 Agreed. Contingency £78.89 A contingency is not appropriate for audited accounts but given the de minimis sum, no challenge £76.89 Agreed. Bank interest received -£1.21 No challenge, save as may be identified in any specific invoices below. -£1.21 Agreed. Miscellaneous income -£2,142.67 No corresponding paperwork. No challenge on the basis it serves to reduce service charge liabilities. -£2,142.67 Agreed. Management Fees £12,626.46 Refer to Statement.of Case and witness statement Challenged on the basis of unreasonable standard of service. £6,000.00 Refer to witness statement and Statement of Case. Applicant Reply: No further comment. Item remains disputed. As per general discussion. Forward Funding - Works instructed 30/12/2019 - External Repairs £4,106.40 Refer to witness statement. Unable to identify corresponding invoices. Relates to works instructed prior to start of service charge regime. No section 20 notices. £0.00 A copy of the invoices totalling £4,106.40 is attached. Refer to witness statement and Statement of Case regarding section 20 consultation. The Landlord seeks dispensation in relation to [NAME]'s invoice dated 26/10/21 in the sum of £2,364. Applicant Reply: Respondent has supplied 208 pages of invoices with its Statement of Case. There is nothing to identify which of those invoices apparently amount to the £4106.40 referred to. The Applicant cannot comment further and disputes the costs. Forward funding is misnomer: it is /666-667, works. One items is subject to a s.20 challenge, where the £250 cap applies: see separate discussion. Otherewise all agreed., TOTAL £89,312.07 £64,327.57 (See below) INVOICES DISPUTED Where it has not been possible to reconcile invoices against the head of cost, "no challenge" may have been stated above. However the following invoices are also disputed.

[COMPANY] £960.00 This is an invoice dated 01/09/2021 for a welding repair to an external gate. The Applicants do not know what this relates to as there are no external gates exclusively serving the [NAME]. The invoice is assumed to relate to the vehicular gate in the rear mews, which is utilised by the wider terrace. Cost therefore disputed as believed not relevant to [NAME]. -£960.00 The costs relate to the gate in the [RESPONDENT] in accordance with the Landlord's obligations under the Argosy House Transfer (as defined in the Leases). The lessees enjoy a right of access to and egress from the Building over this roadway/walkway which they share in common with the owners and/or occupiers of the Adjoining Premises. Such costs are recoverable under clause 10.1 of the Leases although only a fair proportion is attributable to the Building. For reasons that are unclear to the Respondent, it appears [RESPONDENT] incorrectly allocated all of the costs to the Building instead of a fair proportion. Given the small sums involved the Respondent has not sought reapportion the costs. Applicant Reply: Unable to locate a copy of the Transfer. If Respondent is correct then Applicants wish to understand the basis of apportionment as the road/walkway to the rear serves numerous buildings including the mews properties and garages and yet Respondent appears to seek around 50% of the cost from the [NAME]. £473.43 Respondent concedes this. [RESPONDENT] £2,364.00 Invoice relates to water ingress into Flat 5, 14 [RESPONDENT] and states there is a defect with the sliding door. Respondent or window installer should be responsible for this defect on the basis of the [NAME] being a new development. -£2,364.00 See comments above. Applicant Reply: No further comment. Item remains disputed. Only the s.20 point is in dispute: see general discussion on this. TOTAL TOTAL PROPOSED BY APPLICANTS FOR 2021 £61,003.57 £473.43