Tribunal Rules on Service Charges for Warrior House Residents

OUTCOME: Dismissed

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FIRST – TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) __________________________________________________________

Case Reference CAM/00KF/LIS/2023/0016

Property Flats 2 & 6 & 9 [NAME], 42-[ADDRESS], Southend on Sea, Essex [POSTCODE]

Applicants (1) [NAME], [NAME] 6 [NAME] (2) Mr and Mrs [NAME], [NAME] of 2 & 9 [NAME] by [NAME] [RESPONDENT]

Respondent [RESPONDENT] by [COUNSEL] (barrister) instructed by [COMPANY] (solicitors)

Application Determination of the liability to pay and reasonableness of service charges and administration charges pursuant to s27A of the Landlord Tenant Act 1985.

Tribunal Judge Stephen Reeder Valuer member [NAME] of hearing 11 February 2025 Date of Decision 13 March 2026

__________________________________________________________________________________

DECISION __________________________________________________________________________________

© CROWN COPYRIGHT

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DECISION

1. The tribunal determines sums payable and reasonable as service charges in accordance with the issue specific determinations set out in the Reasons below. The Respondent should calculate the service charge based on those determinations.

2. The applicants seek an order pursuant to s20C of the Landlord & Tenant Act 1985 and/or paragraph 5A in Schedule 11 to the Commonhold and Leasehold Reform Act 2002 which reduces or extinguishes the [NAME]’ liability to pay an administration charge in respect of litigation costs as contractual costs under the lease. Having regard to the tribunal’s determinations and the outcome of the proceedings, the tribunal does not make an order pursuant to s20C of the Landlord & Tenant Act 1985 and/or paragraph 5A in Schedule 11 to the Commonhold and Leasehold Reform Act 2002 to extinguish the applicant’s liability to pay a service or administration charge in respect of litigation costs as contractual costs under the lease.

3. The applicants have paid both an issue fee of £100 and a hearing fee of £200. Having regard to Rule 13(2) of The Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, and to the tribunal’s determinations and the outcome of the proceedings, the tribunal does not make an order directing the respondent to re-imburse those costs.

4. In considering whether to exercise its power to make any party costs order the Tribunal has careful regard to section 29(2) of the Tribunals, Courts and Enforcement Act 2007 and Rule 13(1)(b) of the Tribunal Procedure (First-tier Tribunal)(Property Chamber) Rules 2013 read against the overriding objective in Rule 3 of the 2013 Rules and the guidance given by the Chamber President and Deputy President in [ADDRESS] [COMPANY] v [NAME], [NAME] v [NAME], [NAME] v [NAME] Rd Management [COMPANY] [2016] UKUT 0290 (LC). Having regard to the tribunal’s determinations, the outcome of the application and the conduct of the parties the tribunal does not make any party costs order.

REASONS

The application, the parties and the property

5. The application is brought pursuant to 27A(1) of the Landlord & Tenant Act 1985 as amended by the Commonhold & Leasehold Reform Act 2002 to determine the liability to pay and the reasonableness of service charges demanded in respect of flats 2, 6 and 9 [NAME], 42-[ADDRESS], Southend on Sea, Essex [POSTCODE].

6. The first applicant is [APPELLANT] who is [NAME] 6 [NAME]. The joint second applicants are Mr and Mrs [NAME] who are the [NAME] of 2 & 9 [NAME].

7. The respondent is [RESPONDENT] who is the freeholder owner and the head leaseholder of [NAME]. As head leaseholder it is the landlord of the applicant [NAME].

8. [NAME] is a mixed use threestorey building with a basement. It was constructed in the 1960s of reinforced concrete frame with brick and block infill walls under a [NAME] asphalt and felt roof. It was used as a department store until the 1980s when it was converted to mixed use. At all material times for the purposes of this application it has been demised to commercial use on the basement, ground floor, and first floor. At all material times for the purposes of this application it has been

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demised to 19 residential units on the second floor. At all material times for the purposes of this application the building has been managed by [NAME].

9. The basement operates as a night club. The ground floor units operate as an NHS clinic which accepts clients by appointment and walk-in, and 5 shop type units. The first floor comprises NHS offices and a membership snooker club. The second floor is occupied by the 19 residential units including those owned by leasehold interest by [NAME] (6 [NAME]) and by Mr and Mrs [NAME] (2 & 9 [NAME]).

10. The application was commenced by pro forma leasehold 3 form dated 11 August 2023. The appended pages to this form mean that the whole extends to 53 pages. The expressly stated prescribed purpose of the pro forma page is [for the applicants to] “give a clear outline of your case so that the tribunal understands what the application is about”. The appended pages include a large number of questions or averments which do not constitute a challenge to a service charge or to relevant costs recharged within the scope of the tribunal’s jurisdiction pursuant to the Landlord & Tenant Act 1985 as amended by the Commonhold & Leasehold Reform Act 2002. The tribunal does not therefore consider those questions or averments. This is the same position faced by a previous first-tier tribunal in respect of which [NAME] represented the [COMPANY] as is recorded at paragraph 9 of its decision dated 13 September 2018.

11. The accounting years challenged are 2018-2024 inclusive. The accounting year runs from 1 April to 31 March. Judge Wayte made a case management order on 23 September 2024 which includes a determination that the application cannot challenge service charges prior to August 2018. The compelling rationale for that order is August 2018 is the date at which the respondent [RESPONDENT] acquired its interest as owner of the headlease. No party has sought reconsideration of that order. The tribunal notes the date and scope of the previous first-tier tribunal decision dated 13 September 2018 relating to [NAME] and determining an application brought by [NAME] for the [COMPANY] (CAM/ 00KF/LSC/2018/0006). It determined the 2018 service charge year. The tribunal does not therefore consider the 2108 accounting year on this current application before it. The tribunal considers the service charge accounting years 2019- 2024 inclusive.

12. Judge Wayte’s case management order of 23 September 2024 also directed the parties to file a Scott schedule identifying the disputed service charges and setting out the parties’ respective contentions in respect of such charges. This has produced a 48-page Scott schedule included in the documents bundle filed with the tribunal.

13. At the outset of the hearing the parties agreed that there are a number of generic issues for determination by the tribunal in respect of each of the service charge accounting years challenged. Those issues are -

a. The individual service charge proportion payable by the applicants as [NAME] of residential units. b. Whether the cost of a [NAME] is reasonably incurred given the nature of [NAME]. c. The service contribution charge payable toward the cost of [NAME] by the commercial unit operating as a medical centre. d. Whether the cost of [NAME]’s mobile phone and diary can be recharged or should be included in the management charge.

14. The appendices to the pro forma ‘leasehold 3’ application form in the bundle filed for the hearing, include the details of the [NAME] of the residential units at 1, 3 ,5, 7, 8, 10, 12, and 14 [NAME]. They are not listed as applicants. They are referred to as “a list of [NAME] leaseholder names and addresses to whom any decisions on the [service charge] will be associated……given this matter, only those names listed are to be reimbursed any costs related to the claim”. Reference to

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them is made in section 9 of the leasehold 3 form. The tribunal therefore determines that each of those named persons are to be included for the benefit of any section 20C LTA 1985 order made.

The hearing

15. The tribunal convened an in person and attended hearing at the [ADDRESS] [POSTCODE]. Neither party requested an inspection of [NAME] and none was made. The tribunal has been provided with a location map, floor plans, external photographs and internal photographs and so has a clear and detailed picture of [NAME]. The tribunal is satisfied that an inspection was not necessary in order to determine the issues raised in the application.

16. The applicants’ case has been represented by [APPELLANT] both for herself as first applicant and as lay representative for the second applicants.

17. The respondent has been represented by [COUNSEL] of counsel. He has been accompanied by [COUNSEL] and [COUNSEL] of [RESPONDENT] as solicitors for the respondent, [RESPONDENT] of the respondent [RESPONDENT], and [RESPONDENT] of [NAME] as the managing agents for [NAME].

18. The tribunal has been provided with a large volume of documentation for this hearing. The respondent has filed a core bundle of 379 pages, a first supplementary bundle of 416 pages, and a second supplementary bundle of 289 pages. There is an additional bundle from the applicants which provides documents not included in the respondent’s bundles.

19. The documents provided to the tribunal include the application and supporting documents filed pursuant to the case management and directions order, the respondent’s case and supporting documents filed pursuant to the same order, the applicants’ “skeleton argument”, the respondent’s “legal submissions”, and the applicants’ “supplementary response”.

20. The documents provided to the tribunal include a copy headlease, deed of variation, individual residential unit lease, service charge accounts for the relevant years, witness statements from [NAME] and Mr and & Mrs [NAME], and witness statement from [NAME] of [NAME].

21. The documents provided to the tribunal include the Sorrel Property terms of business in relation to the freeholder and headlease, invoices in relation to the freeholder and headlease management, quotations and estimates and invoices relating to relevant costs incurred (including [NAME] costs), management related correspondence, and a copy of a September 2018 first-tier tribunal decision relating to [NAME] (CAM/ 00KF/LSC/2018/0006).

22. The tribunal has been provided with copies of the caselaw referred to in the submissions, being Shilling & Ors & Canary Riverside Development [2005] EW Lands LRX/26/2005, [COMPANY] [2013] UKUT 0592(LC), and Waaler & Hounslow LBC [2017] EWCA Civ 45.

23. The tribunal has considered the evidence and information with care, and the parties have been given the opportunity to refer to it in their oral submissions to the tribunal. No party has sought to cross examine or otherwise put questions to the makers of the evidential statements filed. The application has been determined on the basis of the parties’ oral arguments and the documents before the tribunal. We are grateful to all for their assistance. The hearing process detained us for the entirety of the allocated time of one full day.

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The law

24. The Landlord & Tenant Act 1985 as amended by the Commonhold & Leasehold Reform Act 2002 (hereafter ‘the LTA 1985’) sets out the Tribunal’s jurisdiction to determine liability to pay service charges. Section 27A(1) of 1985 Act provides as follows –

An application may be made to a leasehold valuation 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 is payable.

25. Section 18 sets out the meanings of ‘service charge’ and ‘relevant costs’.

26. Section 19 sets out that jurisdiction to limit service charges to those relevant costs which are reasonably incurred and to those which arise from works and services of a reasonable standard.

27. Section 20C LTA 1985 sets out the jurisdiction, where the tribunal considers that it is just and equitable to do so, to grant an order providing that all or any of the costs incurred by the landlord in connection with proceedings before this tribunal are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by [NAME] or any [NAME] person or persons specified in the application. Paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 provides jurisdiction for the Tribunal to make an order to reduce or extinguish the tenant’s’ liability to pay an administration charge in respect of litigation costs.

28. Part 1 of Schedule 11 to the Commonhold & Leasehold Reform Act 2002 (hereafter ‘CLARA 2002’) sets out the Tribunal’s jurisdiction to determine the payability and reasonableness of administration charges. Section 5(1) of Part 1 to Schedule 11 provides –

An application may be made to a leasehold valuation tribunal for a determination whether an administration charge is payable and, if it is, as to-- (a) the person by whom it is payable, (b) the person to whom it is payable, (c) the amount which is payable, (d) the date at or by which it is payable, and (e) the manner in which it is payable.

29. Section 1 provides a definition of ‘administration charge’. Sections 2 & 3 provide that a variable administration charge is payable only to the extent that the charge specified in lease is reasonable, that the formula specified for determining the charge is reasonable, and that amount of the charge is reasonable.

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The leases

The headlease and related deeds of variation

30. The tribunal is provided with a copy of the headlease dated 28 November 1997.

31. Clause 1.8 defines ‘the building’ to be 42-48 [NAME].

32. Clause 1.9 defines ‘the premises’ to be the reception on the ground floor, the stairs stairwells and landings on the ground first and second floors and the 19 flats and the corridor on the second floor of the building.

33. Clause 1.10 defines ‘the structure’ to be the exterior and main structure of the building including….the whole or any parts of the foundations roofs main walls structural beams and slabs joists and columns and surfaces the external window frames of the flats the stairs fires escapes passageways ([NAME] than the stairs fire escapes passageways within the premises) landings terraces and all [NAME] parts of the building which are used in common by the [NAME] or occupiers thereof and the boundary walls and fences of the building and all [NAME] parts of the building which are not the responsibility of any [NAME].

34. Clause 1.12 defines ‘the flats’ to be the part of the premises comprising the 19 flats therein.

35. Clause 1.5 defines ‘the leases’ to be the leases of the flats granted by [the [NAME] under this lease]…..and any further leases granted by [NAME] during the term.

36. Clause 2.2 provides that the [NAME] is required to pay to the freeholder as rent a fair proportion (to be reasonably determined by the [NAME]’s surveyor) of the cost of the annual premium payable by the freeholder to insure the building against the insured risks in clauses 5(b),(c) of the lease, less a discount of 10%.

37. By clause 3.3 the [NAME] covenants to keep the premises and every part thereof in good and substantial and decorative repair and condition and in full working order…….and to keep clean and adequately lit the reception the stairs stairwells and landings and the passenger lift of the premises”.

38. By clause 3.4.1 the [NAME] covenants to pay to the [NAME] 32.79% of the costs and expenses incurred or to be incurred by the [NAME] in complying with the obligations on its part contained in clause 4.4 of this lease.

39. By clause 4.2.1 the head [NAME] freeholder covenants to…… keep the building incurred against loss or damage by the insured risks.

40. By clause 4.4 the head [NAME] freeholder covenants to…..keep and observe and perform in relation to the structure and on the same basis the covenants contained in clauses 4.4(p) and 5(e) and the Fourth Schedule of the [[NAME]] leases and to keep clean and adequately lit during the hours of darkness the entrance lobby the lift stairs and fire exits of the building [NAME] than those forming part of the premises.

41. The tribunal is provided with a Deed of Variation to the headlease dated 20 August 2003. This refers to an earlier Deed of Variation dated 1 April 2003 deed of variation. The tribunal has not been provided with a copy of the April 2003 Deed. The respondent states it is unable to produce a copy as it predates the acquisition of its interest. We are told that there is no copy held in the Land Registry. We are told that, despite requests from the respondent, neither the solicitors engaged at

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the time or the commercial [NAME] have provided a copy. This is unfortunate as it is this Deed which is said to vary the headlease to reserve the right of the NHS commercial [NAME] (then [NAME] of the ground floor and part of the first floor) rights of access over the corridor, lobby, lift and stairs to the ground floor and first floor to provide fire escape access from their first floor premises.

42. The Deed of Variation to the headlease dated 29 August 2003 provides for a number of variations. The variation relevant to this application is set out at clause 3.5 which adds an additional clause to the lease providing –

“to pay to [NAME] within 14 days of a written demand 67.21% of the reasonable cost incurred by [NAME] in complying with [NAME]’s repairing obligations set out in clause 3.3 hereof so far as the same relate to any part of the premises the costs of repairing or maintaining which were prior to the grant of this lease payable both by [NAME] under the leases and by the tenants and occupiers of the remainder of the building or which at any time during the term otherwise serve both the flats and the remainder of the building……”

The residential [NAME] leases

43. The tribunal is provided with the lease dated 27 February 1987 in respect of 6 [NAME]. The parties have confirmed that the leases of all of the 19 residential units on the second floor are in the same terms.

44. Clause 1(E) defines ‘the building’ as [NAME].

45. Clause 1(F) and the First Schedule define ‘the premises’ as the demised [NAME].

46. Clause 1(G) defines ‘the flats’ as those for the time being in the building

47. Clause 1(H) defines ‘the [NAME] flats’ as those flats in the building [NAME] than the premises and excluding the reserved parts.

48. Clause 1(I) defines the ‘[NAME]’ as the [NAME] of the [NAME] flats.

49. Clause 1(J) defines ‘the commercial premises’ as the commercial units in the building let or intended to be lease for commercial use and excluding the reserved parts.

50. Clause 1(K) defines ‘[NAME]’ as the [NAME] of the flats and the commercial premises.

51. Clause 1(L) defines ‘the reserved parts’ to be the access ways lobbies reception areas halls landings terraces staircases passages and lift and all [NAME] parts of the building which are used in common by the [NAME] or occupiers of the building or their visitors or any of them….

52. By clauses 4(P)(i),(ii) & (iii) the [NAME] covenant to pay in advance on 1 January and 1 July in each year on account of the sums due such sums as the auditors shall from time to time specify at their discretion to be fair and reasonable.

53. Clause 4(P)(iii) provides that at the end of each year the [NAME] shall instruct a [NAME] to act as auditors and to prepare the accounts of the amounts due and payable in in accordance with clause [4P] and if requested shall supply [NAME] with a copy of such accounts. Upon the final proportion due from [NAME] being ascertained in accordance with such accounts [NAME] shall pay any balance due to the [NAME] and any overpayment shall be set against future payments payable by [NAME] under this clause.

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54. By clause 5(3) the [NAME] covenants to…..keep the reserved parts and all fixtures and fittings therein and additions there to in a good and tenantable state of repair decoration and condition including such works of maintenance repair cleansing decorating and repainting as the [NAME] shall from time to time deem necessary expedient …..including the renewal or replacement of the reserved parts or any part or parts thereof and the cleaning and repointing of the exterior [NAME] and brickwork of the Reserved Parts where appropriate and further including the repainting and redecorating as often as the [NAME] shall deem necessary of the outside of the building and of the service cupboard doors and the resurfacing of accessways and including such [NAME] matters as may be referred to in the Fourth Schedule hereto as the [NAME] may from time to time deem necessary.

55. The matters referred to the Fourth Schedule include at paragraph 1, the costs and expenses payable to construct, repair, paint, redecorate, rebuild, cleanse, maintain and insure the Building.

56. The matters referred to the Fourth Schedule include at paragraph 2, the expenses incurred by the [NAME] in providing the services of maintenance staff and a porter or [NAME] and/or security staff if the [NAME] considers such staff desirable for the efficient management of the Building.

57. The matters referred to the Fourth Schedule include at paragraph 5, the fees and disbursements paid to any managing agents appointed by the [NAME] in respect of the management and to any [NAME] for the purposes of the lease.

The commercial unit leases

58. The tribunal has not been provided with any lease relating to the commercial units in [NAME]. The parties were not able to assist the tribunal with the terms of the same. This is unfortunate when one generic issue is the respective proportion of relevant costs between commercial and residential units in [NAME].

Discussion and determinations

59. The scope of the application for determination comprises the agreed generic issues in respect of each of the service charge accounting years challenged, and those ‘year specific’ challenges set out in the Scott schedule. The tribunal considers them in that order.

60. The generic issues for determination by the tribunal in respect of each of the service charge accounting years challenged. Those issues are –

a. The service charge proportion payable by the applicants as [NAME] of residential units. b. Whether the cost of a [NAME] is reasonably incurred given the nature of [NAME]. c. The service charge contribution payable toward the cost of [NAME] by the commercial unit operating as a medical centre. d. Whether the cost of [NAME]’s mobile phone and diary can be recharged or should be included in the management charge.

61. The additional ‘year specific’ challenges are set out in the Scott schedule pages for the respective years. The tribunal has considered each of those issues within the relevant accounting year

Generic issue - individual proportion payable by the [NAME] of residential units.

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62. The applicants contend that the [NAME] are liable to pay 32.79% of “the costs of managing, repairing and maintaining the premises (including the second floor) and structure of the building”. Applying the definitions of “premises” and “building” in the headlease, this means the [NAME] are liable to pay 32.7 % of the relevant costs incurred by the freeholder and the [NAME] in respect of the whole of [NAME].

63. The respondent contends that the [NAME] are liable to pay –

a. 100% of the costs of repair, decoration, maintenance and management of the headlease premises (which are defined in the headlease as the ground floor reception, stairs, stairwells and landings on the ground first and second floors of the building).

b. 32.79% of the access route shared with the NHS commercial tenant (the corridor, lobby, lift and stairs to the ground floor and first floor to provide fire escape access from their first-floor premises)

c. A fair proportion of the cost to the freeholder of insuring the building.

64. The residential [NAME] of [NAME] have their own ground floor entrance with stairs and landings to the first and then to second floor of the building on which the flats are situated (the ‘premises’ under the lease). The leasehold arrangements clearly provide liability for the maintenance and management of the premises and the liability to pay a service charge for that maintenance and management. It is clearly 100% of the relevant cost.

65. The Deed of Variation to the headlease dated 29 August 2003 provides at clause 3.5 that an additional clause is added providing –

66. This variation is made within the factual context of the NHS commercial tenant being granted access to the corridor, lobby, lift and stairs to the ground floor and first floor to provide fire escape access from their first-floor premises. It imposes an obligation to pay 67.21% of the relevant costs of maintain the same. This reduces the proportion due from the [NAME] to 32.79% in respect of those parts now shared with the NHS commercial tenant. It relates to relevant costs payable by both the [NAME] and occupiers of the remainder of the building, in relation to parts which serve both the flats and the remainder of the building.

67. The lease provisions are clear. The intention is clear. The context is clear. The tribunal rejects the applicant’s argument that the effect of the Deed of Variation to the headlease dated 29 August 2003 is that the [NAME] are liable to pay 32.7 % of the relevant costs incurred by the freeholder and the [NAME] in respect of the whole of [NAME].

68. The applicants contend that this issue has already been determined in their favour by a previous decision of the first-tier tribunal. We have been provided with a copy of the decision (CAM/00KF/LSC/2018/0006) made on 13 September 2018. It is a succinct decision which refers to the same head lease and a different [NAME] lease without exploring the covenants in detail. There is no mention of any Deed(s) of Variation dated 2003. It does not on its face determine that the [NAME] are liable to pay 32.7 % of the relevant costs incurred by the freeholder and

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the [NAME] covenants in respect of the whole of [NAME]. It does on its face determine that “the landlord and the head landlord have responsibilities to maintain and manage….the tenants have to pay 32.79% of what the head landlord spends and this plus what is spent by the Respondent are split between the long leaseholders with proportions which appear to be based on square footage”. Whilst we are not bound by the decision of a previous first-tier tribunal, in any event we reject the applicant’s argument that the previous tribunal determined that the residential [NAME] in [NAME] are liable for 32.79% of the relevant costs incurred by the freeholder and the [NAME] in respect of the whole of [NAME].

Generic issue – whether the cost of a [NAME] is reasonably incurred

69. [NAME] has a full-time [NAME] employed by the respondent as freeholder who works from an office on the ground floor of the building. The applicants contend that this is an unreasonable cost.

70. Clause 5(3) the [NAME] lease [NAME] covenants to, inter alia, provide such [NAME] matters as may be referred to in the Fourth Schedule hereto as the [NAME] may from time to time deem necessary.

71. The matters referred to in the Fourth Schedule include at paragraph 2, the expenses incurred by the [NAME] in providing the services of maintenance staff and a porter or [NAME] and/or security staff if the [NAME] considers such staff desirable for the efficient management of the building.

72. [NAME] has a mix of commercial and residential occupiers. Of the 19 residential flats approximately 13 are buy to let properties. The location of the building is such that anti-social behaviour is commonplace. A [NAME] has been employed since in or around 2015 and was requested by the NHS commercial tenant due to its high number of staff and visitors. [NAME]’s responsibilities cover [NAME] as a whole including the retained and common parts used by the [NAME]. The NHS commercial tenant pays £16,000 p/a toward to cost of employing [NAME]. The balance is recharged as a service charge to all of the residential and commercial units. The residential [NAME] proportion is 32.79% apportioned between them.

73. [NAME] is paid at the national minimum wage rate. This is borne out by the accounts. The service charge accounts include a specific item for [NAME]’s wages which is recharged to the [NAME] (to be apportioned between them) which are £4,423 for 2019, £3,710 for 2020, £3,974 for 2021, £4,257 for 2022, £5,030 for 2023, and £4,625 for 2024.

74. The tribunal determines that the leasehold provisions provide for the employment of a [NAME], the factual context establishes that it is reasonable to do so, and the cost of doing so is reasonable. The relevant costs are reasonable and are payable in the sums recharged.

Generic issue - the service charge contribution due for the costs of [NAME] from the commercial unit in use as a medical centre

75. The jurisdiction of the tribunal extends to determining the service charge contribution due from the applicants as [NAME] of residential units in [NAME]. It does not extend to determining the service charge contribution due from the medical centre as one of the commercial units in [NAME].

76. The contribution due from the [NAME] is 32.79% (to be apportioned amongst them) of the actual relevant cost (net of the £16,000 paid the NHS commercial tenant). The tribunal notes that over time this if this seemingly fixed contribution does not increase in line with any increase in the

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overall costs of [NAME] then this may be a relevant consideration when assessing the reasonableness of that overall cost.

Generic issue - whether the cost of [NAME]’s mobile phone can be recharged or should be included in the management charge.

77. The applicants contend that the mobile phone charge of £95.53 for 2019, £79.60 for 2020, £81.63 for 2021, £81.97 for 2022, £82.26 for 2023, and £116.62 are unreasonably high. These are charged at £32.79 of the total actual costs. The applicants contend that a SIM card only deal at £10 per month would be a reasonable charge.

78. The respondent states that these charges relate to a mobile phone contract (including the cost of the phone) which was acquired for [NAME]’s [NAME] use due to the mobile nature of his work throughout the building and following the first applicant’s complaint about the cost of the earlier provision of a land line in the [NAME]. The respondent contends that the mobile phone contract cost is a relevant cost incurred by the respondent as [NAME] in order to meets its repair and maintenance obligations for the building and so is properly recharged to the applicants at their due proportion of 32.79%. The respondent asserts that a SIM only plan would require the separate purchase of a mobile phone and payment for calls and would not provide material savings.

79. The tribunal considers that the provision of a mobile phone in this way for the [NAME] of a building of the size and layout and use of [NAME] is a relevant cost reasonably incurred. The recharge is of the actual relevant cost which is not obviously unreasonable.

80. The tribunal determines that the charges in respect of [NAME]’s mobile phone are reasonable and are payable in the sums recharged.

2019 items challenged

Invoice for management of headlease premises

81. The applicants challenge an invoice dated 2 January 2019 in the sum of £855 which they describe as being made out to the respondent itself for payment for management whereas [NAME] [RESPONDENT] are retained to manage the building. The applicants contend that it is not therefore payable.

82. The respondent states that this invoice was in fact rendered by [NAME] as its fee for management of the headlease premises for the period 1 January 2019 to 31 March 2019, and relies upon clause 4.4(P) and the Fourth Schedule to the [NAME] lease as establishing the applicants’ liability to pay the relevant costs incurred by the respondent to meets its obligation to keep the headlease premises in repair as required by clause 5(e) of the [NAME] lease.

83. This is clearly an invoice rendered by [NAME] [NAME] as described and is payable pursuant to the leasehold provisions relied upon by the respondent.

Invoices for management of headlease premises

84. The applicants challenge invoices dated 3 April 2018, 5 July 2018 and 9 October 2018 totalling £2565 rendered by [NAME] as its fee for management of the headlease premises for the period April 2018 to December 2018 and are addressed to [RESPONDENT] who managed for [RESPONDENT] who were the respondent’s predecessor in title for the headlease premises. Again, the respondent

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contends that clause 4.4(P) and the Fourth Schedule to the [NAME] lease establishes the applicants’ liability to pay the relevant costs incurred by the respondent and its predecessor in title to meet the obligation to keep the headlease premises in repair as required by clause 5(e) of the [NAME] lease.

85. These invoices are all rendered in 2018 in respect of management before the respondent acquired its interest. Further, the 2018 accounting year was dealt with in the previous application brought by [NAME] for the [COMPANY] (CAM/ 00KF/LSC/2018/0006). For these reasons this tribunal does not consider this challenge further.

Amount of management charge

86. The applicants challenge the charge of £20,000 plus VAT per annum by [NAME] to manage the building and rely upon alternative quotes obtained from Keelings lettings and property management, [NAME], [NAME], [NAME], and Reed block management.

87. The respondents contend that it is a reasonable market charge for the scope of the service in relation to this building located in this environment. The respondent has filed evidence setting out the nature and scope of the management service provided by [NAME] including repairs and maintenance, building insurance, utilities, financial matters, mandatory risk assessments lease compliance, staff training supervision and performance, and landlord and tenant matters. The respondent has produced a detailed comparator dated January 2000 from [NAME] which proposes a charge of £22,000 plus VAT per annum.

88. The tribunal is cautious in giving the applicants’ comparators evidential weight. It is not sufficiently clear that they are based on the necessary understanding of the occupier make-up and nature and location and environment of [NAME]. It is not clear that they are based on the same scope of management service as provided by [NAME]. Some are not RICS regulated unlike [NAME].

89. The tribunal has regard to the location, nature, layout and use of [NAME], and to the detailed description of the management service filed in evidence. The tribunal considers that the charge of £20,000 + VAT per annum which is the same for each of the accounting years relevant to this application is reasonable for the service being provided to this building.

90. The tribunal determines that the management charge is reasonable and payable in the sum recharged.

Accountancy charges

91. The applicants challenge the service charge levied in respect of the costs of [NAME] who are the accountants engaged by the respondents for auditing and certifying the service charge accounts. These are calculated as 32.79% of the total relevant cost to result in a charge to the [NAME] (subject to proportion between them) of £176.09 for 2019, £245.93 for 2020, £295.11 for 2021, £295.11 for 2022, £295.11 for 2023, and £295.11 for 2024.

92. This challenge is put on the basis that the accountants do not pay contractors, that they have improperly paid management fees to the respondent, that management invoices “have not been made out legitimately”, and that the inclusion of miscellaneous costs is “poor husbandry” and “highly unprofessional”. The applicants do not challenge the actual sums recharged as service charge.

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93. It is apparent from the evidence and documentation before the tribunal that [NAME] audit the service charge accounts. They do not pay contractors. They do not issue management invoices or pay management fees to anyone. They have included miscellaneous costs in the service charge accounts where they arisen and been audited. This is a very typical picture of the role of an accountant auditing the service charge accounts for a building such as [NAME].

94. The tribunal determines that the accountancy charge is reasonable and payable in the sum recharged.

Charge for postal costs

95. The applicants challenge the charge of £24 as postal costs by asking what it is for. The respondent confirmed that this is the actual costs of postage incurred by [NAME] in respect of issuing the audited service chare account.

96. The tribunal determines that the postal cost is reasonable and payable in the sum recharged. The tribunal would remind the respondent that current best practice advises that miscellaneous items are clearly identified in the account process.

Buildings insurance

97. The applicants challenge the service charge in respect of buildings insurance on the ground they wish to be satisfied that they were only charged a 32.79% proportion and that it was subject to a discount of 10% per annum. The actual relevant cost for buildings insurance is not challenged.

98. It is clear from clauses 2.2 and 4.2.1 of the headlease that the freeholder is responsible for insuring the building and that the respondent as [NAME] is obliged to pay “a fair proportion (less a discount of 10% per annum) of the premium to be reasonably determined by the [NAME]’s surveyor ….of the annual premium payable by the [NAME] in insuring the building”. In its evidence the respondent confirms that it has not received any 10% discount from the freeholder and so cannot pass any on to the [NAME].

99. The tribunal considers that it is reasonable for the respondent to assert that it cannot pass on a discount unless received. However, in future the respondent should use its best endeavours to assert its right to a 10% discount from the freeholder and pass any such discount on to the relevant [NAME].

100. It is clear from the audited account for each service charge year that the [NAME] are being charged 32.79% of the insurance premium.

101. The tribunal determines that the charge in respect of buildings insurance is reasonable and payable in the sum recharged.

Engineering insurance

102. The service charge demanded in respect of engineering insurance (charged to the [NAME] at 32.79% of the total to be apportioned between them) is £54.23 for 2019, £152.80 for 2020, £254.89 for 2021, £3-08.21 for 2022, £430.30 for 2023, and £376.91 for 2024.

103. The applicants challenge the service charge in respect of buildings insurance on the ground they wish to be satisfied that they were only charged a 32.79% proportion. Confirmation of this is obviously apparent from the audited service charge account.

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104. The tribunal determines that the charge in respect of buildings insurance is reasonable and payable in the sum recharged.

2020 items challenged

Invoice for management of headlease premises

105. This is considered and determined above in the 2019 accounting year.

Amount of management charge

106. This is considered and determined above in the 2019 accounting year

Accountancy charges

107. This is considered and determined above in the 2019 accounting year

Buildings insurance

108. This is considered and determined above in the 2019 accounting year

Engineering insurance

109. This is considered and determined above in the 2019 accounting year

[NAME] costs

110. The applicants challenge the sum of £3,480 listed in the service charge account as miscellaneous expenditure and re-charged at 100% to the [NAME]. They query what this is for.

111. The respondent identifies this as comprising two invoices from [NAME] dated 31 December 2019 in the sum of £1,560 and dated 28 February 2020 in the sum of £1,920. The invoices are in the documents bundles before the tribunal. Both are described as charges for “advice on service charges – [NAME]”. The respondent tells the tribunal that the 31 December 2019 invoice is for advice following the previous [NAME] proceedings. The respondent tells the tribunal that the 28 February 2020 invoice is for general advice.

112. The respondent argues that it is entitled to recharge these costs as service charge pursuant to clause 3(C) of the [NAME] lease. The tribunal rejects this argument. That covenant relates to costs charges and expenses (including solicitors costs) incurred in relation to forfeiture notices pursuant to ss146 & 147 LPA 1925.

113. The respondent argues that it is entitled to recharge these costs as service charge pursuant to clause 4(C) of the [NAME] lease. The tribunal rejects this argument. That covenant relates to a [NAME] breach of covenant or [NAME] applicant for any consent or licence required by the lease.

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114. The tribunal determines that these two ‘[NAME] costs’ items are not payable under the terms of the lease.

2021 items challenged

Invoice for management of headlease premises

115. This is considered and determined above in the 2019 accounting year

Amount of management charge

116. This is considered and determined above in the 2019 accounting year

Accountancy charges

117. This is considered and determined above in the 2019 accounting year

Buildings insurance

118. This is considered and determined above in the 2019 accounting year

Engineering insurance

119. This is considered and determined above in the 2019 accounting year

2022 items challenged

Invoice for management of headlease premises

120. This is considered and determined above in the 2019 accounting year

Amount of management charge

121. This is considered and determined above in the 2019 accounting year

Accountancy charges

122. This is considered and determined above in the 2019 accounting year

Buildings insurance

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123. This is considered and determined above in the 2019 accounting year

Engineering insurance

124. This is considered and determined above in the 2019 accounting year

2023 items challenged

Invoice for management of headlease premises

125. This is considered and determined above in the 2019 accounting year

Amount of management charge

126. This is considered and determined above in the 2019 accounting year

Accountancy charges

127. This is considered and determined above in the 2019 accounting year

Buildings insurance

128. This is considered and determined above in the 2019 accounting year

Engineering insurance

129. This is considered and determined above in the 2019 accounting year

2024 items challenged

Invoice for management of headlease premises

130. This is considered and determined above in the 2019 accounting year

Amount of management charge

131. This is considered and determined above in the 2019 accounting year

Accountancy charges

132. This is considered and determined above in the 2019 accounting year

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Buildings insurance

133. This is considered and determined above in the 2019 accounting year

Engineering insurance

134. This is considered and determined above in the 2019 accounting year

[NAME]

135. The sum of £7,710 is recharged to the [NAME] at 100% in the service charge account. The respondent confirms that this comprises invoices for £324 and £900 and £324 for legal advice in respect of a s20 LTA 1985 consultation, and invoices for £4,794 and £1368 in respect of these current tribunal proceedings. The invoices are included in the documents bundles before the tribunal.

136. The respondent argues that it is entitled to recharge these costs as service pursuant to clause 4 to the Fourth schedule to the [NAME] lease. That clause provides for liability to pay -

“all [NAME] expenses of any incurred by the [NAME] in and about the or attributable to the maintenance and management and general supervision and running of the Development and the provision of services therefore including particularly (but without prejudice to the generality of the foregoing) any expenses incurred in ….any legal or [NAME] costs bona fide incurred by the [NAME] in taking or defending proceedings (including any arbitration) arising out of any Lease of any part of the Development or any claim by or against any [NAME] or tenant thereof ([NAME] than the claim for rent alone) or by any third party against the Lessors or occupiers of any part of the Development”.

137. The tribunal determines that clause 4 of the Fourth schedule to the [NAME] lease is effective to attach liability to the applicants to pay these legal costs recharged as service charge.

138. In respect of the s20 consultation process relating to programmed decoration and repairs a detailed chronology of events and parties’ respective positions is set out in the statement of [NAME] of [NAME] dated 12 December 2024. This has not been disputed in any relevant way during the hearing.

139. The tribunal determines that invoices for £324 and £900 and £324 for legal advice in respect of a s20 LTA 1985 consultation are reasonable and are payable in the sum demanded as service charge.

140. The invoices for £4,794 and £1368 in respect of legal costs incurred for these current tribunal proceedings are subject to the application for an order pursuant to s20C LTA 1985 which is dealt with later in this Decision.

The applicants’ request for ‘the 2018 litigation refund’

141. The applicants’ skeleton argument states that the applicants have been trying to “collect the correct refund from the September 2018 FTT hearing” and the parties have reached different conclusions as to the sum due. The skeleton argument states “we ask the tribunal to review those refunds and deliberate that the correct refund is made back to the applicants”.

142. The tribunal is provided with a copy of the decision (CAM/00KF/LSC/2018/0006) made on 13 September 2028. The applicant is the [COMPANY]. The respondent is

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[RESPONDENT]. Neither are parties to the current application before this tribunal. The applicant has no standing to pursue the ‘request’. Nor has any sufficient explanation been given as to how this tribunal could exercise jurisdiction in relation that ‘request’ in any event.

Fees and Costs

143. The application includes an application pursuant to s20C of the Landlord & Tenant Act 1985 and/or paragraph 5A in Schedule 11 to the Commonhold and Leasehold Reform Act 2002 which reduces or extinguishes the tenant’s liability to pay a service or administration charge in respect of litigation costs as contractual costs under the lease.

144. As addressed above the tribunal determines that clause 4 of the Fourth schedule to the [NAME] lease is effective to attach lability to the applicants to pay the legal costs incurred in defending these proceedings before this tribunal as a service charge.

145. The tribunal does not consider that it is just and equitable to grant the application for an order pursuant to s20C of the Landlord & Tenant Act 1985 and/or paragraph 5A in Schedule 11 to the Commonhold and Leasehold Reform Act 2002 to extinguish the applicants’ liability to pay a service or administration charge in respect of the costs of these proceedings as contractual costs under the lease. The applicants contend that the [NAME] have very limited resources but no adequate evidence has been provided to support this. The applicants contend that an order should be made because they have already incurred costs in relation to the s20 LTA 1982 consultation in respect of programmed repairs and redecorations but that process was ongoing when they issued these proceedings. The tribunal notes the outcome of the application. The tribunal has found that some previous charges for legal advice are not recoverable under the lease (see paragraphs 110- 114 above.) Save for that the applicants have failed on every [NAME] issue raised. The tribunal notes also that the application included allegation of misappropriation, misdirection or mismanagement of funds, none of which have been established. The tribunal notes also that the application included a large number of questions or averments which do not constitute a challenge to a service charge or to relevant costs recharged within the scope of the tribunal’s jurisdiction. This is the same position faced by a previous first-tier tribunal in respect of which [NAME] represented the [COMPANY] as is recorded at paragraph 9 of its decision dated 13 September 2018.

146. The applicant has paid both an issue fee of £100 and a hearing fee of £200. Having regard to Rule 13(2) of The Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, and to the tribunal’s determinations and the outcome of the proceedings, the tribunal does not make an order directing the respondent to re-imburse those costs.

147. In considering whether to exercise its power to make any party costs order the Tribunal has careful regard to section 29(2) of the Tribunals, Courts and Enforcement Act 2007 and Rule 13(1)(b) of the Tribunal Procedure (First-tier Tribunal)(Property Chamber) Rules 2013 read against the overriding objective in Rule 3 of the 2013 Rules and the guidance given by the Chamber President and Deputy President in [ADDRESS] [COMPANY] v [NAME], [NAME] v [NAME], [NAME] v [NAME] Rd Management [COMPANY] [2016] UKUT 0290 (LC). Having regard to the tribunal’s determinations, the outcome of the application and the conduct of the parties the tribunal does not make any party costs order.

Delay in providing the written Decision

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148. The tribunal apologies to the parties for the delay in providing this decision. The delay is caused by the judicial member who has had repeated and lengthy medical absences from work since the hearing of this matter. The fault is his alone and is not that of the valuer member or of the tribunal administration and support colleagues.

Stephen Reeder Judge of the First Tier Tribunal, Property Chamber

ANNEX - RIGHTS OF APPEAL

a. This annex notifies the parties of any right of appeal pursuant to Rule 36(2) of the (First- tier Tribunal) (Property Chamber) Rules 2013.

b. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber) then a written application for permission must be made to the First-tier Tribunal at the Regional office which has been dealing with the case.

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

d. If the application is not made within the 28 day time limit, such application must include a request for an extension of time and the reason for not complying with the 28 day time limit; the Tribunal will then look at such reason(s) and decide whether to allow the application for permission to appeal to proceed despite not being within the time limit.

e. The application 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 making the application is seeking.

f. If the tribunal refuses permission to appeal, then a further application for permission may be made to the Upper Tribunal (Lands Chamber).