Decision Nº LRX 24 2010. Upper Tribunal (Lands Chamber), 28-01-2011
| Jurisdiction | UK Non-devolved |
| Judge | George Bartlett QC President |
| Date | 28 January 2011 |
| Court | Upper Tribunal (Lands Chamber) |
| Judgement Number | LRX 24 2010 |
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UPPER TRIBUNAL (LANDS CHAMBER) |
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UT Neutral citation number: [2011] UKUT 42 (LC)
LT Case Number: LRX/24/2010
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LANDLORD AND TENANT – service charge –LVT holding service charges irrecoverable by reason of landlord’s failure to comply with provisions of lease and under statutory provisions – LVT failing to make findings as to reasonableness of costs – appeal allowed – Landlord and Tenant Act 1985 ss 20B, 27A
IN THE MATTER OF A NOTICE OF APPEAL AGAINST A
DECISION OF THE LEASEHOLD VALUATION TRIBUNAL
FOR THE LONDON RENT ASSESSMENT PANEL
and
HOWARD LUCAS Respondent
Re: 21-28 & 31-40 Canons Park Close,
Donnefield Avenue,
Edgware, Middlesex HA8 6RL
Before: The President
Decision on written representations
The following cases are referred to in this decision:
Gilje v Charlesgrove Investments Ltd [2004] 1 All ER 91
Brennan v St Paul’s Court Ltd [2010] UKUT 403 (LC)
Holdings & Management (Solitaire) Ltd v Sherwin [2010] UKUT 412 (LC)
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This is an appeal by the landlord against a decision of a leasehold valuation tribunal for the London Rent Assessment Panel dated 19 May 2009 on an application made to it under section 27A of the Landlord and Tenant Act 1985. The applicants were the tenants of 8 out of the 14 flats and 4 maisonettes in a purpose-built block on 2/3 storeys, built in about 1930 and set in its own grounds, with garaging to the rear. The applications sought a determination of whether the service charges for each of the four years 2005, 2006, 2007 and 2008 were reasonable and payable. On 10 December 2009 the LVT granted the landlord permission to appeal to the Upper Tribunal on five grounds, and on 14 May 2010 I granted permission to appeal on one further ground. Only one of the tenants responds to the appeal, which has been dealt with on the basis of written representations, the appellant having filed a statement of case and a bundle of documents that were before the LVT and the respondent not having added to the ground stated in his notice of intention to respond, “Trust did not represent value for money.”
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I have, as I shall say, found the LVT’s decision confused and confusing, and there is no doubt, in my judgment, that it cannot be allowed to stand.
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The provisions relating to service charges were the same in the leases of each of the 8 properties that were the subject of application. In its original form, the provision creating the liability to pay the service charge, clause 4(ii) said this:
“4. (ii) To contribute and pay upon demand 5.5 per cent of the cost expenses outgoings and matters mentioned in the Fourth Schedule hereto and in respect of such liability to pay to the Lessor on account the annual sum of Fifty pounds on the 24th day of June in each year … PROVIDED ALWAYS that the Lessee shall pay to the Lessor or be entitled to receive from the Lessor the balance by which the said contribution respectively exceeds or falls short of the amount of the service charge payable hereunder.”
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With effect from 2 September 2005 this provision was varied by the LVT under section 38 of the Landlord and Tenant Act 1987 to read:
“4. (ii) (a) to contribute and pay on demand one eighteenth of the costs and expenses outgoings and other matters referred to in the fourth Schedule hereto (‘the Service Charge’) and to pay to the Lessor on account such sum as the Lessor or its surveyor certifies as a reasonable amount having regard to the likely amount of Service Charge. A budget shall be prepared for this purpose by the Lessor or its surveyor no later than three months prior to the start of each financial year commencing on 24th March in any year. The Lessor or its surveyor may revise the contribution to the Service Charge during the current financial year to take account of any actual or reasonably anticipated increase in expenditure and as soon as reasonably practicable after a revision the Lessor must certify the amount of the revised contribution.
(b) As soon as reasonably practicable after the end of the financial year the Lessor shall produce to the Lessee an account of the Service Charge for that financial year prepared by independent auditors, credit being given for payments made by the Lessee in advance. Any shortfall in the Service Charge shall be paid by the Lessee on demand following the production of the account.”
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It is to be noted that in its original form clause 4(ii) provided for a payment on account to be made on 24 June in each year. As varied the provision specifies no date for payment, although it identifies 24 March as the start of each financial year for service charge accounting purposes. It appears from the invoices provided that each tenant was invoiced for the sum of £250 for each quarter from 1 October 2004 to 31 December 2007. In its statement of case the appellant states that interim charges in excess of £1000 pa were levied on each tenant, but I can see nothing in the LVT’s decision or the documentation to substantiate this. Nothing, however, turns on this for the purposes of this decision. Accounts were prepared for the landlord for the years to 31 March 2005, 2006, 2007 and 2008, and the parties and the LVT appear to have proceeded on the basis that each year so defined was the appropriate period to be considered for the purposes of applying the provisions of the leases. No distinction was drawn between the period before 2 September 2005 and the period after that date, reference being made only to clause 4(ii) as varied.
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As provided for by the Fourth Schedule to the lease the costs in respect of which the service charge is payable include those incurred in maintaining the structure of the building and the common parts, painting the exterior, lighting and repairing the gardens and footpaths, insuring the premises and employing persons for the purpose of performing the landlord’s covenants (paragraph 1 of the Fourth Schedule and clause 5(b), (c), (d), (e) and (f)) and in addition water rates and other matters. Under paragraph 10 the lessor is entitled to add to these items its administration expenses and the fees and disbursements paid to the managing agents.
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For the year to 31 March 2005 the landlord’s managing agents were Nesbitt and Mire, Chartered Surveyors. The accounts prepared by them for the year were certified on 30 August 2005. For the other 3 years the managing agents were Trust Property Management Limited, Chartered Surveyors. The accounts prepared by them for the year to 31 March 2006 and 31 March 2007 were not certified until 3 June 2008. The accounts for the year to 31 March 2008 were certified on 9 December 2008.
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It was the tenants’ case before the LVT that the conduct of Trust Property Management Ltd was unacceptable. They had failed to provide accounts for the years to 31 March 2006, 2007 and 2008 within 6 months of the year end, and only did so very late after numerous requests; they had not been able to provide complete invoices to support the alleged expenditure; there were numerous inconsistencies in the preparation of the accounts for the years in dispute; and that they had provided no information on building works to which the tenants had made significant contributions. The tenants also asserted that the landlord was not entitled to charge the service charges as it had not notified them of the expenditure within 18 months, as required by section 20B of the Landlord and Tenant Act 1985.
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On the direction of the LVT the parties prepared a Scott schedule for the LVT hearing, and each of the items of expenditure questioned by the tenants for each of the years was commented on by the parties.
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The tribunal expressed its decision as follows:
“14. The sums demanded for the years 2005, 2006, 2007 and 2008 do not comply with the terms of Clause 4(ii) and Schedule 4 of the lease and are therefore not recoverable.
15. The exception to the above is in relation to works carried out in respect of cleaning and gardening, the service charges cost for these items have been reasonably incurred and the works are of a reasonable standard.
Reasons for the decision of the Tribunal
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Dealing firstly with the sums being claimed within the relevant period the starting point is the lease. Clause 4(ii) provides...
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