Decision Nº LRX 32 2011. Upper Tribunal (Lands Chamber), 28-01-2013
| Jurisdiction | UK Non-devolved |
| Judge | George Bartlett QC PresidentMr Andrew J Trott FRICS |
| Date | 28 January 2013 |
| Court | Upper Tribunal (Lands Chamber) |
| Judgement Number | LRX 32 2011 |
|
UPPER TRIBUNAL (LANDS CHAMBER) |
|
|
UT Neutral citation number: [2013] UKUT 014 (LC)
UTLC Case Number: LRX/32/2011
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LANDLORD AND TENANT – service charges – disputed on-costs and management fee under PFI contract – whether costs reasonably incurred – whether preliminaries should be reduced by ratio of leasehold to tenanted dwellings – whether allowance for contractor’s profit reasonable – whether duplication of management charge – whether 10% reasonable management fee – whether management fee should be charged on on-costs – appeal allowed in part
IN THE MATTER OF AN APPEAL AGAINST A DECISION
OF A LEASEHOLD VALUATION TRIBUNAL FOR THE
LONDON RENT ASSESSMENT PANEL
BETWEEN LONDON BOROUGH OF LEWISHAM Appellant
and
LUIS REY-ORDIERES AND OTHERS Respondents
Re: Various properties in Brockley
Lewisham
London SE4
Before: George Bartlett QC and A J Trott FRICS
Sitting at: 43-45 Bedford Square, London WC1B 3AS
on 28-29 November and 5 and 10 December 2012
Christopher Heather, instructed by Greenwoods Solicitors LLP, for the appellant
Mr Steven Mills and Mr Richard Carey for themselves and the other respondents
The following cases are referred to in this decision:
Auger v London Borough of Camden (2008) LRX/81/2007 (unreported)
Veena SA v Cheong [2003] 1 EGLR 175
The following further cases were referred to in argument:
Birmingham City Council v Keddie [2012] UKUT 323 (LC)
Regent Management Ltd v Jones [2010] UKUT 369 (LC)
Arrowdell Ltd v Coniston Court (North) Hove Ltd [2007] RVR 39
Country Trade Ltd v Noakes [2011] UKUT 407 (LC)
Schilling v Canary Riverside Development PTD Ltd LRX/26/2005 (unreported)
Yorkbrook Investments Ltd v Batten [1985] 2 EGLR 100
Daejan Investments Ltd v Benson and others [2011] 1 WLR 2330
-
This is an appeal by the London Borough of Lewisham (“LBL” or “the appellant”) against a decision of the Leasehold Valuation Tribunal for the London Rent Assessment Panel dated 7 February 2011, as amended by a correction certificate dated 10 March 2011, on an application made under Section 27A of the Landlord and Tenant Act 1985 (the 1985 Act) on 16 December 2009.
-
The applicants (who are the respondents in this appeal) were 24 leaseholders of various properties on the Brockley Estate in Lewisham, all of whom held long leasehold interests granted by LBL pursuant to the right to buy legislation under the Housing Act 1985. A list of the respondents and their addresses is attached as Appendix 1. The application to the LVT was for a determination of the amount of service charge payable in respect of the years 2007-2009. The applicants also questioned whether the landlord had complied with the consultation requirements under Section 20 of the 1985 Act.
-
On 4 June 2007 LBL had entered into a management agreement under the Private Finance Initiative (“the project agreement”) with Regenter B3 Limited (“Regenter”) to refurbish, manage and maintain the appellant’s housing stock in Brockley which comprised approximately 500 properties held on long leases, including those held by the respondents, and some 1,300 tenanted properties.
-
At a directions hearing on 13 October 2010 the LVT recorded that the applicants were no longer challenging the consultation procedure and ordered that three matters should be heard as preliminary issues:
-
The reasonableness of the “professional fees” charged under the PFI contract (26%);
-
The reasonableness of the management fees charged in relation to the works (10%); and
-
Whether the costs of scaffolding were reasonable.
-
The LVT heard these preliminary issues on 19 January 2011 and determined as follows:
-
The “professional fees” (or “on-costs”) of 26% could be broken down into “fees” of 3.48%; “preliminaries” of 10.52% and “refurbishment sub-contractors” of 12%. The fees were considered reasonable; the preliminaries were reduced to 3.5% “to take account of the fact that the majority of the preliminary costs related to the rented properties and not leaseholders”; and overheads (5%) and profit (7%), which together made up the refurbishment sub-contractors’ costs of 12%, were reduced to a total of 10%. In respect of the applicant’s leasehold properties the amount of professional fees was therefore reduced by the LVT from 26% to 16.98%.
-
The management fee of 10% was disallowed because the LVT considered that management charges were already included in the (amended) figure for on-costs.
-
The overall costs of the scaffolding were held to be reasonable.
-
LBL sought permission to appeal against the LVT’s decision regarding preliminaries, the refurbishment sub-contractor’s costs and the management fee. The LVT refused permission to appeal on 10 March 2011. Upon application to the Upper Tribunal (Lands Chamber) the President granted permission to appeal on 24 June 2011. The appeal was to be by way of review with an immediate rehearing if successful.
-
The principal hearing of the leaseholders’ application was held before an LVT in July 2011, and in its decision of 20 September 2011 the LVT made determinations on whether particular works, including window replacement, general roof repairs and other external works, electrical works and redecoration, were reasonably necessary and carried out to a reasonable standard and whether the costs of them were reasonable. There was no appeal against this decision.
-
The matters in dispute, both at the preliminary issues hearing and the principal hearing, related to works carried out under the project agreement. Although, therefore, the agreement extended to matters, in particular the management of the properties, that were not exclusively related to the carrying out of these works, it was only the cost of these works, including the associated management costs, that were in dispute.
-
At the hearing before us Mr Christopher Heather of counsel appeared for the appellant and called Mr Steven Bonvini, the Operations Director of Regenter and Mr Adrian Kelly, the Surveying Team Leader of Higgins Construction Plc, the refurbishment sub-contractor under the PFI contract, as witnesses of fact; and Mr Duncan Grimshaw BSc MRICS, a Chartered Quantity Surveyor of Gardiner & Theobald (and formally of Davis Langdon LLP), as an expert witness.
-
Mr Steven Mills, Chair of the Brockley Leaseholders Association and a respondent; and Mr Richard Carey, Vice-President of the Brockley Leaseholders Association and a respondent, appeared on behalf of the respondents. They called Mr Zac Crawley and Mr Luis Rey-Ordieres as witnesses of fact.
Facts
(i) The Leases
-
The respondents’ leases are in substantially the same form having been granted under the right to buy provisions of Part V of the Housing Act 1985. A specimen lease (relating to 8 Aldham House) was provided. Under clause 5(1) of the lease the lessee covenants to pay to the lessor such sum or sums in respect of the matters described in Parts I and II of the Tenth Schedule as are demanded in writing from the lessor. Part I of the schedule deals with service charges and provides for the estimation of the proportion of the lessor’s costs and payments made, expended or incurred in complying with or performing its covenants as may be properly attributable to the lessee (the lessee’s contribution). The lessee’s contribution is calculated by summating the expenditure incurred on a number of elements of works and services that are set out in paragraph 5 of the schedule. Paragraph 5(xvi) deals with the element of management costs which are defined as:
“The costs of managing the Building or Estate including the costs of managing agents if appointed.”
-
The lessor covenants under clause 6 of the lease to perform, observe and carry out the obligations set out in the Ninth Schedule to the lease. Paragraph 8 of that schedule provides that the lessor shall:
“manage and conduct the management of the Estate and Building in a proper manner.”
-
Part II of the Ninth Schedule provides for an “improvement contribution” (as is properly attributable to the lessee) to the paid by the lessee to the lessor in respect of the lessor’s expenditure on any works subject to certain excepted items as set out in paragraph 2 of the Ninth Schedule.
-
Clause 8 of the lease provides that:
To continue reading
Request your trial