Decision Nº LRX 36 2012. Upper Tribunal (Lands Chamber), 10-12-2013
| Jurisdiction | UK Non-devolved |
| Judge | Martin Rodger QC, Deputy President |
| Date | 10 December 2013 |
| Court | Upper Tribunal (Lands Chamber) |
| Judgement Number | LRX 36 2012 |
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UPPER TRIBUNAL (LANDS CHAMBER) |
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UT Neutral citation number: [2013] UKUT 0592 (LC)
UTLC Case Number: LRX/36/2012
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LANDLORD AND TENANT – service charges – whether landlord’s costs of leaseholders’ unsuccessful application to appoint manager recoverable as service charge – section 24, Landlord and Tenant Act 1987 - whether costs of leaseholders’ application to determine service charges recoverable as service charge – section 20C, Landlord and Tenant Act 1985 – whether LVT exercised discretion on incorrect basis - scope of section 20C determination - appeal dismissed – cross appeal allowed
IN THE MATTER OF AN APPEAL AGAINST A DECISION
OF A LEASEHOLD VALUATION TRIBUNAL FOR THE
LONDON RENT ASSESSMENT PANEL
BETWEEN (1) KEVIN G CONWAY(2) OLA AINA
(2) CAROL MARSHALL & ROGER GREEN
(3) SAUL GREENBERG & SAM CATHCART
(4) SAM BOND
(5) MANOJ BULSARA
(6) GEORGINA DWIGHT
(7) JULIANNE O’LEARY
(8) CHRISTOPHER SCOTT
(9) MALCOLM TORZ
(10) STEPHEN LEWIS
(11) KEVIN CONWAY
(12) SUDHA KHETERPAL
(13) SARADHA CABRAL Appellants
and
JAM FACTORY FREEHOLD LIMITED Respondents
Re: The Jam Factory
27 Green Walk
London SE1 4TT, SE1 4TX and SE1 4TQ
Before: Martin Rodger QC, Deputy President
Sitting at: 10 Alfred Place, London WC1E 7LR
on
13 November 2013
Mr Kevin G Conway, the first appellant, for all appellants
Mr Nathaniel Duckworth instructed by Bishop & Sewell, solicitors, for the respondent
The following cases are referred to in this decision:
Sella House Ltd v Mears [1989] 1EGLR 65
Canary Riverside Property Limited v Schilling LRX/65/2005
Iperion Investments Corporation v Broadwalk House Residents Limited (1996) 71 P & CR 34
Tenants of Langford Court (Sherbani) v Doren Limited LRX/37/2000
Schilling v Canary Riverside Development PTE Limited LRX/26/2005
Church Commissioners v Derdabi [2011] UKUT 380 (LC)
Phonographic Performance Ltd v AEI Rediffusion [1999] 1 WLR 1507
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The appeal and cross-appeal in this case are against a decision of the Leasehold Valuation Tribunal for the London Rent Assessment Panel (“the LVT”) given on 2 December 2011 in a dispute between a group of fourteen leaseholders of flats at the Jam Factory, Green Walk, London SE1 and their landlord, a company owned by a substantial group of the leaseholders of flats in that building. These proceedings, and others which continue between the same parties in the LVT and in this Tribunal, are a sad example of the disagreements which can beset leaseholder-managed blocks of flats despite the best efforts and sacrifices of many whose only motivation is to improve the management of premises in which they and their neighbours share a common interest.
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Two main issues are raised by this appeal:
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Whether the terms of the standard Jam Factory lease permit the respondent to include in the service charge payable by all leaseholders the costs which it incurred in lengthy proceedings brought by the fourteen appellants in an unsuccessful bid by them to procure the appointment of a manager under section 24 of the Landlord and Tenant Act 1987 (“the 1987 Act”).
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Whether the LVT was wrong to make an order, under section 20C of the Landlord and Tenant Act 1985 (the “1985 Act”), that the costs of those proceedings, although recoverable in principle, should not be added to the service charge.
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The appellants were represented before me by the first appellant, Mr Conway, who is a solicitor, and the respondents by Mr Duckworth of counsel. I am grateful to them both for their assistance.
The background facts
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The Jam Factory is a modern conversion of three Victorian industrial buildings which, as their name suggests, were originally used for the manufacture of jam. In about 2003 the buildings were converted to provide 194 residential flats and penthouses in three blocks by a development company known as Angel Property (Hartley Buildings) Ltd (“Angel”).
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The lease of flats in the Jam Factory is in a standard form for a term of 999 years from 25 December 2000 and includes covenants by the landlord in the Sixth, Seventh and Ninth Schedules to provide services coupled with an obligation on the leaseholder to pay a service charge.
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The management of the Jam Factory proved controversial from the outset. Two different firms of managing agents were successively appointed in the early years but each resigned. For a period in 2005 and 2006 Angel managed the Jam Factory in its own right before eventually appointing Stonedale Property Management (“Stonedale”) as its agent in 2006.
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A series of disputes broke out between individual leaseholders and Angel. The details do not matter but certain leaseholders complained that work had not been completed to the standard which had been agreed when they contracted, off plan, for the purchase of their flats. As a result of these disputes, and a wider dissatisfaction with the management of the Jam Factory, a number of leaseholders began to withhold service charges.
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Angel went into liquidation in October 2009 by which time the respondent had already been incorporated by the leaseholders of about half of the flats at the Jam Factory with a view to its acquiring management of the building through the purchase of the freehold. Terms were subsequently agreed with Angel’s liquidator and in September 2009 the respondent entered into a contract to acquire the freehold for £413,000. The purchase was completed in January 2010. Under the agreement the respondent became entitled to the arrears of service charges due from leaseholders of flats in the Jam Factory. The precise number of leaseholders of the 194 flats and penthouses who participated in the acquisition as members of the respondent is disputed between the parties with suggested figures ranging from 92 to 100. The exact number does not now matter.
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On acquiring the freehold the respondent decided to retain the services of Stonedale, Angel’s managing agent. This decision was contentious as there was considerable dissatisfaction amongst a group of leaseholders with Stonedale’s track record.
The lease
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For all practical purposes, the relevant terms of the leases of flats and penthouses in the Jam Factory are identical. Clause 2.1, reserves the service charge, payable in accordance with the provisions of the Ninth Schedule, as further rent. Each party then covenants to perform the obligations on its behalf in the various schedules, including the Ninth Schedule which concerns the calculation and payment of the service charge and identifies the items to which the charge may relate. Before turning to that schedule however, I should refer to certain other provisions to which most of the argument in this appeal has been directed.
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Clause 14 of the lease is headed “General Agreements and Declarations” and, so far as is relevant to this appeal, provides as follows:
“For the avoidance of doubt the parties acknowledge and declare that notwithstanding anything herein contained or implied:-
14.1 In the management of the Building and the performance of the obligations of the Landlord hereinafter set out the Landlord shall be entitled to employ or retain the services of any appropriately qualified or experienced employee agent consultant service company contractor engineer or other advisers of whatever nature as the Landlord may reasonably require in the interest of good estate management and the proper expenses incurred by the Landlord in connection therewith shall be deemed to be an expense incurred by the Landlord in respect of which the Tenant shall be liable to make a contribution in accordance with the Service Charge Percentage under the provisions set out in the Ninth Schedule hereto.”
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The leaseholder’s covenants in the Fourth Schedule include at paragraph 9 an obligation to pay costs, charges and expenses (including legal costs) incurred by the landlord in a variety of circumstances including in connection with proceedings under section 146 of the Law of Property Act 1925, or in connection with the service of notices or schedules relating to wants of repair, or in respect of requests for information or inquiries, or finally in dealing with any deed required to be entered into under the lease.
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