Decision Nº LRX 54 2010. Upper Tribunal (Lands Chamber), 15-09-2011
| Jurisdiction | UK Non-devolved |
| Judge | Her Honour Judge Alice Robinson |
| Date | 15 September 2011 |
| Court | Upper Tribunal (Lands Chamber) |
| Judgement Number | LRX 54 2010 |
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UPPER TRIBUNAL (LANDS CHAMBER) |
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UT Neutral citation number: [2011] UKUT 367 (LC)
UTLC Case Number: LRX/54/2010
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LANDLORD AND TENANT – service charges – whether costs reasonably incurred – whether LVT should have taken into account financial impact on tenants when deciding whether major works should be phased – appeal allowed – Landlord and Tenant Act 1985 s.19
IN THE MATTER OF AN APPEAL FROM A DECISION OF THE LEASEHOLD VALUATION TRIBUNAL FOR THE LONDON RENT ASSESSMENT PANEL
(2) MICHAEL ANSON
and
RFYC LIMITED Respondents
B R MAUNDER TAYLOR
Re: 15, 20 & 36 Frognal Court,
Finchley Road,
London
NW3 5HG
Before: Her Honour Judge Alice Robinson
Sitting at: 43-45 Bedford Square, London WC1B 3AS
on 12th September 2011
Edward Denehan instructed by Woolsey, Morris & Kennedy for the Appellants
Gerard van Tonder instructed by Gisby Harrison for the Second Respondent
There was no appearance on behalf of the First Respondent.
The following cases are referred to in this decision:
Ashworth Frazer Ltd v Gloucester City Council [2001] 1 WLR 2180, HL
Forcelux v Sweetman [2001] 2 EGLR 173, LT
Veena SA v Cheong [2003] 1 EGLR 175, LT
Southend-on-Sea Borough Council v Skiggs LRX/110/2005, LT
DECISION Introduction-
The Appellants appeal to the Upper Tribunal (Lands Chamber), with permission, from a decision of the Leasehold Valuation Tribunal for the London Rent Assessment Panel (hereafter “the LVT”) dated 10 March 2010 whereby the LVT decided that service charges sought in respect of major works for the years ending 2009 (£100,000) and 2010 (£538,012) were reasonably incurred as required by section 19(1)(a) of the Landlord and Tenant Act 1985 (hereafter “the 1985 Act”).
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The Appellants are the lessees of flats in The Frognal Estate, Finchley Road, London NW3 5HG (hereafter “the Estate”) of which the First Respondent is lessor. The First Appellant is the lessee of 15 Frognal Court pursuant to a lease dated 27 October 1975 for a term of 120 years from 24 June 1969 and also holds the lease of 20 Frognal Court which is sub-let. The Second Appellant is the lessee of 36 Frognal Court pursuant to a lease dated 21 July 1975 for a term of 120 years from 24 June 1969. The Second Respondent is the Manager of the Estate appointed by the LVT on 7 May 2009 pursuant to section 24 of the Landlord and Tenant Act 1987.
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The Estate comprises 5 blocks containing 54 flats and, in some cases, commercial premises at ground floor level. Historically little maintenance work had been carried out by the lessor leading to neglect as a result of which a number of the lessees applied to the LVT for the appointment of a manager. On his appointment as Manager the Second Respondent took steps to arrange for the outstanding works to be carried out. Initially a figure of £100,000 was added to the service charge in 2009 and when a detailed specification had been prepared and costed a further £538,012 was added to the proposed service charge for 2010. A number of the lessees were concerned about the very significant increase in service charges and their ability to pay the sums demanded. On 26th November 2009 the Second Respondent applied to the LVT for a determination as to whether the service charges for 2009 and 2010 were reasonably incurred. By its decision dated 10 March 2010 the LVT decided that these sums were reasonably incurred.
Submissions
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The Appellants’ case before the LVT was that, although it was accepted works of repair were needed, it was not appropriate to carry the bulk of them out all at once. Rather, the work should be phased so as to spread the increased service charge costs. The amount of service charge being demanded (around £7,600 and £9,000 for the Appellants respectively in 2010 alone) was very substantial. It was said many of the lessees could not afford to pay and some would have to sell their flats in order to be able to do so.
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In its decision the LVT said:
“15. The Tribunal does not accept [counsel for the lessees’] argument that consideration of the reasonableness of costs requires consideration of the ability of individual leaseholders to pay those costs. Whilst [counsel] suggested that this was one of the factors behind the legislation he was unable to direct the Tribunal to any evidence which suggested that different classes of leaseholders should be treated differently. In the opinion of the Tribunal the ability of individual leaseholders to pay for required works is not a matter covered under this legislation.
16. Given that there was no argument as to the reasonableness of the costs, the specification of the works or Mr Maunder Taylor’s ability to seek the payments in advance, the Tribunal is satisfied that reasonableness under Section 19 of the Landlord and Tenant Act 1985 relates to the reasonableness of the works themselves and their costs, not to the ability of persons to pay for them.”
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Before the Upper Tribunal Mr Edward Denehan, counsel for the Appellants, submitted that the LVT’s approach was wrong in law. Whether service charge costs are reasonably incurred for the purposes of section 19 of the 1985 Act required two separate questions to be asked. First, was the action taken reasonable? Second, was the cost of the action taken a reasonable amount? There is no restriction in the 1985 Act on the factors which may be taken into account when judging reasonableness which should be given a broad, common sense meaning. There is nothing which prohibits consideration of the financial impact of the service charge costs on lessees being taken into account when deciding whether it is reasonable to carry out the repair works in one major contract or to phase them over a period of time to spread the cost. It was also submitted that the purpose of sections 18 to 30 of the 1985 Act was to protect lessees whereas here they were being unfairly treated first by having to put up with many years of deteriorating standards of maintenance and now by incurring financial hardship, in some cases by selling their flat, to pay for repair work done all at the same time
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Mr Gerard van Tonder, counsel for the Second Respondent, submitted that if a lessee’s ability to pay were relevant to the reasonableness of what work should be undertaken and when, it would introduce an unworkable duty on the lessor (or here, the manager) to make enquiry as to the means of lessees. It would also give rise to the need to make difficult and potentially controversial judgments as to what level of hardship would or would not be acceptable. Where some lessees want the repair work to go ahead in full immediately, the lessor or manager would be preferring the interests of one group of lessees over others. This would introduce unfairness and be contrary to the Second Respondent’s duty in paragraph 9 of the LVT order appointing him to act fairly and impartially in his dealings with the lessees. The Second Respondent had been appointed manager by the LVT against the background of historic neglect and had a duty to get on with the repair work, which it was common ground was necessary, with all due expedition. The lessees should have known that a substantial increase in service charges was inevitable. Further, it was submitted that the Appellants had at no stage provided any evidence to support the assertions of financial hardship or as to phasing i.e. as to what works should be carried out in which years. Even if the LVT had taken financial impact into account, the lack of evidence was such it would have found the service charge costs to be reasonably incurred in any event.
Law
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The Landlord and Tenant Act 1985, as amended by the Housing Act 1996 and the Commonhold and Leasehold Reform Act 2002, so far as relevant, provides:
“18 Meaning of ‘service charge’ and ‘relevant costs'
(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...
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