Decision Nº LRX 6 2012. Upper Tribunal (Lands Chamber), 18-07-2013
| Jurisdiction | UK Non-devolved |
| Judge | Martin Rodger QC, Deputy President |
| Date | 18 July 2013 |
| Court | Upper Tribunal (Lands Chamber) |
| Judgement Number | LRX 6 2012 |
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UPPER TRIBUNAL (LANDS CHAMBER)
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UT Neutral citation number: [2013] UKUT 0349(LC)
LT Case Number: LRX/6/2012
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LANDLORD AND TENANT- service charges – non-compliance with contractual procedure – time not of the essence – provision of incomplete information – failure to account on annual basis – choice to account separately for major works – possibility of serving revised documents – content of revised demands
IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE
LEASEHOLD VALUATION TRIBUNAL FOR THE
LONDON RENT ASSESSMENT PANEL
and
DIRK ANDREA WOELKE Respondent
Before: The Deputy President, Martin Rodger QC
Sitting at: 43-45 Bedford Square, London WC1B 3AS
on 27 June 2013
Philip Rainey QC and Michael Walsh instructed by the London Borough of Southwark for the appellant
Clare Parry instructed by Housing and Property Law Partnership, solicitors, for the respondent
© CROWN COPYRIGHT 2013
The following cases are referred to in this decision:
Universities Superannuation Scheme Ltd v Marks & Spencer plc [1999] L&TR 237
Leonora Investment Co v Mott Macdonald [2008] EWCA Civ 857
Morshead Mansions Ltd v Mactra Properties Ltd [2013] EWHC 224
Wembley National Stadium Ltd v Wembley (London) Ltd [2007] EWHC 756
The following additional cases were referred to in argument:
Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896
Rainy Sky v Kookmin Bank [2010] 1 WLR 2900
West Central Investments v Borovik [1977] 1 EGLR 29
DECISION
Introduction
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This is an appeal, by way of review, against a decision of the Leasehold Valuation Tribunal for the London Rent Assessment Panel (“the LVT”) given on 2 November 2011 in a dispute over the entitlement of the appellant landlord to recover service charges totalling £4,039.26 from the respondent long leaseholder. The charges were for the respondent’s contribution towards the cost of major works undertaken by the appellant. The LVT decided that because the appellant had billed the service charges for the major works separately from more routine recurring service charges it had not followed the terms of the lease, and that as a result the sum claimed was not yet payable.
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The LVT granted permission to appeal to this Tribunal, not, it emphasised, because it thought its decision might be wrong, but because the lease is in a form used extensively by the appellant and the approach to billing of which the LVT disapproved had been adopted as a matter of routine. Although I was told that its approach to billing has now been revised, the appellant regards this appeal as being of continuing significance to the management of its residential estates.
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The issues raised by the appeal concern the strictness with which contractual procedures for the recovery of service charges must be observed, and the degree of flexibility available to a landlord to deviate from those procedures either deliberately or inadvertently. It is therefore convenient to begin with the terms of the lease, before considering how those terms were implemented by the appellant.
The Lease
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The respondent is the leaseholder of a flat in a block of 42 flats on the appellant’s Tabard Gardens Estate in London SE1 (“the Estate”), on which there are 19 similar blocks with a total of 888 flats. The respondent’s lease was granted by the appellant in 1990 and was assigned to the respondent in 1999.
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The lease is for a term of 125 years and is in the standard form adopted by the appellant for long leases granted under the “right to buy” provisions of the Housing Act 1985. It includes covenants for the appellant to provide services and for the respondent to contribute towards their cost through a service charge.
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By clause 2(3)(a) of the lease the leaseholder covenanted:
“To pay the Service Charge and the Capital Expenditure Reserve Charge contributions set out in Part I and Part II of the Third Schedule hereto respectively at the times and in the manner there set out.”
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The covenants on the part of the appellant (referred to in the lease as “the Council”) are at clause 4 and included obligations to keep the structure and exterior of the flat and of the building in repair and to provide various services listed elsewhere.
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The Third Schedule to the lease is divided into two parts. Part I, entitled “Annual Service Charge”, provides machinery for the lessee to contribute towards the costs incurred annually by the Council in complying with its covenants. Part II, entitled “Capital Expenditure Reserve Charge”, authorises the accumulation of a reserve fund to meet major capital expenditure. Part II of the Third Schedule has not been implemented by the appellant and the parties agree that it is not relevant to the issues in this appeal.
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The relevant provisions governing the annual service charge in Part I of the Third Schedule are as follows:
“1(1) In this Schedule “year” means a year beginning on 1 April and ending on 31 March
1(2) Time shall not be of the essence for service of any notice under this Schedule
2(1) Before the commencement of each year (except the year in which this lease is granted) the Council shall make a reasonable estimate of the amount which will be payable by the Lessee by way of Service Charge (as hereinafter defined) in that year and shall notify the Lessee of that estimate
2(2) The Lessee shall pay to the Council in advance on account of Service Charge the amount of such estimate by equal payments on 1 April, 1 July, 1 October and 1 January in each year (hereinafter referred to as “the payment days”)
3 [Apportionment of expenditure in first year of term]
4(1) As soon as practicable after the end of each year the Council shall ascertain the Service Charge payable for that year and shall notify the Lessee of the amount thereof
4(2) Such notice shall contain or be accompanied by a summary of the costs incurred by the Council of the kinds referred to in paragraph 7 of this Schedule and state the balance (if any) due under paragraph 5 of this Schedule.
5(1) If the Service Charge for the year (or in respect of the first year hereof the apportioned part thereof) exceeds the amount paid in advance under paragraph 2 or 3 of this Schedule the Lessee shall pay the balance thereof to the Council within one month of service of the said notice
5(2) If the amount so paid in advance by the Lessee exceeds the Service Charge for the year (or the apportioned part thereof for the first year hereof) the balance shall be credited against the next advance payment or payments due from the Lessee (or if this lease has then been determined be repaid to the Lessee)
6(1) The Service Charge payable by the Lessee shall be a fair proportion of the costs and expenses set out in paragraph 7 of this Schedule incurred in the year
6(2) The Council may adopt any reasonable method of ascertaining the said proportion and may adopt different methods in relation to different items of costs and expenses
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[A list of costs and expenses]
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The summary of costs referred to in paragraph 4 of this Schedule shall contain an explanation of the manner in which the proportion of those costs apportioned to the flat under paragraph 6 of this Schedule have been calculated.”
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These provisions follow a conventional pattern of charging for services by reference to defined years, with equal quarterly payments based on an estimate of expenditure for the forthcoming year followed by a balancing payment or credit once a final year end account has been prepared.
The facts
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The LVT did not examine the facts in detail in its decision, but from the documents which were before it, I take the following summary as the basis of my decision.
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The service charges claimed by the appellant relate to the respondent’s share of the cost of two programmes of major works carried out on the Estate. In 2003 the Estate was managed on behalf of the appellant by the Tabard Gardens Tenant Management Co-op (“the TMC”). The TMC wished to enter into a contract worth approximately £1.8 million for the replacement of windows in 19 blocks on the Estate, and on 30 October 2003 it wrote to the respondent and other leaseholders in the respondent’s block, informing them of competitive tenders which had been received for that work. The letter broke three of the tenders down to show the price for the respondent’s block and informed him that it was intended to accept the lowest tender and that the estimated contribution of each individual leaseholder would be 1/42 of the total cost. The respondent’s share was estimated to be £3,486.27, although the letter emphasised that the final cost of the works might be higher or lower than that estimate.
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The...
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