Decision Nº LRX 86 2012. Upper Tribunal (Lands Chamber), 21-10-2013
| Jurisdiction | UK Non-devolved |
| Judge | Mr Andrew J Trott FRICS |
| Date | 21 October 2013 |
| Court | Upper Tribunal (Lands Chamber) |
| Judgement Number | LRX 86 2012 |
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UPPER TRIBUNAL (LANDS CHAMBER)
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UT Neutral citation number: [2013] UKUT 0471 (LC)
UTLC Case Number: LRX/86/2012
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LANDLORD AND TENANT – service charges – whether any credit for overpayment should be given to all leaseholders or just appellant – whether respondent’s conduct amounting to breach of trust and/or RICS Code of Conduct – whether VAT on electricity supply to common parts of blocks of flats should be charged at reduced rate – whether Climate Change Levy chargeable on such electricity supply – respondent concedes case on administration charge and insurance premium – guidance given on whether another section 47 notice can be served and upon whether insurance premium was reasonably incurred – section 47 of Landlord and Tenant Act 1987 – section 20B of Landlord and Tenant Act 1985
IN THE MATTER OF AN APPEAL AGAINST A DECISION
OF THE LEASEHOLD VALUATION TRIBUNAL FOR THE
SOUTHERN RENT ASSESSMENT PANEL
BETWEEN
IAIN ROBERT MacGREGOR Appellant
and
B M SAMUELS FINANCE GROUP PLC Respondent
Re: Flat 23 and 29, Samuels Towers, Longhill Avenue,
Chatham, Kent, ME5 7AT
Before: A J Trott FRICS
Sitting at: 43-45 Bedford Square, London WC1B 3AS
on 10 June 2013
Mr Trevor Cave, solicitor, for the Appellant
Andrew Dymond, instructed by Hurford Salvi Carr Property Management Limited, for the Respondent
© CROWN COPYRIGHT 2013
The following cases are referred to in this decision:
Forcelux v Sweetman [2001] 2 EGLR 173
Johnson v County Bideford Ltd [2013] L&TR 18
London Borough of Brent v Shulem B Association Ltd [2011] EWHC 1663 (Ch)
Weston v Ian Frances as liquidator of Axiom Workshops Ltd (in liquidation) (LON/00AG/LSC/2011/0470)
Solitaire Property Management Company Limited v Holden [2012] UKUT 86 (LC)
Country Trade Limited v Noakes [2011] UKUT 407 (LC)
Skilleter v Charles (1992) 24 HLR 421
The following cases were referred to in argument:
Snook v London & West Riding Investments Limited [1967] 1 All ER 518
Warwickshire Hamlets Limited v Gedden [2010] UKUT 75 (LC)
DECISION
Introduction
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This is an appeal by Mr Iain MacGregor (“the appellant”), the leasehold owner of flats 23 and 29 Samuels Towers, Longhill Avenue, Chatham, Kent ME5 7AT, against a decision of the Leasehold Valuation Tribunal of the Southern Rent Assessment Panel dated 2 March 2012 on an application made by BM Samuels Finance Group plc (“the respondent”) under section 27A of the Landlord and Tenant Act 1985 (“the 1985 Act”).
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Permission to appeal was granted by the then President of the Upper Tribunal, (Lands Chamber), Mr George Bartlett QC, on 24 September 2012. The appeal was by way of rehearing and was limited to three issues:
(i) administration charges;
(ii) the cost of electricity to the common parts for the financial (calendar) years 2009 and 2010; and
(iii) the building insurance premium for the period 7 August 2009 to 6 August 2010.
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At the hearing the respondent conceded that the administration charges, which concerned the costs of a debt collection agency called London Debt Collection Limited (“LDC”), were not payable. The appeal is therefore allowed on issue (i) which is not considered further in this decision except in relation to the preliminary issue raised by the appellant which is discussed at paragraph 13ff below.
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The disputed electricity charges are £3,699 and £3,920 for 2009 and 2010 respectively.
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The disputed insurance premium for the year 2009/10 is £7,549.32 (including finance costs at 3.5%).
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The appellant’s flats are two of 44 flats forming Samuels Towers, a development of two blocks (known as blocks A and B) built by Scammell Developments Limited (“Scammell”) in the early 2000s. Originally there were 38 flats but some of these were subsequently subdivided into two. Both the appellant’s flats are in block B.
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The respondent took a charge against Scammell’s freehold interest in May 2005. In May 2008 Scammell went into administration and the company was wound up. The respondent became the mortgagee in possession and appointed Hurford Salvi Carr Property Management Limited (“HSC”) as its managing agents.
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The leases of flats 23 and 29 are in common form and provide for the payment of “Insurance Rent” which means the “Insurance Rent Percentage” (2.632%) of the cost to the landlord from time to time of paying the premium for insuring the “Buildings” (blocks A and B). This percentage was based upon the original number of flats in the blocks (38). It is agreed by the parties that the appropriate contribution is now 1/44 (2.273%) per flat.
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The tenant must also pay the “Service Charge” which means the “Service Charge Percentage” (now agreed at 1/44 or 2.273%) of the “Annual Expenditure”. Such expenditure includes all costs expenses and outgoings whatever reasonably and properly incurred by the landlord during a financial year in or incidental to providing all or any of “The Services”.
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“The Services” means the services, facilities and amenities specified in the Seventh Schedule to the lease and which the landlord covenants with the tenant to observe and perform. They include maintaining, repairing, renewing or replacing the common parts. They also include cleaning, lighting and heating the common parts and all entrances, halls, landings, staircases etc and other parts of the buildings used by the tenant and other occupiers.
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Mr Trevor Cave, solicitor, appeared for the appellant and called Mr Iain MacGregor as a witness of fact.
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Mr Andrew Dymond of counsel appeared for the respondent and called Mr James Douglas Thornton, Managing Director of HSC, as a witness of fact.
Preliminary issues
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Mr Cave raised two preliminary issues at the start of the hearing:
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That the respondent had a conflict of interest and/or was in breach of trust. This submission was based upon the conflict of interest that Mr Cave said arose as a result of HSC, as managing agent, engaging (at least) two firms, LDC and Saracen Investments Limited (“Saracen”) to carry out debt collection and building insurance services respectively. Mr Thornton was a director of HSC, LDC and Saracen and owned and controlled all three companies, either personally or through his wife. Mr Cave submitted that the facts gave grounds to believe that there had been a clear breach of the requirement imposed under section 42 of the Landlord and Tenant Act 1987 (“the 1987 Act”) for the respondent to hold on trust the service charge contributions made by the leaseholders. Mr Cave also submitted that, as a firm of Chartered Surveyors, HSC was bound to carry out its duties as a managing agent in accordance with the RICS Service Charge Residential Management Code (an approved code of practice under section 87 of the Leasehold Reform, Housing and Urban Development Act 1993). Mr Cave said that HSC had not complied with this Code in a number of respects. It had also failed to comply with the RICS’s standards of ethical conduct with regard to the need to act with integrity and to avoid conflicts of interest.
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That the ambit of the appeal should extend to the reimbursement to the service charge account of all monies that were shown not to have been reasonably incurred. Mr Cave submitted that the amounts to be credited should not be limited to the appellant’s contribution. Mr Cave relied upon the Tribunal’s overriding objective to deal with cases fairly and justly and submitted that Rule 2(2) of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010 supported the view that the Tribunal should deal with the contributions of all the leaseholders of flats at Samuels Towers, nine of whom had been respondents at the LVT proceedings, and not just those of the appellant. Mr Thornton had conceded that the demand for the administration charge had been improperly made and that monies had wrongly been taken from the service charge fund. In those circumstances it was incumbent on the respondent to rectify the improper use of trust fund property without delay.
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The first preliminary issue was mainly directed to the administration charge which, it is now conceded by the respondent, was improperly demanded and which is no longer contested in this appeal. It is therefore not necessary for me to consider the matter in that context although it remains relevant to the consideration of the charge for the building insurance premium and I return to the point below.
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In response to Mr Cave’s submissions on the second preliminary issue Mr Dymond submitted that the jurisdiction of the Tribunal was limited to the parties to the appeal and did not extend to those other leaseholders who were liable to the service charge. If the appellant succeeded in his appeal then the appellant’s proportion of the insurance premium and/or the electricity costs would be credited to his account. The respondent accepted that the Tribunal would be concerned with whether the whole of the costs for the insurance premium and the electricity costs were reasonably incurred but it did not follow from that that...
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