Decision Nº LRX 98 2009. Upper Tribunal (Lands Chamber), 07-07-2011
| Jurisdiction | UK Non-devolved |
| Judge | His Honour Nicholas Huskinson |
| Date | 07 July 2011 |
| Court | Upper Tribunal (Lands Chamber) |
| Judgement Number | LRX 98 2009 |
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UPPER TRIBUNAL (LANDS CHAMBER) |
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UT Neutral citation number: [2011] UKUT 268 (LC)
Case Number: LRX/98/2009
LRX/109/2009
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LANDLORD AND TENANT – service charges – construction of lease – whether term to be implied that the management company must calculate the relevant adjustment to the on account payments within a reasonable time – whether breach of such an implied term resulted in nothing being recoverable as service charges for the relevant year.
IN THE MATTER OF AN APPEAL AGAINST A DECISION OF
THE LEASEHOLD VALUATION TRIBUNAL OF THE MIDLAND RENT ASSESSMENT PANEL.
(2) DICKENS HEATH (PHASE 5) MANAGEMENT COMPANY LIMITED
(3) GALA UNITY LIMITED
and
(1) DAVINDER HOTHI Respondents
(2) ROMANDA HOTHI
(3) DAVID RAMSDEN
(4) KAREN MARTIN
(5) GURDEV JHEETA
(6) HAYLEY THOMPSON
(7) S. ARUNKUMARAN
(8) R. MOLY KURIAN
Re: Flats and Town Houses at
Ascote Lane,
Dickins Heath,
Solihull,
West Midlands,
B90 1TP
Before: His Honour Judge Nicholas Huskinson
Sitting at: Birmingham Civil Justice Centre, Priory Courts, 33 Bull Street,
Birmingham. B4 6DS
on 29 June 2011
Andrew Vinson, instructed by I.H.R. Mason Solicitor for Redrow Homes Limited Midlands Division, on behalf of the First Appellant.
Douglas Readings, instructed by Hadgkiss Hughes & Beale, on behalf of the Second Appellant and Third Appellant.
Mr Davinder Hothi appeared in person on behalf of himself and the Second Respondent.
The other Respondents were not present or represented.
The following cases are referred to in this decision:
Gilje v Charlegove Security’s Limited [2003] EWHC 1284 (Ch)
Leonora Investment Company’s Limited v Mott MacDonald Limited [2008] EWCA Civ 857
Holding & Management (Solitaire) Limited v Sherwin [2010] UKUT 412 (LC)
Halsbury’s Laws of England 4th Edition Re-issue Volume 9(1) paras. 929 and 931.
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The Appellants appeal, with permission, from the decision of the Leasehold Valuation Tribunal of the Midland Rent Assessment Panel (“the LVT”) dated 13 June 2009 whereby the LVT decided certain matters relating to the recoverability of service charge payable by the Respondents as lessees of property at Ascote Lane. The Phase 5 Dickins Heath Development comprises 85 properties of various types. The case before the LVT concerned 6 of those properties namely Nos.50, 54, 56 and 62 all of which were in Block C Ascote Lane, No.44 in Block B Ascote Lane and No.121 in Block A Ascote Lane.
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An application was made by the First Respondent to the LVT in November 2008 for a determination of the amount payable for service charges in respect of No.56 for 2007 and 2008. Thereafter, pursuant to directions from the LVT, the other Respondents were also joined as parties to the proceedings and the proceedings were widened to include consideration of the interim service charge demands for 2009. The First Appellant was the freeholder of all of the properties when the leases were executed, but thereafter the freehold has been transferred to the Third Respondent. The Second Respondent is the manager of the estate and is a party to the leases as described below.
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In its decision the LVT determined certain matters regarding the recoverability of the interim service charges demanded for the calendar year 2009. There is no challenge to this aspect of the decision. However so far as concerns the years 2007 and 2008 the LVT, rather than considering the merits of the matter and examining the amount of the service charges properly payable for those years, decided instead that nothing whatever was payable by way of service charge for either of those two years. The terms of the leases are referred to in detail below but, putting the matter shortly for the moment, the leases envisaged there would be payments on account of service charge made in advance during the relevant calendar year and that after the calendar year the final calculations would be prepared and a figure, referred to as “the Maintenance Adjustment”, should be determined being the amount (if any) by which the estimated figure (on the basis of which the on account demands had been made) exceeded or fell short of the actual figure. There was then provision for payment by the lessees of any shortfall or for the repayment (or giving of credit) to the lessees in respect of any over payment.
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The totality of the LVT’s reasoning which led it to conclude that, in the circumstances which had arisen, nothing was payable for service charges for 2007 and 2008 is given in paragraphs 18, 19 and 20 of its decision as follows:
“18. In our view there is an implied term in the Leases that the Second Respondent will determine the Maintenance Adjustment within a reasonable time after the end of the year.
19. We are also of the opinion that a breach of this implied term invalidates any interim (service charge) demand.
20. In our view, a reasonable time has now elapsed since the end of 2007 and 2008. It follows that the interim demands for 2007 and 2008 are now invalid.”
In conclusion the LVT also decided in paragraphs (C) and (D) of its decision that:
“C). All of the costs incurred or to be incurred by the Respondents in connection with these proceedings are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the tenants.
(Section 20C of the Landlord and Tenant Act 1985).
D). The Second Respondent to reimburse to the First Applicant, forthwith, the whole of the fees paid by the First Appellant in respect of these proceedings.
(Regulation 9 of the Leasehold Valuation Tribunals (Fees) (England) Regulations 2003).”
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The issue for the Upper Tribunal on this appeal is whether the LVT was correct in its conclusion that nothing was payable for service charges for 2007 and 2008. If the LVT was correct then the appeal must be dismissed, but if incorrect then the matter will have to be remitted to the LVT for the determination on the merits as to what is the quantum of the service charges properly recoverable for those two years having regard to the evidence and to the terms of leases and the provisions of the Landlord and Tenant Act 1985 as amended, especially section 19. The appeal has been ordered to proceed by way of review. At the hearing the First Respondent appeared, representing himself and the Second Respondent, but the other Respondents had not given notice of intention to respond to the Appellant’s appeal and were not parties to the appeal and were neither present nor represented. Mr Vinson and Mr Readings and Mr Hothi had all prepared helpful skeleton arguments and they developed those arguments in oral submissions. No evidence was heard.
The Leases
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Certain of the leases on the estate are of houses for a term of 999 years and certain leases are of flats for a term of 125 years. However so far as concerns the issue before the Tribunal on this appeal nothing turns upon any difference in the wording of the leases. In particular it was accepted by all parties that the wording of the relevant service charge provisions are the same in the various leases. I take the terms of the lease from the lease dated 21 December 2006 which was granted in respect of 56 Ascote Lane to the First and Second Respondent.
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There were three parties to the relevant leases, namely the Lessor (i.e. the First Appellant), the Company (i.e. the Second Appellant) and the Tenant. After the grant of the relevant leases the First Appellant has transferred the freehold to the Third Appellant.
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The lease defines the expression “the Material Charges” as being the aggregate of the charges computed in accordance with the Sixth Schedule and payable under clause 3(4). The lease defines the expression “the Material Charges Percentage” as being specified percentages of various elements of the Material Charges. Clause 3 of the lease contains covenants by the Tenant with the Lessor and as separate covenants with the Company. By clause 3(4) the Tenant covenanted as follows:
“(4)(a). Pay to the Company the Material Charges Percentage in respect of each year ending on 31 December (hereinafter called “the Maintenance Year”) the first of such payment being that payable for the year ending 31st day of December...
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