Mr I.D. Humphries B.Sc.(Est.Man.) FRICSMr W. Jones FRICSMr Michael Williams, Company Secretary to Respondent for the ApplicantDate 20 June 2024Property: Flat 4, Gwynne Gate Catherine Street Hereford HR1 2EDType of application: (1) Under section 27A Landlord and Tenant Act 1985 for determination of the reasonableness and payability of service charges in respect of the subject property. (2) Under section 20C Landlord and Tenant Act 1985 for an order for the limitation of costs. (3) Under paragraph 5 Schedule 5A Commonhold and Leasehold Reform Act 2002 for an order reducing or extinguishing liability to pay administration charges in respect of litigation costs.
[1]FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) 2 Disclosure 1 On receiving the case papers, the Chairman, Mr Humphries, discovered the Respondent was represented by Mr M.Williams who had instructed him on a case elsewhere in January 2021 to value a Freehold interest for prospective purchase. Mr Williams was acting as agent to Lessees at the time and had no personal interest in the property. Mr Humphries provided a valuation but there had been no prior or subsequent contact with Mr Williams since that instruction. 2 Although the terms of reference were completely different, one being a Freehold valuation and the subject case a service charge determination, Mr Humphries disclosed the previous contact at the site inspection on the morning of the Hearing and at the start of the Hearing and invited the parties to make any representations they wished to make within seven days to ensure complete transparency. 3 At the Hearing, the parties confirmed their request for Mr Humphries to proceed. Mr Williams subsequently confirmed by email received on 13 June 2024 that he had no objection. Accordingly, Mr Humphries continued to act in the Tribunal with Mr W. Jones FRICS. Introduction 4 The Applicant, Mr Lenain, holds a long leasehold interest in Flat 4, Gwynne Gate, Hereford, HR1 2ED. The flat is subject to service charges and since 2021 Mr Lenain has objected to the cost of painting joinery in three stairwells for which that element of the service charge had been budgeted at £7,500 over a 3 year period although later reduced to £6,240, for which the Freeholder had paid an invoice for £2,900 just for 2021. The Freeholder is a company owned jointly by the 16 Lessees of Gwynne Gate. 5 Mr Lenain agreed the work needed to be carried out and had obtained three contractors’ quotes in 2021 from which he estimated a fair cost at the time to have been £900. He therefore considered the additional £2,000 to have been unreasonably incurred. 6 As a consequence, he objected to an increase in the service charge from £600 per annum to £720 per annum with effect from 1 July 2020. 7 Mr Lenain applied for the Tribunal to determine the service charge for the years ending 30 June 2021, 2022 and 2023, and to determine budget estimates for three future years ending 30 June 2024, 2025 and 2026. The application was made on 16 November 2023. 8 At the same time, he applied for an Order under section 20C of the Landlord and Tenant Act 1985 to limit the costs and under paragraph 5, Schedule 5A to the Commonhold and Leasehold Reform Act 2002, to reduce or extinguish the liability to pay administration charges in respect of litigation costs. 9 The Tribunal held a Case Management Conference on 1 March 2024 and issued Directions. 10 The Tribunal inspected the property at 10.30 am on the day of the Hearing, 12 June 2024, with Mr H. Todd representing Mr Lenain, the Applicant, and Mr M.Williams and Mr R. Williams representing the Respondent Freeholder. 11 The Hearing was held on-[2]Tribunal Decision 32 As a preliminary point the Tribunal finds that although the lease refers only to the 'newel posts' requiring fire retardant paint, this would necessarily include all the exposed stairwell joinery such as the hand rails, window sills and skirtings because there would be no point having the newel posts finished in fire retardant paint and leaving the other joinery exposed to fire risk. 33 The three quotes obtained by Mr Lenain related to the total costs of redecorating each stairwell which included not only the joinery but also the walls and ceilings and set the upper limit of estimates at the time. The joinery elements comprised only part of these estimates. 34 The key figure relevant to the decision is the amount paid to the sub-contractor of £780 to paint the three stairwells. Although not specifically mentioned on the invoice, the Tribunal finds it highly likely to have excluded the cost of paint which all parties agree would have been expensive at around £80-£100 / tin. Mr Lenain says 3 tins were used and submitted a photograph of one of the 2.5 litre tins in evidence. 35 It is possible the sub-contractor may have charged less than the average contractor but even allowing for this, the Tribunal finds the reasonable cost of the work to have been £1,200 (One Thousand Two Hundred Pounds) including paint in 2021, rather than the £2,900 paid by the Freeholder. 36 The excess payment is therefore £1,700 which divided by 16 flats is £106.25 p.a. which the Tribunal rounds to £100 / flat p.a. The Tribunal therefore deducts £100 from the new service charge of £725 p.a. per flat as the other items comprising the service charge were not disputed, and assesses the service charges for years ending 30 June 2021, 2022 and 2023 at £625 p.a. 37 The Tribunal will not at this stage set the budgets for subsequent years as costs are rising and the Lessees will have an opportunity to raise any concerns in the future when service charge demands are submitted. Issue 2 Application under section 20C of the Act for an order for the limitation of costs Section 20C of the Landlord & Tenant Act 1985 ('Section 20C') 38 This grants tenants the right to apply for an order that all or any of the costs incurred, or to be incurred, by a landlord in connection with proceedings before a court or tribunal, 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. 6 Applicant 39 At the Hearing the Applicant briefly re-stated his request. Respondent 40 The Respondent objected, partly on the ground that when the Applicant Mr Lenain had been a Director of the Freehold company he had himself set the service charge at £600 p.a. at some date prior to 2020. An increase was due as costs had risen and it was partly to cover the additional cost of £100 / flat p.a. plus VAT paid to Mr Williams to manage the scheme. Tribunal Decision 41 The Applicant contended for £600 p.a. and the Respondent £725