Morteza SafarzadehApplicantNorwich City CouncilRespondent
Before
G K Sinclair, R Thomas MRICS & C Gowman BScMCIEH MCMIVictoria Jempson, counsel (instructed by npLaw) for the ApplicantDate 24 April 2019Property: 51 Heathgate, Norwich NR3 1PQType of application: to determine reasonableness and payability of service charges [LTA 1985, s.27A]
DECISION
• Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . paras 1–2• Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . paras 3–4• The lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . paras 5–10• Material statutory provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . paras 11–15• Inspection and hearing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . paras 16–28• Discussion and findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . paras 29–31[1]In this application the applicant lessee seeks to challenge service charges levied by the respondent for the service charge year 2016–17 in respect of qualifying major works undertaken by it, namely extensive repairs to concrete elevated concrete walkways, canopies and vertical panels, plus the replacement of rusting steel barrier railings with new galvanised ones that (being higher and with more secure fixings that prevent penetration of water into the concrete) are complaint 1 with current Buildings Regulations.[2]For the reasons which follow the tribunal considers the application hopeless and, unsupported either by evidence or coherent argument, without merit. It stands dismissed. Background[3]51 Heathgate is a maisonette in one of a number of mainly interconnected multistorey blocks constructed by Norwich City Council as part of its social housing portfolio in the late 1960s or early 1970s just off Gurney Road and Mousehold Heath, Norwich. The general layout is shown in the lease plan at page [A58] of the hearing bundle. The blocks are of reinforced concrete construction, with flats and maisonettes faced with brick panels. Their entrance doors are sheltered by vertical concrete panels on the outer edges of the external concrete walkways and by cantilevered concrete canopies above. Elsewhere, the outer edge of each walkway between the concrete panels is protected by painted steel railings. As demonstrated by inspection of a block yet to undergo refurbishment, these railings are heavily rusted, are bolted into the concrete in such a manner as to permit penetration of moisture, and have a parapet set too low to comply with current Building Regulations safety requirements.[4]The respondent local authority resolved upon a rolling programme of repairs, based upon exploratory reports and testing undertaken on its behalf by Martech Technical Services Ltd, which reported in 2012. The detailed report appears in section B of the bundle, at pages [B1–92]. This work was funded entirely by the respondent, with (unusually for local authorities) no attempt being made to recoup any of this investigative cost from leaseholders. The block in which the subject premises are situate was included in the second phase of the programme. The lease[5]The lease, which appears at pages [A57–79] of the bundle, is a standard Norwich City Council Right to Buy lease dated 6th October 1997. The subject property is identified as “the maisonette numbered 51 and store shed on the fifth and sixth floors together with the store shed on the ground floor” (sic).[6]By clause 4(3) the lessee covenants with the council : without prejudice to the provisions of Paragraphs 16B C and D of Schedule 6 of the Act1 and Sections 18 to 30 of the Landlord and Tenant Act 1985 to pay such sums of Service Charge as are payable in accordance with the provisions of Schedule C.[7]By clause 6 the council covenants with the lessee, inter alia, to keep in repair the structure and exterior of the property and the building, and any other property over or in respect of which the lessee has rights as specified in Schedule A.[8]Schedule C to the lease defines the council’s expenditure recoverable by way of service charge as including the reasonable expenditure of the council in complying with its above obligation. The service charge is defined as such percentage as shall from time to time be a fair share (as defined by the council’s Housing Manager or such other officer of the council “as shall be appropriate) of 1 Meaning the Housing Act 1985 as amended by the Housing and Planning Act 1986 2 the council’s expenditure attributable to the property proportionate to the number and/or nature and/or size of the properties from time to time comprised in the building...”[9]The Schedule goes on to define the expressions “service charge instalment” (one quarter to the service charge shown on the service charge statement last served on the lessee) and “service charge statement” (an itemised total of the council’s actual expenditure over the year ending on 31st March, accompanied by a certificate that in the opinion of the Housing Officer or other officer that it is a fair summary of the council’s expenditure and is sufficiently supported by accounts, receipts, etc).[10]By paragraph 3 the lessee must pay to the council the service charge shown on the service charge statement within one month of service of that document. Material statutory provisions[11]Section 18 of the Landlord and Tenant Act 1985 defines the expression “service charge”, for the tribunal’s purposes, as : 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...[12]The overall amount payable as a service charge continues to be governed by section 19, which limits relevant costs :a. only to the extent that they are reasonably incurred, andb. where they are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard.[13]The tribunal’s powers to determine whether an amount by way of service charge is payable and, if so, by whom, to whom, how much, when and the manner of payment are set out in section 27A of the Landlord and Tenant Act 1985. The first step in finding answers to these questions is for the tribunal to consider the exact wording of the relevant provisions in the lease. If the lease does not say that the cost of an item may be recovered then usually the tribunal need go no further. The statutory provisions in the 1985 Act, there to ameliorate the full rigour of the lease, need not then come into play.[14]Insofar as major works are concerned, ie those in respect of which the contribution of any tenant liable to pay towards the service charge will exceed £250, then section 20 provides that the relevant contributions of tenants are limited to that amount unless the consultation requirements have been either complied with in relation to the works or dispensed with by (or on appeal from) the appropriate tribunal. As the applicant is a “public body” for the purposes of the Public Contracts Regulations 20152 (implementing the European Public Contracts Directive3) the consultation requirements relevant in the instant case are those appearing in Part 1 of Schedule 4 to the Service Charges (Consultation 2 SI 2015/102 3 Directive 2014/2 4/EU of the European Parliament and of the Council 3 Requirements) (England) Regulations 20034 (as amended).[15]In the instant case, however, no issue is taken by the applicant concerning the consultation process that preceded entry into this programme of works. These provisions can therefore be ignored for the purposes of this decision. Inspection and hearing[16]In the presence of the applicant, his letting agent, and representatives of and counsel instructed on behalf of the respondent council the tribunal inspected the exterior of the relevant block and a connected one immediately to the northwest, as the latter had yet to undergo remedial works. Paragraph 3 above sufficiently records what the tribunal observed on site.[17]At the commencement of the hearing the tribunal enquired of the applicant whether he had sought or obtained any legal advice in relation to the application. He said that he had not. The tribunal then drew his attention to the directions for trial that had been issued by the regional judge. He had failed to comply with those directions by omitting to file a statement of case or any evidence at all, so that the only evidence before the tribunal comprised two witness statements on behalf of the respondent council, including detailed technical survey reports that it had obtained from Martech Tenchincla Services Ltd and correspondence that showed how the council had complied with its statutory consultation obligations under section 20 and the regulations referred to in paragraph 14 above. All that the applicant could do was question the council’s witnesses and make closing arguments at the end of the hearing. He could not adduce any new evidence of his own.[18]At page [A12] the applicant produced a typed version of the list of handwritten points set out in his application form. Like Lincolnshire, the document was in three parts. These comprised :a. A list of items of service charges that are in issue (including allegations that these were not service charges but capital costs – which should be spread over many years, that if it were a service charge it should be charged monthly, that the quality of the completed works in general is not of an acceptable standard, and that the cost of the protective coating seemed excessive)b. A description of 7 questions he would like the tribunal to decidec. Further comments (which mainly referred to attempts to negotiate terms for payment with the council, and whether he should go through its internal complaints process or directly to the tribunal). The 7 questions were :[1]The leaseholders were not asked if they were happy to approve these works which are over £10 000 per household[2]The costs are more than 10% of the value of the individual properties are they justified (sic) Has a cost benefit been applied to the costs[4]Have any of the charges have added any value to the properties[5]Why does the council only offer a payment plan to some of the tenants[6]Non residents make up a large proportion of the proportion of the 4 SI 2003/1987 4 properties why are they being discriminated against by being forced to pay these charges as a lump sum[7]Why was the paperwork not completed properly even two and a half years after the work was completed.[20]The tribunal explained to the applicant that it had no jurisdiction to go behind the express payment provisions in the lease, referring to the Lands Tribunal’s decision in Southend-on-Sea Borough Council v Skiggs5, so all questions to do with his offers to pay by instalments, or the council’s offer of payment plans to resident leaseholders but not investors, could not be considered.[21]The material before the tribunal included the above application, the respondent council’s statement of case, the lease, witness statements (plus copious exhibits) from David Green, senior civil engineer, and Jonathan Pederson, a leasehold officer. Unfortunately Mr Green was ill and unable to attend the hearing, so in his stead Mr Neil Watts, another engineer familiar with the project – and similar ones elsewhere across the city – attended, spoke to Mr Green’s statement and the technical points, and answered questions from Mr Safarzadeh and the tribunal on contractual matters, including on the considerable increase in cost of the concrete repairs from £46 168 in the original estimate disclosed to leaseholders to the final figure of £166 862 shown in the actual costs on page [B84]. On cost overruns he commented that, of the last four projects with which he was directly involved, three came in below the tender price and only one was higher.[22]He said that Martech’s report only gave an indication of the general condition of the block. It was not exhaustive, and it was only when the building was fully scaffolded and a very close inspection undertaken that it would it be possible to discover exactly what repairs were required. One could never tell what would be revealed until a close inspection was possible. When the council tests the general condition of the block at the beginning of a scheme it can only place approximate costs. To quote accurately the council would have to scaffold first and keep it up (or take it down and put it up again). The cost of doing so would be prohibitive.[23]In response to a question by Mr Safarzadeh he confirmed that it was probably correct to say that these were the first major structural work to the block since it was built about 50 years ago. It was put to him that in about five years the building would look as if nothing had been done to it, and when asked why the opportunity was not taken to repair the roof and staircases while the scaffold was up Mr Watts said that roof works are different from structural repairs. The stairs had been done previously. The roof will be done at some time, but roofing is a different type of contractor and skill-base from structural works.[24]Asked by the tribunal to focus his questions on the points he had raised in his application - such as the poor quality of the works, Mr Safarzadeh surprised everyone by prefacing his question with the observation that “it is not that the quality is bad; just high maintenance.” Asked whether the concrete parapet needs to be maintained when it could be replaced with railings, Mr Watts said that removing the sections of parapet would be complex and expensive. Work done to the concrete parapet is not high maintenance, and has the benefit of 15 year guarantees. 5 [2006] 2 EGLR 87 5[25]There was general puzzlement at the applicant’s suggestion that there was some significance to a major works cost in excess of £10 000, and that this granted the leaseholders a greater degree of control. Mr Safarzadeh was referred instead to the consultation regulations.[26]On the allegedly excessive cost of protective coatings, Mr Watts responded that this was actually a measured quantity of carbonation coating – 3-layer – and was the cheapest price obtained after tender. On cost-effectiveness of the works, Mr Watts observed that carrying out the repairs means that the block is structurally sound, so the works have added value. He went so far as to say “I know it has definitely added to the value.”[27]Mr Pederson was questioned on the consultation issues and confirmed that no comments or recommendations of alternative contractors had been made by the applicant. As to the applicant’s query why insurers rather than leaseholders were approached for payment, he said that the damage was due to wear and tear, so not an insurable risk. Attempts to question him on the differential treatment of council tenants and leaseholders were halted by the tribunal on the ground of irrelevancy. The applicant, an investor with a small portfolio of former council properties, was bound by the terms of his lease.[28]In his closing submissions the applicant said that what is done is done. There were two major issues here : one is the ratio of preliminary work, which he said should be 10% and not 15%. The second is that on the figures of actual works done, they are close – but the brickwork cost is a lot less because they did not do much. The biggest element is concrete repairs. This increase is not acceptable. He was however prepared to compromise and say that the total cost should be £10 000 instead of £15 000. He also noted that the council charges a lot for admin. Percentage-wise it is too much. Discussion and findings[29]The tribunal was left with the impression that some of the costs incurred may have been subject to effective challenge but that Mr Safarzadeh, in failing to seek or obtain any legal or technical advice before issuing his application and then failing to file a response to the council’s detailed statement of case or adduce any evidence at all, had frittered away what chances he had. In cross-examination of Mr Watt on some of his listed points of dispute he even conceded some of them at the outset of his questioning, and the points he sought to raise in his closing submissions (after being given the lunch adjournment to think about what he wanted to say) were entirely new.[30]The tribunal is therefore satisfied that on the basis of the material put before it by the respondent council, and Mr Watts’ very thorough answers to the technical issues put to him (which evidence it wholly accepts), that there is no basis for challenging the actual costs incurred by the council in relation to the major works undertaken at the blocks in question. The cost overrun was unfortunate, but not negligent.[31]Mr Safarzadeh’s application is therefore dismissed in its entirety. Although unclear from the poorly copied page of his application form at page [A6], this 6 dismissal includes any application that he may have made under section 20C of the Landlord and Tenant Act 1985. Dated 24th April 2019 Graham Sinclair Graham Sinclair First-tier Tribunal Judge 7