Regional SurveyorAndrew Otty for the ApplicantDate 30 October 2023
DECISION
[1]The Applicant seeks a determination of service charges for 2023-24. The value of the dispute is said to be £249.37 per month; “Service charge £250.20/month (rising from £193.84; a 29% increase) Heating charge £236.54/month (rising from £43.53; a 443% increase)”[2]The reasons for the objection were; “Service charges should have decreased because our services have decreased (for example, we no longer have a manager living on site and that property is let out to generate more revenue) so is a 29% increase reasonable? How is a 443% increase in monthly heating charges reasonable or justifiable when gas costs have risen 129%? THA’s compensation policy has not been reviewed in line with the service charge increases, meaning that we pay more in charges for a day of heating than we are compensated when the boiler fails, and of course using electricity as a substitute costs significantly more on top so we pay more than double. The heating and/or hot water failed 30 times in winter 21/22 and so far 3 times over winter 22/23. How is it satisfactory that THA gains financially when they leave elderly residents without heating in winter?” Preliminary issue[3]A copy of the Applicant’s tenancy agreement was provided which on examination indicated that the Tribunal may not have had jurisdiction to determine this application.[4]The Tribunal invited representations as to the question of jurisdiction and, on the information received issued a notice that it was minded to strike out the application. Further representations were received from the Applicant which contained a copy of a budget indicating that adjustments were made for over or underpayments from the previous year, thereby meeting the requirements of Section 18 of the Landlord and Tenant Act 1985. (the Act)[5]The Tribunal therefore determined that the service charge is variable and can be determined by the Tribunal under Section 27A of the Act. Substantive issue[6]The Tribunal considered that the application was to be suitable for determination on the papers in accordance with rule 31 of the Tribunal Procedure Rules 2013 unless a party objected. No such objection has been received.[7]The Applicant has raised two issues; the level of service charges and the Respondent’s loss of heating compensation policy. The Tribunal’s jurisdiction under Section 27A of the Landlord and Tenant Act 1987 is limited to determining the appropriate level of service charges only. Issues of compensation policy are not within the Tribunal’s jurisdiction and cannot be determined.[8]The Tribunal did not order a hearing bundle and the documents available to it are;• The Application• The tenancy agreement between Teacher’s Housing Association and Mrs Patricia Otty commencing on 16 September 2019• A witness statement from Carmen Clarke dated 5 July 2023• A witness statement of Patricia Otty dated 18 July 2023• A second witness statement of Patricia Otty dated 4 August 2023• The Respondent Statement dated 4 September 2023• A third witness statement of Patricia Otty dated 7 September 2023 The Law See the Appendix to this decision for the relevant law. The Lease[1]The tenancy agreement is described as a “Sheltered Assured Tenancy Agreement” and commenced on 16 September 2019. The monthly charge was indicated as;• Rent £330.11• Services £208.97• Total monthly charge £539.08[2]Clause B.3 refers to changes to the Total Monthly Charge, that relating to service and fuel charges reading as;[3]In the Schedule of Services at section H is “Provision of Heating, Electricity and Hot Water” To tenants’ properties where a communal charge is made. Submissions and evidence[4]In her witness statement of 18 July 2023 the Applicant refers to requests for an audited statement in accordance with Clause B 2(ii) (c) which has not been provided. In her email of 28 February 2023 is a request for such a statement and in her letter of 16 March 2023 the Applicant refers to receiving unaudited working documents for 2020/21. The Applicant’s letters of 16 and 30 March 203 also query whether the fuel costs have been market tested.[5]The Applicant’s witness statement of 4 August 2023 is solely in respect of the Tribunal’s jurisdiction which has now been determined.[6]The Respondent’s statement of 4 September 2023 states that;• The service charge budget for 2023/2024 provides a breakdown of the costs making up the service charge. It also sets out the different tenancy types in relation to the heating charge. The Applicant’s flat is a Type D flat. This was sent to all residents of Romaleyn Gardens in February 2023.• The heating costs for 2023/2024 were based upon the consumption in the previous year, the standing charge and the agreed contract with energy supplier SSE plc.• The service charge budget for 2023/2024 provides a budget of £163,716 for heating and hot water. The heating bills for the 4-month period 1 April 2023-1 August 2023 amount to £42,609.04. This would give an estimated projected annual cost for 2023-24 of £127,827.12. However, the £42,609.04 is based upon the usage during summer months, during winter usage will be higher. We therefore reasonably believe that £163,716 is an appropriate budget for heating and hot water and based our calculation on that reasonable estimate.[7]The Applicant states in their application that the current off site managers' salary is well over £50,000 whereas the previous on-site managers’ salary was only £30,000. We confirm that there are 4 staff in this role and their salary costs total the £50,000 that has been included within the service charge budget. The service charge includes the salaries, national insurance and pensions for those employees’ providing services to RMG. Appended to the statement were copies of service charge budgets for 1/4/23 – 31/3/24 and 1/4/22 – 31/3/23.[8]The Applicant’s “Third Witness Statement” dated 7 September 2023 states that;• Devonshires can’t give direct evidence of events with no first-hand knowledge.• The Tribunal’s Directions required copies of accounts, quotations and estimates none of which have been provided.• No energy bills or contracts have been provided.• Repeated requests for an audited statement have been ignored.• The Respondent has not contested the reduced level of service by replacing the on site manager with four staff.• Compensation policy not reviewed. Decision[9]As indicated above, the Tribunal does not have jurisdiction to determine what level of compensation payment should be made or to order the Respondent to provide an audited statement of accounts in accordance with Clause B.3 (ii)(c) of the tenancy agreement.[10]The Tribunal notes however that the Respondent has not, contrary to the Tribunal’s directions, provided any evidence regarding accounts, quotations or estimates obtained. Neither has the audited service charge statement been forthcoming in satisfaction of Clause B.3 (ii)(c). The Applicant’s reasonable query as to whether competitive quotations have been obtained has not been addressed.[11]The terms of the agreement are quite clear in that the charge for the forthcoming year will be an estimate of the likely costs based on the previous year’s income and expenditure together any budget adjustments in respect of the current year.[12]The Respondent has at paragraph 6 above, explained that the 2023/24 budget is based on actual expenditure for the four month period from 1 April 2023 adjusted for time of year to a total cost of £163,716. Given the direct challenge to this sum copies of invoices supporting the actual expenditure would have been helpful to allay the Applicant’s concerns, they were not however provided.[13]There is no explanation as to whether competitive quotations were obtained or why the percentage increase was at such a level. The provision of some explanation may have gone some way to providing an explanation to what would no doubt have remained an unwelcome increase.[14]The Tribunal’s task is however to determine whether the budgeted figure is reasonable for 2023/24 and as such the previous year’s expenditure is of limited value. The Tribunal is however concerned that on the evidence available to it there does not appear to have been any form of competitive tendering process which may have produced a lower sum or at the very least demonstrated that some effort had been made to minimise the cost. To reflect the possible saving that could have been made the Tribunal intends to deduct 10% from the heating budget of £234.66 giving the sum of £211.19 plus the deficit brought forward from 2022/23 of £1.88 arriving at £213.07.[15]Turning now to the cost of the manager it appears that there has been a change of provision from an onsite manager to a management service provided by 4 members of staff. The Applicant has made the assumption that such a change indicates a reduction in the quality of the management services but provides no details such as the working hours of the on-site manager or the hours now covered by the 4 on call staff. Without such evidence the Tribunal is unable to find that there has been a reduction in the quality of the service.[16]It is for the landlord to decide how the provision of services recoverable through the service charge are to be provided and as such unless the cost of the provision of those services is demonstrated to be excessive the Tribunal will not interfere with the sum claimed.[17]To summarise therefore the tribunal determines that the following monthly sums are reasonable and payable;• Service charge £250.20 per month• Heating charge £213.07 per month D Banfield FRICS Regional Surveyor 30 October 2023 RIGHTS OF APPEAL[1]A person wishing to appeal this decision to the Upper Tribunal (Lands Chamber) must seek permission to do so by making written application by email to rpsouthern@justice.gov.uk to the First-tier Tribunal at the Regional office which has been dealing with the case.[2]The application must arrive at the Tribunal within 28 days after the Tribunal sends to the person making the application written reasons for the decision.[3]If the person wishing to appeal does not comply with the 28 day time limit, the person shall include with the application for permission to appeal a request for an extension of time and the reason for not complying with the 28 day time limit; the Tribunal will then decide whether to extend time or not to allow the application for permission to appeal to proceed.[4]The application for permission to appeal must identify the decision of the Tribunal to which it relates, state the grounds of appeal, and state the result the party making the application is seeking. Appendix of relevant legislation Landlord and Tenant Act 1985 (as amended) Section 27A(1) An application may be made to the appropriate tribunal for a determination whether a service charge is payable and, if it is, as to - (a) the person by whom it is payable, (b) the person to whom it is payable, (c) the amount, which is payable, (d) the date at or by which it is payable, and (e) the manner in which it is payable.(2) Subsection (1) applies whether or not any payment has been made.(3) An application may also be made to the appropriate tribunal for a determination whether, if costs were incurred for services, repairs, maintenance, improvements, insurance or management of any specified description, a service charge would be payable for the costs and, if it would, as to - (a) the person by whom it would be payable, (b) the person to whom it would be payable, (c) the amount which would be payable, (d) the date at or by which it would be payable, and (e) the manner in which it would be payable.(4) No application under subsection (1) or (3) may be made in respect of a matter which - (a) has been agreed or admitted by the tenant, (b) has been, or is to be, referred to arbitration pursuant to a post-dispute arbitration agreement to which the tenant is a party, (c) has been the subject of determination by a court, or (d) has been the subject of determination by an arbitral tribunal pursuant to a post-dispute arbitration agreement.(5) But the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment.