Mr and Mrs Justin AllanApplicantMs L SuttonRespondent
Before
Judge D R WhitneyMiss C Barton MRICS--- for the ApplicantReeves James Solicitors for the RespondentDate 9 September 2021Hearing 2021-09-01Property: 57 Maxwell Road, Bournemouth, Dorset BH9 1DQType of application: Determination of service charges – Section 27A Landlord and Tenant Act 1985
DECISION
[49]The Tribunal thanks both Mrs Allan and Mr Cuff for their measured and considered submissions. Plainly it was an emotive hearing for both parties.[50]We have considered carefully the lease [28-39]. The lease allows the Respondent freeholder to recover 50% of the costs she spends undertaking repairs to the Property which includes expressly the roof. Clause 2(j) entitles a payment on account to be levied. Clauses 3 (a) to (d) set out the items which the Respondent is entitled to recover the costs of. In our determination all of the heads of expenditure we were asked to adjudicate upon are costs which fall within such covenants. The Applicant did not suggest otherwise.[51]We turn now to the particular items. We comment only on those raised within the Scott Schedule [40-42] and for the sake of completeness confirm all additional costs for the years 1st April 2018 until 31st March 2021 as set out in the statements of account [44-46, 53-55 & 117-119] are reasonable.[52]Firstly the insurance. Neither party particularly challenges the reasonableness of the premium save that the Applicants contends they should not have to pay towards the cost of legal expense cover.[53]In our judgment the inclusion of legal expense cover at a modest expense is a reasonable risk which the Respondent is entitled to recover. In our judgment the insurance premium claimed is reasonable and payable.[54]The next item is the cost of the report of Mr Spiers. We have had sight of the report and have read and considered the same [239-243]. In this Tribunal’s determination it was reasonable given the matters being raised by the Applicants for the Respondent to instruct a surveyor to inspect and report on the roof. Mr Spiers did so and determined that the roof required replacement. The Applicant raises no particular complaint as to his findings, only that they subsequently obtained their own report. His fee of £250 was in our judgment modest and we are satisfied that the same is reasonable.[55]We look next at the costs of BPL solicitors for conducting the section 20 consultation. We have various invoices which far exceed the sum which the Respondent looks to recover. It is unfortunate that the invoices do not properly break down what work was spent on which item and therefore enable us to forensically assess the costs. We do however have copies of the notices and the correspondence at that time.[56]We are satisfied that such work was properly incurred by the Respondent in complying with her repairing covenants. In principle we are satisfied such costs are recoverable being costs associated with her complying with her repairing obligations. The amount the Respondent seeks to recover is reasonable in our judgment on the basis of the evidence within the bundle and heard orally.[57]We note the specification for roof works included a contingency sum for works of repair to the internal parts of Mrs Sutton’s flat. We note Mr and Mrs Allan did object to this in replying to the section 20 consultation. We have the explanation of the contractor as to what work was undertaken. We are satisfied that it is likely some damage would have been caused to the internal parts of the upper flat when total replacement of the roof was undertaken. In our judgment it is reasonable for the costs of such repairs to be borne by the service charge and so apportioned equally between the parties being works associated with the Respondent complying with her covenants of repair as freeholder. Mrs Allan suggests a cost of £200 would be reasonable for re-decoration but we accept the works go beyond that and in our judgment on the evidence we find the cost of such works to be reasonable.[58]This then leaves the costs of the roof and associated works themselves. Mrs Allan does not challenge the cost of the works themselves. We note they were subject to a section 20 consultation and in our judgment the cost is reasonable. Mrs Allan does not challenge the quality of the works and we are satisfied that in principle the sum claimed is recoverable.[59]The Applicants contend they are entitled to a set off. In short the grounds being that Mrs Sutton is in breach of the lease in that she did not have the roof repaired sooner when she knew or ought to have known it was in poor repair. The Applicants suggest Mrs Sutton should have had reserve funds so that the Applicants would not have to shoulder the full burden of the cost. The Applicants suggest Mrs Sutton did not provide full information when they purchased. Finally they suggest that her delay in completing the works has added to the costs.[60]We considered whether or not the Respondent is entitled to establish a reserve fund. In our opinion the wording of the lease is not sufficiently clear to allow the establishment of a reserve fund. In our judgment unless the lease specifically allows the establishment of the same then the Respondent cannot require the leaseholders to contribute towards the same.[61]Even if we are wrong in our interpretation of the lease we are satisfied there is no obligation upon the Respondent to have a reserve fund. The Applicants appear to accept this point. Certainly they were aware when they purchased that the property did not have the benefit of a reserve fund. We are satisfied no criticism may be laid at the feet of Mrs Sutton for having not done so. It may be said to be desirable but the Applicants knew or ought to have known that no fund existed.[62]We are satisfied that the Tribunal is entitled to set off amounts by way of damages from service charges.[63]We are not satisfied that the Applicants have identified any losses for which they are entitled to off set sums.[64]When they purchased, they have candidly admitted the advice they received was “less than diligent”. The Applicants had not seen the LPE1 form until after their purchase had completed. Mrs Sutton made clear within this that her approach to the management was on an “as and when basis”. Further their Home Buyers Report highlighted the roof as an urgent item for further investigation prior to completion of purchase and suggested replacement might be necessary. Despite these comments Mr and Mrs Allan did not obtain a report specifically regarding the roof, only works to the chimney stack from a contractor who had that particular area of expertise. Neither did they follow up when Mrs Sutton reported certain repairs had been undertaken. In her words it was an overhaul of the roof. No further enquiries were raised as to what works were undertaken.[65]In our opinion a prudent purchaser would have raised further enquiries and employed a roofer to inspect the roof. Also the Allan’s conveyancer should have advised that given there was no reserve fund as and when works were required they would be billed for 50% of the costs of the same as and when required.[66]We are not satisfied that the Applicants have established that the Respondent was in breach of her repairing covenants in respect of the roof. As Mrs Sutton said within the LPE1 enquiries as and when she identified works were required, she had these undertaken. Roofers had undertaken modest repairs over her period of ownership. It is always a balance as to when repairs are no longer appropriate and replacement required. It was Mrs Sutton’s flat that was most significantly at risk and she tried to repair the roof for as long as was reasonably practicable. In this Tribunal’s judgment this was a reasonable approach. Some may have replaced the roofer sooner, some later. However, everyone seems to accept that replacement of the roof was a reasonable way for the Respondent to proceed when she opted for this. We do not find that the Respondent was in breach of her repairing obligations in respect of the roof.[67]We note that within the report of Mr Colbourne is a suggestion that the open market value of the flat was diminished due to the disrepair. We have already found that in our judgment Mrs Sutton did not mislead the Allans. However even if we were wrong on that we would not have accepted there was any reduction in the value of the Property. Mr Colbourne’s report contains little explanation as to how the reduction in value is reached beyond that a professional colleague undertook this assessment. We prefer the evidence within the Home Buyers Report which was contemporaneous with the purchase and valued the flat at the price paid. This report flagged the issue with the roof and other issues and yet still determined the open market valuation was the price paid by the Applicants subject to the outcome of investigations identified by the surveyor.[68]Having carefully considered all of the evidence presented we are not satisfied that the Applicants are entitled to recover any amount to be off set against their service charge liability.[69]This then leaves the various costs applications made by the Applicant.[70]We note that all such determinations as to reimbursement of Tribunal fees, orders pursuant to section 20C of the Landlord and Tenant Act 1985 and paragraph 5A of Schedule 11 of the Commonhold and Leasehold Reform Act 2002 are at the Tribunal’s discretion.[71]Mr Cuff indicated he did not believe his client could recover her legal costs, but his client’s position is reserved. We make no finding as to whether or not any costs may be recoverable. We remind the parties such costs are only recoverable if the lease expressly allows the same.[72]We note Mrs Allan explained that part of her motivation for bringing the application was to obtain copy accounts, invoices and the like which support the fact she and her husband have a credit which should have been refunded.[73]Certainly we agree that the overpayment should have been refunded. It was, and is, for Mrs Sutton to instruct her now former solicitors to attend to this without delay. We see no good reason as to why this has not been attended to, certainly as to the undisputed figures. It is the one area in which Mrs Sutton’s actions may be criticised.[74]The above being said we have determined that all of the costs are reasonable and costs properly recoverable by way of service charge payments. The circumstances are unfortunate. The Applicants as first-time buyers purchased a flat which within a short period thereafter required major works. We do not know what advice the Allans received, but we have determined that there is no right of set off against the Respondent.[75]Taking all matters into account we exercise our discretion and decline to make any orders as to costs in this case. 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.