71 Medina View, East Cowes, Isle of Wight, PO32 6SU (“the premises”) CHI/00MW/LSC/2023/0124

FIRST-TIER TRIBUNAL

PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case No CHI/00MW/LSC/2023/0124

Between

Mr Mel CraytonApplicant

Medina View (Horseshoe) RTM Company LimitedRespondent

Before

Tribunal Judge H Lederman

Date 7 January 2025

DECISION

[1]Communications to the Tribunal MUST be made by email to rpsouthern@justice.gov.uk. All communications must clearly state the Case Number and address of the premises. Decision

[3]a. the Applicant is liable to pay service charges for the service charge year commencing April 2023 in the sum of £1392.38 (being £1167.38 for “flats charge” which does not include a sum for lift costs or associated telephone costs) and £225.00 for “estate costs” under the Lease of the premises dated 18th December 2002 (“the Lease”).

[4]b. No determination is made about the Applicant’s liability for service charge years 2024 or other future service charge years.

[5]c. None of the costs of these proceedings shall be treated as relevant costs for the purpose of calculating service charges payable by the Applicant under section 20C of the Landlord and Tenant Act 1985 (“the 1985 Act”).

[6]d. Upon the Respondent indicating that no claim for litigation costs will be made against the Applicant arising from any of the issues determined in this application, no determination is made under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002.

[7]e. The Respondent should reimburse the Applicant £300.00 for hearing and application fees paid to the Tribunal within 14 days of receipt of this Decision.

REASONS

[1]The Applicant made an application for determination of liability to pay and reasonableness of service charges for the year 2023 and “ongoing” in connection with “lift costs” including telephone costs associated with the use of lifts in the parts of the development which include the premises managed by the Respondent.

[2]A determination of a single issue was made without a hearing issued on 9th July 2024 (“the first decision”). Much of the relevant background is set out in the first decision and is not repeated.

[3]The Applicant was accompanied at the hearing by his wife Mrs Elizabeth Crayton a director of the Respondent. Mrs Crayton made extensive representations on behalf of the Applicant at the hearing, without objection from the Respondent. Her representations were not treated by the Tribunal as evidence as they were not contained in a witness statement as the direction of 8th October 2024 required. Mr Chris Caws, a director of the Respondent attended the hearing, but did not give evidence. The Respondent did not seek to cross examine the Applicant. The hearing proceeded by way of oral submissions supplementing extensive written arguments.

[4]The Applicant and his wife are both articulate and intelligent and participated fully in the hearing. They mentioned the Williams and Waaler decisions referred to in the first decision. They were able to follow and participate with some energy in the hearing without requesting an adjournment. However, neither the Applicant nor his wife appeared to have any legal training or relevant legal experience, did not appear to have had the benefit of legal advice and could not be expected to have fully grasped all the legal concepts implicit in their detailed arguments. The Tribunal made allowance for this. Documents available to the Tribunal

[5]A second bundle of 213 pages prepared for use at the hearing included documents suggested by the Respondent. References to page numbers are to the second bundle unless stated otherwise.

[6]No witness statements were submitted by the Respondent additional to the Respondent’s statement of case of 12 February 2024 (69-71). The Respondent’s “Points of Response” of 20 November 2024 at 197-206 supported by a statement of truth from the Respondent’s director Mr Caws contained little in the way of evidence of fact. The Points of Response consisted mostly of helpful written submissions prepared by the Respondent’s Counsel. Structure of these reasons

[7]In these Reasons where narrative, facts or descriptions are recited, they should be treated as the Tribunal’s findings of fact unless stated otherwise. These reasons address in summary form the key issues which the Tribunal considers it necessary to determine consistently with the overriding objective. References to “the lessee” in most cases in these reasons are to the Applicant who together with his wife have taken an assignment of the Lease.

[8]For ease of description, these reasons refer to “blocks of flats” as those parts of the development which are accessible by a common entrance door. In respect of the premises in which the block of flats is situated, this arrangement is illustrated by plan on page 84 (“Conveyance Block and Site Plan Block B & C”). This is a “block of flats” which does not have a lift. However for the purposes of interpreting the Lease, “Block” is given the meaning “6 blocks comprising 54 flats in total” in “the Particulars”. Key factual background

[9]It is common ground, clear from the documents provided in evidence to the Tribunal, or not the subject of challenge by the Respondent:a. The Applicant is a lessee of the premises under the Lease; his wife is a director of the Respondent;

b. The premises are one of 74 flats in a development originally built by Barratt Homes Limited in 2000-2002 in 9 separate blocks of flats. The development as shown also includes garages, parking spaces and some 8 freehold houses.

c. A schematic view of the blocks of flats in plan format is found as plan B as part of the Lease (on page 85);

d. Some of the 9 blocks of flats originally built (including the block of flats in which the premises are located) do not have lifts. All flats appear to have 999 year leases.

e. The Respondent took over management and dealing with service charge of 54 flats (including 2 blocks of flats which do not have lifts) in about 2012 pursuant to the “Right to Manage” legislation. For most purposes including service charges the Respondent takes the place of the landlord under the Lease.

f. From about that time (if not earlier) the Respondent adopted an allocation of service charge costs which meant that the 2 blocks of flats which did not have lifts were not directly or openly charged for lift costs (including associated telephone costs). It appears that from about 2019-2022 this allocation of costs between lessees continued, but as a matter of practice, some part of the costs of lifts were met from reserve fund.

g. From the date of its management the Respondent departed from the initial allocation of the service charge proportion at 1.36%: see Respondent’s Statement of Case of 12 February 2024, page 70.

h. Notice of the change from 1.36% to an allocation of service charge proportions to those which reflected the amounts actually demanded such as 1.86% under part I of the Fourth Schedule to the Lease was not given: Respondent’s Statement of Case of 12th February 2024 page 70.

i. The Applicant’s copy of the Lease at pages 79-107 is typical of the Leases within the block containing 54 flats which are the subject of the Respondent’s “right to manage”.

j. The remaining 20 of the 74 flats are the subject of another Right to Manage company Medina View Marina Apartments (12-31) RTM Company Limited. That company is not a party to this application.

k. In about March 2023 a decision was made by the Respondent to include an element of lift costs within sums demanded for service charges for those Flats including the premises which did not have the use of a lift in the block of flats where the flat was located (“the Decision”). Additional factual issue

[10]The Applicant asserted those blocks of flats with lifts in the parts of the development managed by the Respondent are not readily accessible to the Applicant or his wife. The entrance doors are locked and according to the Applicant and his wife, the tradesman’s entrance button is only available during some limited daytime hours.

[11]The Respondent pointed to the grant of right to use passenger lifts in “the Block” in paragraph 1.4 of Part II of the First Schedule to the Lease and asserted access to those blocks of flats with lifts was available by use of the tradesman entrance button. The Tribunal did not find it necessary to reach a finding on this issue. Inspection

[12]Neither party indicated an inspection of the premises was needed to decide the outstanding issues. Issues for decision at the hearing on 19th December 2024

[13]The outstanding issues were initially categorised by the Tribunal as follows:a. Whether a valid demand (invoice) for service charges which includes lift costs and associated telephone costs as at March/April 2023 has been issued to the Applicant.

b. Whether there was a notice recalculating the service charge proportion complying with Part 1 of the 4th schedule to the Lease.

c. if there was such a notice, whether it complied with the terms of the Lease and in particular whether the Tribunal had the power to reach a determination upon any such a “discretionary” decision in the light of the decision in Williams v Aviva Investors Ground Rent GP Ltd [2023] 2 W.L.R. 484.

d. If there was such a document qualifying as such a notice, whether it had been validly notified (sent) to the Applicant.

e. whether any costs incurred for lift costs or associated telephone costs were reasonably incurred within section 19 of the 1985 Act;

f. Whether the Respondent’s legal costs can validly be charged to service charge under the terms of the Lease or any other Lease under clause 14.

g. Whether orders under section 20C of the Landlord and Tenant Act 1985 and/or paragraph 5A of Schedule 11 to the 2002 Act should be made.

h. Whether an order for Reimbursement of application and hearing fee should be made. Additional issues

[14]In the course of submissions by the parties it became apparent there were additional issues:a. the effect, if any, of the fact that the majority of the Board of directors who made the Decision held leases in flats with lifts so that there was an apparent conflict of interest between different classes of lessees or between the Respondent and those flats without Leases;

b. the meaning of the words in Part I of The Fourth Schedule “If in the opinion of the Landlord it should at any time become necessary or equitable to do so the Landlord shall recalculate on an equitable basis the Service Charge Proportion…” Clarification of documents

[15]In response to the Tribunal Judge’s questions at the outset of the hearing the Respondent’s Counsel clarified:a. References to “notice” and “letter” in paragraph 23(i) of the Respondents’ Points of Response (20 November 2024) were to the “Respondent’s” Newsletter said to have been dated 14th March 2023 and in particular the paragraph beginning “An issue regarding the management charge…”

b. The invoice alleged to have been sent to the Applicant was in similar format to that at page 213 addressed to Ms Huggup a director of the Respondent;

c. The draft letter at page 77 of the second bundle was not sent to the Applicant or other lessees; The Respondent’s position

[16]This is set out in Points of Response prepared by Counsel supported by a statement of truth signed by Mr Chris Caws. The key parts are as follows: “8…..After receipt of legal advice and full discussion at a board meeting, in January 2023 the board of directors of the Respondent took the decision to reapportion service charges so as to achieve an equal liability in respect of each of the flats in the Block.

[9]On 14 March 2023 the Respondent sent to all leaseholders a newsletter providing notice that from April 2023 all owners would pay the same service charge, albeit not referencing the specific percentage. The Respondent included details of expenditure in connection with the Block in the sum of £74,264.26 and expenditure in connection with the Estate in the sum of £18,281.99. The Respondent stated that leaseholder in the Block would be liable for service charges in the sum of £1,680.00, being £1,380.00 for the Block and £300.00 for the Estate. The service charges were to be billed on the basis of four payments in the sum of £420.00 each. “

[10]On 14 March 2023 the Respondent made a demand to the Applicant for payment of service charges in the sum of £420.00 for the period 1 April 2023 to 30 June 2023. ………………………………………..

[17]The Lease includes no mechanism for inclusion or exclusion of certain items of expenditure for particular leaseholders in the Block, other than perhaps by way of adjustment of the service charge percentage. Pursuant to clauses 1.7 and 3.2 of the Lease, the leaseholders in the Block are each required to pay their requisite service charge percentage as against the whole of the annual maintenance provision. If certain lift costs were to be excluded from the Applicant’s service charges, the same could only be achieved by reducing the service charge percentage of the owners of flats in buildings without lifts and increasing the service charge percentage of the owners of flats in the buildings with lifts. ……………………………………………………..

[20]Considering that the Lease contains provision for adjusting the service charge percentage, the issue as to inclusion of certain costs incurred in connection with the lifts is not whether inclusion is reasonable under section 19 of the LTA 1985, but, rather, whether the Respondent’s decision was equitable under the fourth schedule of the Lease. …………………………………………………………

[22]It follows that it is necessary for the First-Tier Tribunal to have regard to whether the Respondent’s exercise of its discretion was equitable.”

[17]The Respondent’s Counsel’s oral submissions confirmed the Respondent’s decision to make the service charge contained in the invoice (demand) of 14th March 2023 was made pursuant to part I of the Fourth Schedule to the Lease. The Applicant’s position about the Decision

[18]This is set out at length at pages 8-26 and was amplified orally. Key points for the purpose of the Tribunal decision can be summarised:a. 2011 – 2022 lift costs (save possibly electricity costs which were difficult to separate) were not expressly charged to flats without lifts;

b. This reflected the fact that (despite reference in the Lease to the right to use the lift), this right was to all intents and purpose surplusage;

c. 2020-2022 some of lease costs of the 54 flats under the Respondent’s management had been paid from reserve fund without express consultation or consent of lessees;

d. The Lease does not state in clear and unambiguous language that the 12 flats in two blocks without lifts have to pay towards the lifts and telephones in the 42 flats in the four other blocks of flats (page 13);

e. The Lease recognises that there are two ‘classes’ of flats; there are flats in blocks with lifts, and there are flats in blocks without lifts in Clause 3.3 of The Fourth Schedule Part II (Page 20 of Lease, Bundle p 101) that recognises this difference by reference to “...appropriate to the Flat and Parking Space”.

f. The Lease provides for the service charge proportion of different ‘classes’ of flat to be varied in order to allow for a service charge proportion to be recalculated to reflect that some flats do not benefit from a service that other flats do enjoy – namely a lift.

g. the Fourth Schedule of the Lease, Part I and Clause 3.3 of Part II, that together provide for a variation or recalculation of the annual service charge, as appropriate, to recognise that some flats do not benefit from certain services. Relevant terms of the Lease

[19]In the Lease the Applicant covenants to pay “the Service Charge” in respect of every Maintenance Year by equal instalments by clause 3.2 of the Lease. The Service Charge is defined by clause 1.7 as follows: “The Service Charge means a sum equal to 1.36% (or such other proportion as may be determined pursuant to Part I of the Fourth Schedule) of the aggregate Annual Maintenance Provision for the whole of the Estate for each Maintenance Year (computed in accordance with Part II of the Fourth Schedule).”

[20]The “Particulars” in the Lease define “Service Charge proportion” as “1.36%”. That clause must be read subject to the variation of proportion provision in part 1 of the Fourth Schedule which enables the landlord, and now the Respondent which takes the place of the landlord, to vary the amount of that proportion of costs payable by each lessee. The Applicant points out that 1.36% is consistent with each of the 74 flats initially having the same proportion for the purpose of service charge.

[21]“Maintenance year” is defined by clause 1.6 to be a 12 monthly period ending on 30th September each year. The annual accounts show the service charge years adopted has been calculated by reference to a year end 31st December 2023: see pages 165-166.

[22]Part I of the Fourth Schedule to the Lease provides: “Part I - Variation of Proportions If in the opinion of the Landlord it should at any time become necessary or equitable to do so the Landlord shall recalculate on an equitable basis the Service Charge Proportion and the Service Charge and notify the Lessee accordingly and in such case as from the date specified in the notice (which for the avoidance of doubt can be a date prior to the date of the notice) the new Service Charge Propertion (sic) notified to the Lessee shall be substituted for that set out in Clause 1.7 of the Particulars and the new proportions notified to the other lessees in respect of the other flats and parking spaces shall also be substituted for those set out in Clause 1.7 of the Particulars of their leases.”

[23]The relevant part of part II of the Fourth Schedule to the Lease explains what is included in the Annual Maintenance Provision that is to say: “2 The Annual Maintenance Provision shall consist of a sum comprising:- 2.1 the expenditure estimated as likely to be incurred in the Maintenance Year by the Landlord for the purposes mentioned in the Fifth Schedule together with 2.2. an appropriate amount as a reserve for or towards those of the matters mentioned in the Fifth Schedule as are likely to give rise to expenditure after such Maintenance Year being matters which are likely to arise either only once during the then unexpired term of this Lease or at intervals of more than one year during such unexpired term including (without prejudice to the generality of the foregoing) such matters as the decorating of the exterior of the Block the repair of the structure thereof and the repair of the Conduits 2.3 a reasonable sum to remunerate the Landlord for its administrative and management expenses (including a profit element) such sum if challenged by any lessee to be referred for determination by an independent Chartered Accountant appointed on the application of the Landlord by the President of the Institute of Chartered Accountants in England and Wales acting as an expert”.

[24]Paragraph 3 of the Fifth Schedule of the Lease reads as follows: “3 Maintenance of Lift To maintain the lift in the Block in proper working order and repair and keep the same in good repair and condition provided that the Landlord shall not be responsible for loss or inconvenience occasioned by the breakdown or temporary closure of the lift for repairs or any other necessary purpose or for any accidents that may occur to the Lessee or any other person using the lift and that in the event of a breakdown of the lift the Landlord will use its best endeavours to have it repaired as speedily as possible and the Landlord shall maintain and effect such insurance in respect of the said lift.”

[25]There are provisions granting the Lessee the right to use the Lift in the in clause 2 marked “demise”. This section refers to rights granted by Part IV of the First Schedule. The First Schedule to the Lease does not have a part IV. The rights granted to the Lessee are in Part III starting on page 91 of the Bundle (internal page 10 of the Lease). The pertinent part of Part III is paragraph 1.4 which reads: “1.4 to use the passenger lift in the Block for access to the Flat but not for the carrying of goods save in the nature of personal luggage and the like and subject to the management regulations that are then subsisting.”

[26]The reference to part IV of the First Schedule to the Lease instead of part III is clearly a clerical or administrative error which can be ignored for the purpose of this determination. Objectively the reference was intended to be to part III of the First Schedule. The leases of the 54 flats are under the Respondent’s management are for all relevant purposes materially identical.

[27]The Applicant drew attention to paragraph 3.3 of Part II of the 4th schedule which reads: “3.3 The Lessee shall be allowed or shall on demand pay as the case may be the proportion of the Maintenance Adjustment appropriate to the Flat and the Parking Space.” (his emphasis) The Respondent’s Decision to charge £1380 for flat cost and £300 for estate charge for each flat

[28]Contemporaneous evidence of the Decision is found in excerpts of minutes from the Respondent’s Board of Directors at page 67 (“the Minutes”). References to “LC” in the minutes are to Mrs Crayton. CC is assumed to be Chris Caws. Relevant parts of the Minutes read as follows: “11th January 2023 “CC had attended Glanvilles solicitors for a meeting on 6th Jan 2023. He reported that it was the solicitor’s opinion that all blocks should be paying for lift costs within the management charge, however he would prefer to have sight of a lease from a block that did not contain a lift to be assured of his opinion. LC agreed to provide CC with a copy of her lease in order that the solicitor can ratify the decision. 8th February 2023 Matters arising from previous minutes were largely included in the meeting’s agenda but CC did report back to the meeting regarding his discussions with the solicitors concerning the apportionment of lift charges. The solicitor having now seen all the necessary copies of the lease has advised that all flats should share lift charges. 4 directors (HH, CF, PK, CC) agreed that we should carry forward the solicitor’s findings. LC maintains her view, as noted in the minutes of 11.1.23, that according to the lease and associated documents, the cost of Lifts and Telephones should be covered entirely by the 42 flats in blocks with lifts as was happening from 2002 up to and including 2019.”

[29]Further evidence of the directors’ reasons for the decision is found in part of the Respondent’s Newsletter at page 212 (dated 14 March 2023): “An issue regarding the management charge was brought to our attention and this has caused us to review the terms of the lease relating to the management charge. We have taken legal advice and been advised that according to the terms of the lease, all owners should be charged the same management charge, although historically this has not been the case. Our investigations have shown that the initial management charge specified in all our leases was the same for all the flats in Medina View, regardless of their lift status. Despite this, and the fact that the lease stipulates how the management charge is to be applied, it appears, that for reasons best known to themselves, the original management company employed by Barratts chose not to treat all blocks the same. Whilst the actual wording of the lease can be notoriously difficult to interpret correctly, and following the recent legal opinion sought by the directors, we feel that we have no alternative but to follow the intended terms of the lease, so going forward, from April 2023, all owners will pay the same maintenance charge. Based on the estimates shown above, the management charge for each property will be £1680 for the year. This is made up from £1380 for the flats charge which all the flats will pay equally and £300 for the estate charge which will be the same for both the flats and the houses. The management charge for 2023-24 will be paid in 4 equal payments of £420 for the flats and £75 for the houses.” (emphasis added) The Tribunal’s findings about the Respondent’s reasons for the Decision

[30]The Decision was made in the belief that legal advice had been given that the Leases required that all 54 flats including the flats which did not have access to a lift, should pay the same proportion. An excerpt from the legal advice given is at page 66 in an undated letter from a partner at Glanville Damant Limited solicitors. It is unclear whether that legal advice was addressing the issue of variation of the proportions. No reference is made to such a variation or the procedure for variation contained in the Lease that in the letter. The letter does not address the possible consequences, if such a variation was not made, or the conditions which needed to be satisfied if a decision to make variation was to be made. It is unknown if the solicitor had been told of the established pattern of contributions had been that those flats without lifts had not been paying for lifts previously, although one possible reading of the letter is that that issue had been put to her.

[31]The excerpts from the Minutes of 8th February 2023 at page 67 give some additional information about the solicitor’s legal advice as follows “”the solicitor having seen all the necessary copies of the lease has advised that all flats should share lease charges”.

[32]The excerpts from the Minutes of 11 January 2023 and 8 February 2023 do not explain why in the opinion of the Respondent’s directors it was either “necessary” or “equitable” to change the established apportionment of service charge from that adopted between 2011 – 2022. The directors’ understanding of the legal advice was simply that legal advice had been given that all flats should share the same proportion. The minutes do not explain why it was necessary or equitable to “carry forward” the solicitor’s advice, or adopt a proportion that was different from the proportion adopted previously. The newsletter simply says that the directors felt that they had “no alternative but to follow the intended terms of the lease”.

[33]In addition the Respondent has not produced evidence that the directors addressed the question whether it was necessary or equitable to “recalculate on an equitable basis” a variation to the existing service charge proportions within the terms of Part I of the Fourth Schedule – only that it wished to ensure that lift costs were payable by all lessees as that was its understanding of what the lease required – a different question.

[34]According to the newsletter, the Respondent’s state of mind was that it thought that the legal advice was that those flats without lifts “should” pay for lifts because the majority of the directors thought that was what the lease intended. The Respondent did not address the issue of variation of the “proportion” at all. The Respondent’s Points of Response paragraph 17 (page 201) accept that: “If certain lift costs were to be excluded from the Applicant’s service charges, the same could only be achieved by reducing the service charge percentage of the owners of flats in buildings without lifts and increasing the service charge percentage of the owners of flats in the buildings with lifts”

[35]Those Points of Response paragraphs 18-19 (page 202) acknowledge - “The manner in which the Respondent has split categories of expenditure into three [flat charge=lift charge and estate cost – see for example pages 46-47] and charged different amounts to different leaseholders depending upon lifts within their buildings does not really correspond with the stipulated methodology for calculating service charges unless channelled through the lens of differing service charge percentages. In particular, over the years different leaseholders have ended up paying different service charge percentages depending upon whether their building contained a lift simply because they have been required to pay different sums, irrespective as to they were notified as to their particular percentage.

[19]For example, in 2018 the total of the service charges levied against the 54 leaseholders in the Block was £72,861.12. Those without lifts in their buildings were required to pay £1,219.92, being 1.674 percent. Those with lifts in their buildings were required to pay £1,386.24, being 1.902 percent.” (insertions in square brackets)

[36]The Minutes show the Respondent wished to add an additional component of service charge cost to a class of flats which did not have lifts. The evidence before the Tribunal does not show the conditions for variation of the proportion was addressed.

[37]The Respondent concluded that “they had no alternative but to follow the intended terms of the lease”. However such of the legal advice as has been shown to the Tribunal did not address whether there was an alternative to variation, whether the “recalculation” could be done an equitable basis, or whether the conditions for the Variation in Part I of the Fourth Schedule applied. The Respondent’s failure to apply their minds to the conditions required for variation and whether it was “necessary” for the purpose of paragraph 1 of the Fourth Schedule means it did not take into account a factor which was essential to the decision to vary the service charge proportions. As this was a decision which inevitably placed the Respondent’s interests in conflict with those of flats without leases, the decision was flawed and cannot stand: see Braganza v BP Shipping [2015] 1 W.L.R. 1661 at 1671 paragraph 24.

[38]The Tribunal is not satisfied that either of the initial two conditions for the Respondent to begin to exercise its discretion under Part 1 of the Fourth Schedule were considered when the Respondent reached the Decision. Did the Respondent make a decision to recalculate the Service Charge Proportion on an equitable basis?

[39]The Minutes and the Newsletter do not show the Respondent came close to considering what basis of any recalculation was equitable. The Respondent reached the view that the legal advice was that lift costs “should” be shared with all lessees. The issue of whether the proportion should be recalculated on an equitable basis was not mentioned. Paragraph 22 of the Respondent’s Points of Response suggest that various outcomes could have been equitable. The Respondent has not shown that it considered whether the recalculation in the Decision was considered as “equitable basis”, or for example whether there were other possible variations which might have been upon such an equitable basis.

[40]Accordingly the Tribunal concludes that the condition for the exercise of discretionary decision in paragraph 1 of part 1 of the Fourth Schedule referred to in the Williams decision discussed in paragraphs 15-16 of the Respondent’s Points of Response had not been made out. Whether there was a notice recalculating the service charge proportion complying with Part 1 of the 4th schedule to the lease.

[41]The Points of Response and Counsel’s submissions contended that the Newsletter amounted to notification of the Decision to vary an impose the new proportion substituted for that set out in clause 1.7 of the Lease.

[42]The Tribunal is unable to accept the Newsletter amounted to such a notification. It simply said that all lessees should be charged the same without specifying any proportion, let alone addressing the issue of what would be a recalculation upon an equitable basis. Was notice of variation given in these proceeding that the apportionment had been made?

[43]This point was made in the Respondent’s Points of Response as follows: “The Applicant has been provided with ample notice within the context of the proceedings that his service charge percentage has been reapportioned to 1.86 percent (indeed, it is clear that he already had notice of the same because the reapportionment gave rise to him making the Application). Again, whilst notice by way of the proceedings would be subsequent to the reapportioning of the service charge percentage, the fourth schedule to the lease permits retrospective notice.”

[44]The Points of Response did not specify which part or aspect of the current proceedings was relied upon as such a notice.

[45]The Respondent’s statement of case of 12 February 2024 (supported by statement of truth by the Respondent’s director Chris Caws) at page 70 contained the following passage: “The Landlord has the right under Part One of the Fourth Schedule of the lease at any time or when equitable to do so, to recalculate on an equitable basis, the Service Charge Proportion and the Service Charge and notify the leaseholders including the right to backdate the change to a date prior to the date of the notice. Following the Respondent taking over responsibility of managing 54 of the flats in 2012, this led to the Service Charge proportion being altered in practice to 1.86%, to reflect that the Respondent was only managing 54 out of the 74 flats. The Service Charge demands from that period onwards reflects this. However, notice has not been given in compliance with Part 1 of the Fourth Schedule to confirm the position, backdated to 2012 and a copy of this is attached to this response. In addition, I attach email from the landlord’s legal representatives confirming that the power to vary the service charge proportion, under Part 1 of the Schedule was transferred to the respondent following responsibility of the amending of the 54 flats being transferred to the respondent from the landlord in 2012. In the circumstances, the correct Service Charge proportion is 1.86% payable by all leaseholders which has been the case since 2012.” (emphasis added)

[46]The Notice that was “not given” referred to in that paragraph is at page 77 (the draft notice that was not sent). The Respondent did not indicate the date from which the recalculation would take place as paragraph 1 of part I of the Fourth Schedule requires. If anything, the emphasised passage appears to suggest that the 1.86% proportion was adopted in 2012. This is not the Respondent’s position. The Respondent’s position is that the newsletter of 14th March 2023 constituted notice that the principle of equal service charge liability was decided: see paragraph 23(i) of the Points of Response at page 204. This confused passage in the Statement of Case cannot be interpreted as Notice of recalculation.

[47]The Respondent did not identify anything in these proceedings which could be taken to amount to a notice which satisfied the conditions of paragraph 1 of part I of the Fourth Schedule. Adjustment of service charge proportion appropriate to the Flat pursuant to paragraph 3.3 of part II of the Fourth Schedule

[48]It is not necessary or appropriate for the Tribunal to determine whether paragraph 3.3 of part II of the Fourth Schedule requires or permits an adjustment to take account of the fact that some flats do not have lifts. Validity of invoice of 14th March 2023

[49]Accordingly on the assumption that an invoice was sent to the Applicant in the same form as the invoice to Ms Huggup, it was not valid as demand under the Lease and the increased sums demanded were not payable. Calculation of sums payable for year ended December 2023

[50]The Respondent’s Counsel helpfully indicated the sum attributable to lift and associated telephone costs included in the demand of March 2023 which would have been sent to the Applicant was £212.62. The year ended 31st December 2023 service charge accounts show the sums payable at £1625.87 (the estate cost at £225.00). This produces a figure of £1392.38 (being £1167.38 for “flats charge” excluding lift costs or associated telephone costs) and £225.00 for estate costs. Future years

[51]The Tribunal does not make any determination about future service charge years or the service charge year ending December 2024 which may be subject to different factual and legal issues. Were lift costs reasonably incurred in year ended December 2023?

[52]This issue does not arise. The Applicant’s argument is not the cost of maintaining and running the lifts were not reasonable or not reasonably incurred, only that the Applicant should not be required to bear a proportion of that cost. Costs of Tribunal proceedings as relevant cost to be taken into account to calculate service charge

[53]The Applicant says that following receipt of the Decision of 09 July 2024, he emailed the Respondent on 20 August 2024 indicating willingness to participate in the Tribunal’s mediation scheme and emailed the completed mediation application form to the Tribunal on 27 August 2024. On 29 August 2024 the Respondent emailed saying they were happy to try and resolve the matter amicably but failed to progress this: see page 78. The Respondent did not return the completed mediation application form to the Tribunal. The Tribunal has not been shown evidence that the Respondent tried to renew the offer to mediate or mediation through the Tribunal. The Respondent’s Counsel argued the parties were too polarised in their positions to mean that mediation stood a reasonable chance of success. The Tribunal disagrees. This was a case par excellence where neighbours in a continuing relationship had fallen into disagreement partly through difficulties in communicating with each other. Mediation is ideally suited to this kind of dispute. The explanation given by the Respondent for not pursuing mediation is unsatisfactory.

[54]In an email issued after the hearing the Respondent’s Counsel has said it has legal expenses insurance, subject to an excess in the sum of £5,000.00. That sum has been exceeded and will be charged in full to the Respondent, but no further litigation costs will be payable by the Respondent.

[55]There may be other litigation costs prior to instruction of Rradar, the solicitors instructed on behalf of the Respondent following an insurance claim being initiated. The Respondent has been asked to confirm whether or not any such costs were incurred and the quantum of the same, but has not provided any additional information.

[56]The Tribunal regards these legal costs as very concerning. They illustrate starkly why professional facilitated mediation should have been attempted. The Respondent’s offer of a meeting in the development’s gymnasium was not a substitute for mediation. The Tribunal bears in mind the Respondent has no assets of its own apart from service charge. Despite that, it would not be just or equitable in view of the outcome that the Applicant should have to contribute to the legal and other costs of the Respondent contesting this case by way of service charge.

[57]The Tribunal does not make any determination upon whether any of the legal costs incurred in these proceedings fall within the service charge provisions of the lease. This issue, and the issue of whether any legal costs were reasonably incurred, can justly and more efficiently be dealt with when the amount of costs incurred and the precise purposes for which they were incurred are before the Tribunal. Reimbursement of application and hearing fees

[58]The Applicant has borne the burden of the Tribunal’s fees for the application and hearing. He has been largely successful in this application. It is just and equitable that the responded reimburse him for the £300.00 fees within 14 days of receipt of this Decision. Coda

[59]The Tribunal wishes to thank both parties for their assistance to the Tribunal. The Respondent’s Counsel came into this case very late in the day and was faced with presenting a case which had largely been pre-determined before his involvement. He did so very attractively and fairly. H Lederman Tribunal Judge 7th January 2025 FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : CHI/00MW/LSC/2023/0124 Property : 71 Medina View, East Cowes, Isle of Wight, PO32 6SU (“the premises”) Applicant : Mr Mel Crayton melmail.mc@gmail.com Respondent : Medina View (Horseshoe) RTM Company Limited caws.chris@gmail.com Represented by Daniel Metcalfe, Counsel instructed by Rradar solicitors Type of Application : Determination of liability to pay and reasonableness of service charges Section 27A Landlord and Tenant Act 1985 Tribunal : Tribunal Judge H Lederman Professional member: Ms T Wong Surveyor member Paul E Smith FRICS Date of Hearing : 19 December 2024 Date of decision : 7th January 2025 DECISION AND REASONS Communications to the Tribunal MUST be made by email to rpsouthern@justice.gov.uk. All communications must clearly state the Case Number and address of the premises. Decision The Tribunal determines that:a. the Applicant is liable to pay service charges for the service charge year commencing April 2023 in the sum of £1392.38 (being £1167.38 for “flats charge” which does not include a sum for lift costs or associated telephone costs) and £225.00 for “estate costs” under the Lease of the premises dated 18th December 2002 (“the Lease”).

b. No determination is made about the Applicant’s liability for service charge years 2024 or other future service charge years.

c. None of the costs of these proceedings shall be treated as relevant costs for the purpose of calculating service charges payable by the Applicant under section 20C of the Landlord and Tenant Act 1985 (“the 1985 Act”).

d. Upon the Respondent indicating that no claim for litigation costs will be made against the Applicant arising from any of the issues determined in this application, no determination is made under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002.

e. The Respondent should reimburse the Applicant £300.00 for hearing and application fees paid to the Tribunal within 14 days of receipt of this Decision. REASONS Background