Lindsey Lynsey Gray Adekoyejo Odusina Ricky looms Farah Butt Abiola AdejumoApplicantSouthfields House RTM Company LimitedRespondent
Before
Mr C Norman FRICSMr B Bourne MRICSMr D Ashby FRICSAndrew Gray for the ApplicantNo appearance For the determination of the liability to for the RespondentDate 16 October 2024Property: Gravesend DA11 7BF Lindsey Lynsey Gray Adekoyejo OdusinaType of application: pay service charges under section 27A of the Landlord and Tenant Act 1985 Mr C Norman FRICS
DECISION
Re-issued with typographical corrections under r.50 shown in strikethrough and underlining on 13 November 2024 Decisions of the Tribunal(1) The Tribunal makes the determinations as set out under the various headings in this Decision and the annexed Scott Schedule.(2) The Tribunal makes an order under section 20C of the Landlord and Tenant Act 1985 so that none of the landlord’s costs of the tribunal proceedings may be passed to the lessees through any service charge.(3) The Tribunal makes an order under Para 5A of Sch 11 Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”) that the landlord may not recover litigation costs via administration charges against the applicants.(4) The Tribunal orders that the applicants’ hearing and application fee be reimbursed by the respondent within 28 days of this decision. The application[1]The Applicants seek a determination pursuant to s.27A of the Landlord and Tenant Act 1985 (“the 1985 Act”) as to the amount of service charges payable by the Applicant in respect of the past service charge years 2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 And the future service charge year 2022/2023 The applicants also apply for orders under s 20C of the 1985 Act Para 5A Sch. 11 of the 2002 Act for reimbursement of the application and hearing fees. The hearing[2]The Applicants appeared in person and were represented by Mr Andrew Gray. Ms Abiola Adejumo also attended and Mr Luke Vilain as an observer.[3]At the hearing the Tribunal directed the applicants to provide, following the hearing, an electronic version of the Scott Schedule in MS Word format and to provide a further submission on a Scott Schedule entry. It subsequently requested evidence of redecorating cost (see below), having raised this orally at the hearing. The background[4]The property which is the subject of this application is a modern block of 12 flats dating from 2008. Photographs of the building were provided in the hearing bundle. Neither party requested an inspection, and the Tribunal did not consider that one was necessary, nor would it have been proportionate to the issues in dispute. In 2018, a previous service charge case was heard concerning the same property CHI/29UG/LIS/2018/0009 between different parties. That determined (amongst other matters) that 50% of the communal electricity cost should be apportioned to the building (see below).[5]Directions were issued on 15 January 2024 listing the application for a case management and dispute resolution hearing on 6 February 2024. Following that hearing, further directions were issued on 9 February 2024 of which Paragraph 24 directed the Respondent to send to the Applicant “copies of all documents they seek to reply upon, to include copies of invoices, management agreements and service charge accounts for the relevant years.” On 11 April 2024, it was directed that a related section 20ZA dispensation application CHI/29UG/LDC/2024/0051 would be heard with the section 27A case.[6]By a case management order of 7 May 2024, the Tribunal stated, “if there have been issues in relation to disclosure, then these should be raised within [the parties’] statements of case so that they can be addressed in any subsequent replies”. On 19 June 2024 the Tribunal (Regional Judge Whitney) made an Unless Order against the respondent for failure to disclose its statement of case, effective 21 June 2024. On 21 June 2024 the respondent sought an adjournment which was refused. No statement of case was provided by the respondent and the respondent which was therefore debarred from participating in the hearing.[7]Rule 9(8) of the Tribunal Procedure (First-tier Tribunal)(Property Chamber) Rules 2013 states: “If a respondent has been barred from taking further part in the proceedings under this rule and that bar has not been lifted, the Tribunal need not consider any response or other submission made by that respondent and may summarily determine any or all issues against that respondent.” The respondents were not debarred from the section 20ZA application (CHI/29 UG/LTC/2024/0051).[8]Although there was no statement of case, a considerable volume of disclosure by the respondent had been provided. This included service charge accounts for all years except 2022-23, for which a budget was supplied. The Applicants’ Case[9]The applicants stated that Hyde Housing was the original management company for Southfields House. In 2017 Southfields House RTM Company Limited took over management responsibilities and appointed a managing agent named Blocsphere Property Management Limited. The applicants submitted that the RTM company had no authority to assume management before 1 April 2018. The applicant referred to an injunction having been obtained in relation to that dispute. In 2017, the applicant made payments to Hyde Housing and was advised by Hyde Housing not to make payments to the RTM company.[10]The Applicants complained that they were owed monies by the respondent which should be repaid. The Applicants also complained that the RTM accounts were unsigned.[11]There were a large number of disputed items. These were directed to be set out in a Scott Schedule. Whilst this was done, additional schedules were also provided. Therefore, although this was done in an attempt to set out all the information, the Tribunal has had to marshal and understand the applicant’s position by reference to multiple sources of information for each entry. Furthermore, the Scott Schedule references do not reflect the eventual bundle pages. This has also resulted in a bundle of 1610 pages which is very large for a one-day case.[12]The Tribunal therefore relies primarily on the Scott Schedule to record its decisions, supplemented where necessary below. The Respondent’s Case[13]No statement of case was received but the Tribunal has had regard to documents provided by the respondent to the extent it considers proper. The Lease[14]The service charge mechanism is set out at clause 7 of the lease. The Tribunal notes that the tenant is liable to pay sums on account until the landlord certifies actual expenditure. The Tribunal notes that no such certificate has been provided for the year ending 31 March 2023. Therefore, in respect of that year, the Tribunal has determined payability on account only, under section 27A(3) of the 1985 Act. Findings[15]Although no copy of the injunction was supplied, an invoice at [943] from Blocsphere to Southfields House RTM states “addition (sic) work relating to postponement of management services, liaising with leaseholders and directors and postponing all contractors’ services until 1 April 2018”. The applicants’ case is further supported by an invoice from Brethertons solicitors to Blocksphere dated 28 March 2018 which references the application for an injunction [949]. There is further reference in Hyde Housing’s letter of 4 March 2021 [411]. Therefore, the Tribunal finds that Blocksphere was not entitled to levy service charge demands prior to 1 April 2018.[16]The Tribunal has considered each entry on the Scott Schedule on its merits and then decided whether to apply rule 9(8). In many cases, the applicants have complained that invoices are missing. The Tribunal finds that the signed service charge accounts are not conclusive as to expenditure, because they are not based on an audit and reflect a sampling of invoices only [517]. Secondly, the applicants are entitled to see the invoices said to give rise to their liability. Thirdly, the Tribunal directed full disclosure of invoices, which has not been provided. Fourthly, expenditure, where supported by invoices may nevertheless fall outside the terms of the lease or be unreasonable in amount. Furthermore, as pointed out by the applicants, the accounts for the years ending 31 March 2021 and 2022 are unsigned. There are no accounts for the year ending 31 March 2023, but an updated budget for that year [563] to which the Tribunal has had regard.[17]The Tribunal records the majority of its findings on the attached Scott Schedule. The Tribunal has no power to order repayment of service charge monies or consider matters relating to the internal management of the RTM company. The Major Works – Background and Findings[18]In about August 2019 internal redecorating was carried out at a total cost of £35,664. The landlord admitted that the section 20 consultation procedure was not carried out. Consequently, the current finding is that the recovery is limited to £250 per lessee which the applicants have offered, unless and until dispensation is granted. However, as there is a dispensation application, the Tribunal invited the applicants both at the hearing and subsequently by further directions, to propose an alternative figure. The Tribunal expressed the view at the hearing that the level of cost incurred appeared very high for a low rise building of 12 flats dating from 2008. The applicants responded putting forward a very low informal figure and another current quote from SJ General Building Services of £9,495. They made the point that the price would need adjusting for time. The Tribunal, unusually, and absent expert evidence decided to carry out the adjustment itself and applied the Building Cost Information Service Tender Price Indices. These showed a 17.61% adjustment between the date the work was carried out (third quarter 2019) and the date of the quotation (third quarter of 2024). The consequential adjusted sum was £8,100. The Tribunal wrote to the parties on 16 September 2024 putting this forward and inviting further comments. None were received. The Tribunal therefore finds that the reasonable cost of carrying out this work was £8,100. It also finds that no VAT would be payable as many contractors for this type of work would not be registered for VAT. However, it finds that the managing agents would be entitled to a management fee for supervising the works. In the management contract [1591] this is stated as 15% plus VAT. However, under the management contract this is directly referable to the consultation stage reached. From the Preliminary Submissions for the section 20ZA application [85] only the notice of intention was served. Therefore, the only fee payable is 25% of the 15% which is 3.75%. To this VAT should be added giving a total management fee for this contract of 4.5%. This aggregates to £8,464.50. Application under s.20C and refund of fees[1]The Applicants made application for a refund of the fees paid in respect of the application and hearing. Having considered the merits of the applicants’ cases, the outcome and the conduct of the respondent leading to its debarment, the Tribunal orders the Respondent to refund the fees paid by the Applicant of £300 within 28 days of the date of this decision.[2]In the application form the Applicants applied for orders under section 20C of the 1985 Act. Having taking into account the determinations above, and the conduct of the respondent resulting in its debarment, the Tribunal determines that it is just and equitable in the circumstances for orders to be made under section 20C of the 1985 Act, so that the Respondent may not pass any of its costs incurred in connection with the proceedings before the Tribunal through the service charge in respect of the applicants in this case.[3]For the same reasons above, the Tribunal makes orders under Paragraph 5A of Sch 11 of the 2002 Act that no costs in relation to this litigation may be recovered from the applicants by means of an administration charge. Name: Mr C Norman FRICS Date: 16 October 2024 Rights of appeal By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the tribunal is required to notify the parties about any right of appeal they may have. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber), then a written application for permission must be made to the First-tier Tribunal at the regional office which has been dealing with the case. The application for permission to appeal must arrive at the regional office within 28 days after the tribunal sends written reasons for the decision to the person making the application. If the application is not made within the 28-day time limit, such application must include a request for an extension of time and the reason for not complying with the 28-day time limit; the tribunal will then look at such reason(s) and decide whether to allow the application for permission to appeal to proceed, despite not being within the time limit. The application for permission to appeal must identify the decision of the tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal and state the result the party making the application is seeking. If the tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).