7 Roland House, Harris Place, Tovil, Maidstone, Kent ME15 6BP : HAV/29UH/LSC/2025/0643 HAV/29UH/LSC/2025/0643
FIRST-TIER TRIBUNAL
PROPERTY CHAMBER (RESIDENTIAL PROPERTY)
Case No HAV/29UH/LSC/2025/0643
Between
Luke FrancisApplicantFreehold Managers (Nominees) LimitedRespondent
Before
Judge T.HingstonK. Ridgeway FRICST. Wong - Lay memberJohn Beresford (Counsel) for the ApplicantDate 25 November 2025Property: 7 Roland House, Harris Place, Tovil, Maidstone, Kent ME15 6BPType of application: Determination of liability to pay and reasonableness of service charges - Section 27A Landlord and Tenant Act 1985
[1]The property in question is one of the flats in a purpose-built block of 24 in a residential development at Harris Road, Tovil, Maidstone. There are two apartment blocks and five maisonette blocks on the estate.[2]The freeholder is Freehold Managers (Nominees) Limited.[3]The development is managed by Principle Estate Management (hereafter referred to as ‘Principle’).[4]The Applicant, who is leaseholder of Flat 7, made an application for determination of liability to pay and reasonableness of service charges for the years 2021 to 2025. The application was received on 28 March 2025.[6]The Applicant further seeks orders pursuant to Section 20C of the Landlord and Tenant Act 1985 (hereafter referred to as ‘The 1985 Act’) and paragraph 5A of Schedule 11 of the Commonhold and Leasehold Reform Act 2002 (hereafter referred to as ‘The 2002 Act’.)[7]The application refers to: · Alleged illegitimate insurance commission taken by the freeholder · Alleged unjustified insurance valuation charges · Alleged excess reserves taken without justification[8]There was a remote Case Management and Dispute Resolution Hearing on the 25th of July 2025, attended by the Applicant in person and by John Beresford (Counsel for the Respondent).[9]A position statement was provided by both parties.[10]At the hearing it was agreed that the name of the Respondent was to be amended from Freehold Managers Plc to Freehold Managers (Nominees) Ltd., and the years in question that were in dispute were amended to relate solely to: · the service charges for the years ending 31/03/2023 and 31/03/2024, and · the budgeted accounts for the years commencing 01/04/2024 and 01/04/2025.[11]The matters in dispute were agreed as follows:• Insurance commissions• Insurance valuation fees• Aerial Maintenance• Professional fees (2025 budget only), and• Reserve contributions.[12]Directions were issued and the case was listed for final hearing. THE LEASE 2[13]Under the Particulars of the Lease, the ‘Service charge proportion’ is defined as: - ‘ A 1.17% of the Annual Maintenance Provision attributable to the Managed Areas for the services set out in Part 1 of the Fifth Schedule’.[14]The ‘Annual Maintenance Provision’ is said to consist of a sum calculated in accordance with Part II of the Fourth Schedule.[15]The ‘service charge’ is defined as a sum - ‘...equal to the aggregate of the proportions… of the aggregate Annual Maintenance Provision for the whole of the Managed Areas for each Maintenance Year.’[16]There is provision for ‘Special contributions’ of any amount as the Lessor shall ‘...reasonably consider necessary for any of the purposes set out in the Fifth Schedule… for which no or inadequate provision has been made within the Service Charge and for which no or inadequate reserve provision has been made …’.[17]Clause 3 sets out the Lessee’s covenants, with particular relevant sections as follows: - · Clause 3.2 deals with the lessee’s obligation to pay the service charge in two equal half-yearly instalments, · Clause 3.3 deals with ‘Maintenance Adjustments.’ (see below). · Clause 3.4 deals with ‘Special contributions.’[18]Clause 4 sets out the Lessor’s covenants, with reference to the repairs, services and obligations contained in the Fifth and Sixth Schedules.[19]Part II Paragraph 2 of the Fourth Schedule deals with the computation of the Annual Maintenance Provision, which is said to consist of a sum comprising: - ·(i) ‘the expenditure estimated as likely to be incurred in the Maintenance Year … for the purposes mentioned in the Fifth Schedule…’, ·(ii) an ‘...appropriate amount as a reserve for or towards those matters mentioned in the Fifth Schedule...likely to give rise to expenditure after such maintenance year…’, and also ·(iii) ‘a reasonable sum to remunerate the Company for its administrative and management expenses...(including a profit element).’ Under Schedule 4 Part II Paragraph 3, at the end of each year this adjustment is calculated according to the amount by which the estimated expenditure has exceeded or fallen short of the actual expenditure. Under point c) it states that - ‘the lessee shall be allowed or shall on demand pay as the case may be…’ the appropriate proportion of the Maintenance Adjustment attributable to their particular flat.[20]Paragraph 12.1 of Part I of the Fifth Schedule requires the Lessor to keep the Managed Areas insured against loss or damage, with a wide discretion as to the detail of such insurance. 3[21]By Paragraph 12.2 of the same Part the landlord covenants to - ‘...have the buildings in the Managed Areas revalued for insurance purposes from time to time in accordance with good estate management practice.’ RELEVANT LAW 22. See Appendix. THE HEARING[23]The hearing was held remotely by video link on the 31st of October 2025. The Applicant appeared in person.[25]Mr. Beresford of Counsel represented the Respondent landlord, with Andrew Davis (Director of the managing agents Principle) and Mr. Gerry Currell (Managing Director of Freehold Managers (Nominees) Limited) also attending as witnesses.[26]The Applicant provided an electronic bundle of statements, documents, correspondence and Exhibits comprising 327 pages. A further bundle of legal authorities was also provided. THE APPLICANT’S CASE[27]The Applicant’s case was set out in the Application form, in the Reply (dated 10th October 2025) to the Respondent’s case, in the Position Statement of 18th July 2025, and in Mr. Francis’ Witness Statement dated 5th September 2025.[28]Mr. Francis also gave evidence and made oral submissions during the hearing.[29]As above, the Applicant challenged certain elements of the service charges during the relevant years, broken down as follows.[30]Year ending 31st March 2023 · Insurance commission The Applicant confirmed that the full cost of the insurance premium (at £5,068.63) was passed on to leaseholders in this year, but he pointed out that there was a ‘commission’ of £1,820.86 included in the figure. This ‘commission’ was divided between A.J. Gallagher (insurance brokers) and a third party, Freehold Managers Plc, and Mr. Francis submitted that it was irrelevant whether or not the total premium was affected by the arrangement: there was no contract between the leaseholders and the third party and such costs could not be said to be ‘reasonably incurred.’ The case of Williams v. Southwark LBC [2001] 33 HLR 22, which was cited by the Respondent, was distinguished by Mr. Francis on the grounds that it concerned ‘commission’ paid directly to a landlord for work performed in connection with the insurance, whereas in the subject case the work was out- sourced to a third party. 4 · Insurance revaluation There was a revaluation -‘Reinstatement cost assessment’, or ‘RCA’ – carried out by Cardinus in October 2022. The cost of this assessment was £799 including VAT [Invoice at Page 221]. No challenge to this particular item in this year was submitted by the Applicant. · Aerial maintenance The landlords charged the leaseholders £600 (£7.50 per flat) for ‘aerial maintenance’ in this service charge year, despite the fact that there was no actual cost incurred. Invoices were produced showing a call-out charge of £120 in September 2021 [Page 240] and a charge of £706 in October 2021 [Page 240], but there was no invoice for 2022 – 2023. The Applicant submitted that service charges should reflect costs actually incurred, and it was not reasonable to demand speculative amounts on an annual basis. · Reserve contribution The landlord collected a total contribution of £11,000 for reserves during this service charge year (as per the Service charge accounts at Page 144), at £137.50 per unit. The Applicant contended that, as only £475 of the reserves was spent in total during the relevant period, the contribution was excessive and unjustified and therefore unreasonable. The case of Assethold Limited v. Alexandra Adam and Others [2022] UKUT 282 [LC] was cited as authority for the proposition that service charges are only recoverable where the landlord’s decision-making was objectively rational.[31]Year ending 31st March 2024 · Insurance commission The insurance premium for the year ending March 2024 was £23,092. This included a fee of £1,833.30 paid to Freehold Managers Plc, which was said to be ‘remuneration’ for a range of services provided by the company, including various management and administrative tasks associated with setting up and handling the insurance on the property [as per the letter from Freehold Management Plc at Page 220 of the bundle.] The Applicant Mr. Francis submitted that tasks such as ‘claims handling’ and ‘risk management’ were standard property management tasks which should have been carried out by Principle, and that there was ‘double-charging’ for identical services. He contended that this cost was not provided for in the Lease in any event and could not be said to be ‘reasonably incurred’. · Insurance revaluation The Applicant objected to the £2,000 (divided between 80 units, so representing a cost of £25 per flat) which was charged for insurance revaluation 5 in the year ending March 2024, when no such valuation was necessary or undertaken. Valuations were only required every three years, and the previous revaluation had taken place in October 2022 as above. · It was submitted that this charge was not reasonable or necessary and did not reflect costs actually or reasonably incurred. Despite the fact that sums paid during a ‘non-valuation’ year were credited under a balancing adjustment, Mr. Francis argued that the decision to make a substantial charge in a year when no valuation was to be done was intrinsically unreasonable, and that the Respondent’s concession that they would not be charging under this heading in future was an implicit admission to that effect. · Aerial maintenance In the year to 31st March 2024 the leaseholders were again charged £600 for ‘aerial maintenance’, although no costs had actually been incurred. Mr. Francis submitted that it was not reasonable or necessary to make such a charge, and there was adequate provision for any modest and ordinary costs of this nature to be met from general maintenance demands. · Reserve contribution A far greater contribution to the reserve fund was demanded in this year, at £25,500 in total (£318.75 per unit) [as per the Accounts at Page 152 - 153] and the Applicant queried the justification and rationale for such an increase. In particular Mr. Francis submitted that the Property Maintenance Plan (or ‘PMP’) [at Page 174 of the bundle], which had been prepared by Ashby Building Surveyors in December 2023 on behalf of the freeholders and their previous management company, was fundamentally flawed and misleading. The PMP details a programme of likely and necessary works and expenses on the estate for the next 20 years, and the Respondent purported to rely upon it in assessing the level of annual contributions to the reserves. However, the Applicant argued that (amongst other things) the authors of the PMP over- estimated future levels of inflation, under-est[32]Budget estimate year commencing 1st April 2024 [Page 160] · Insurance commission There is no figure given for budgeted insurance commission in this year, but the Applicant’s position is that ‘commission’ paid to a third party is outside the remit of the Lease and not payable. · Insurance revaluation As per the previous financial year, the Applicant objected to the £2,000 which was listed [Page 160] as an estimated cost under this heading in 2024. The anticipated revaluation was not due until later in 2025 (three years after the previous one), and it was submitted that it was unreasonable and unjustified to demand a contribution in the 2024 budget. · Aerial Maintenance As above, a figure of £600 was allowed for this item in the Budget for 2024- 2025, and the Applicant submitted that such a speculative cost was unreasonable. · Reserve contribution The total reserve fund contribution to be demanded in this service charge year was £37,000, or £462.50 per unit. Mr. Francis pointed out that the PMP had budgeted £15,765 for specific external works (Reserve Funds 1a and 1b) in 2024 (as set out in his ‘Reply’ at Page 256 of the bundle], but in fact nothing had been spent at all from the reserve funds in this category. In respect of the Reserve Fund 1 (‘Estate External’ works), the PMP had budgeted £10,488 for this year, but only £3,229 had actually been spent on such works [as per Page 257]. Finally, in respect of Reserve Fund 2 (Block internals), the PMP budgeted £5,658, and the actual expenditure was said to have been £8,374. Mr. Francis submitted that there were no invoices or records to show what this money was spent on. As in the previous years, Mr. Francis argued that the reserve contributions were illogical, unjustified by evidence, and not ‘reasonably incurred’ under Section 19 of the Landlord and Tenant Act 1985. 7 The case of Knapper v Francis [2017] UKUT 0003 (LC) was cited, and Mr. Francis submitted that budgets must be reasonable at the time that they are set rather than being judged with the benefit of hindsight. · Professional fees The ‘Budget estimate’ at Page 160 makes no mention of ‘Professional fees’. However, the ‘Statement of Anticipated Service Charge Expenditure’ for the year ending 31st of March 2026 [at Page 161-162] lists both a figure of £2,081 for ‘Professional fees’ which were apparently in the budget for the previous year (i.e. 2024-2025), and £294 for the same item in the 2026 budget. Mr. Francis challenges these costs on the basis that there is no evidence at all as to what they relate to, and in the circumstances he submits that such costs cannot be said to have been ‘reasonably incurred’.[33]Budget estimate year commencing 1st April 2025 [‘Statement of Anticipated Expenditure’ at Page 161-162] · Insurance commission There is no figure given for budgeted insurance commission in this year, but the Applicant’s position is that ‘commission’ paid to a third party is outside the remit of the Lease and not payable. · Insurance revaluation The property was due for revaluation in this service charge year, and the invoice from Cardinus dated 31st July 2025 [at Page 223] shows that the total cost was £2,394, (including £1,197.60 for Combined Fire/ Health and Safety Assessment. The Applicant has not challenged the amount listed in this particular budget. · Reserve contribution The Budget for this year listed a total ‘Reserve Contribution’ of £39,500, or £493.75 per unit. Mr. Francis’ objections to this figure are as set out above for the preceding years. As at the 31st of March 2025 the total reserve fund stood at £66,582.89 [Accounts, Page 171]. In addition to the above points, it was said that there had been an excessive escalation in reserve contributions over the relevant years (2023 -2026), and detailed tables were produced [at Page 255] to highlight - · firstly the percentage increase year on year, and · secondly the inconsistency between the PMP projections, the contributions demanded, and the sums actually expended by the Respondent. Mr. Francis further submitted that the managing agents and the Respondent were contradicting themselves, in that they claimed that they were building up 8 reserves in accordance with the PMP, yet not once in the three years since the Plan had their demands matched the recommended amount. Further, none of the works as proposed under the Plan were in fact being carried out, and Mr Davis of Principle stated that no major works were currently planned. The Applicant alleges [Page 260] that the Respondents are over-charging leaseholders in order to amass large reserves and avoid compliance with the Section 20 consultation requirements (under the Landlord and Tenant Act 1985) in respect of future expensive works. Finally, evidence was produced (in the form of photographs of disrepair and poor maintenance, together with WhatsApp messages exchanged between residents, at Pages 258 and 259) that, whilst reserve funds were being increased disproportionately, basic maintenance jobs were being badly neglected.[34]Overall, the Applicant was critical of the handling and management of the estate by Principle and by their predecessors, particularly in respect of service charges, general maintenance, and communication with leaseholders.[35]As to whether the disputed sums were payable in accordance with the Lease, the case of Gilje v Charlegrove Securities Ltd [2002] 1 EGLR 41 was cited as authority for the proposition that service charge provisions in a lease must be clear and unambiguous, and anomalies are likely to be construed in favour of the tenant.[36]On the question of the burden of proof, the Applicant submitted that because the service charge demands were not in accordance with the statute or the Lease, the burden shifts onto the Respondent to establish payability and reasonableness. Section 20C Costs (under the 1985 Act) and Administration charges charges (under the 2002 Act). In respect of costs incurred by the landlords in respect of these proceedings, the Applicant submitted that these should not be regarded as ‘relevant costs’ which could be recovered from him by way of service charges. He produced a chronology of events and a list of failings and conduct on the part of the Respondent landlord and their agents [Pages 247 – 249] which, in his view, made ‘proceedings unavoidable.’[37]It was alleged that, in particular, the Respondent had: - · failed to refund charges paid for services budgeted for but not provided, whilst conversely demanding extra payments to balance under-payments · failed to answer reasonable enquiries made for information and/or documentation under Sections 21 and 22 of the 1985 Act · wrongly applied a test of ‘affordability’ when calculating service charges rather than applying the correct test of reasonableness under Section 19 of the 1985 Act · wrongly pursued debt collection processes in respect of non-payment of service charges and reserve contributions which were unsupported by invoices or other evidence 9 · failed to produce copies of the PMP to the Applicant until 15th August 2025, when forced to do so by Tribunal Directions following the Case Management hearing in July 2025 · dishonestly claimed that they had already provided a copy of the PMP to the Applicant · failed to comply with Tribunal Directions as to service of other case documents, and · unreasonably applied to the Tribunal for time extensions despite ample time being agreed for preparation of their case.[38]Mr. Francis produced copies of correspondence showing that he had made efforts to resolve the issues without the need for formal proceedings.[39]In the light of all the above, the Applicant asked the Tribunal to make orders that the £216 Administration charges and the costs of the proceedings should not be recoverable from him by way of service charges. THE RESPONDENTS’ CASE[40]The Respondent’s case is set out in the Position Statement of the 18th of July 2025, in the Respondent’s Statement of Case of the 3rd of October 2025, in the witness statements of Andrew Davis, Gerry Currell and Julie Howard, and in the documents, reports, correspondence and other exhibits in the case bundle.[41]Oral evidence was also given during the hearing by the Respondent’s witnesses, and Mr. Beresford of counsel made submissions and representations on the Respondent’s behalf.[42]In respect of the service charge challenges raised by the Applicant as above, the Respondent’s case is summarised under the same headings as follows.[43]Year ending 31st March 2023 · Insurance commission It was asserted on behalf of the Respondent that the Lease requires the landlord to insure the property, and it is clear that the Applicant has not argued that the insurance charges as a whole are unreasonable or not payable. The only issue is the payment of ‘commission’ to a third party, Freehold Management PLC (FMPLC). The ‘commission’ was said to be remuneration for services rendered by the landlord’s asset managers (FMPLC), to the brokers (A. J. Gallagher), rather than a genuine ‘commission’. The list of services provided in exchange for this payment is set out in the letters at Pages 214 and 220 of the bundle, and evidence was given that (for example) any leaseholder enquiries about insurance would be referred to FMPLC to deal with. 10 The Respondent’s case is that the insurance is both arranged and administered by FMPLC rather than by the managing agents Principle, and the tasks performed by FMPLC would have been carried out (and charged for) by the brokers if not sub-contracted to them. Effectively, it is said that it makes no difference to the premium payable by the landlords, no matter who deals with the administration of the policy. It was pointed out that the Lease uses the term ‘expenditure’ in connection with costs connected to insurance, and allows for the cost of arranging cover ‘through such agency...’ as the landlord might think fit. It was submitted that this can be construed to include expenses generally and not merely the basic premium. The case of Williams v Southwark (as above) was said to be clear authority, on very similar facts, for the right of a landlord to retain ‘consideration’ for their handling of the insurance administration, which had been recovered as service charges and which represented a proportion of the total premium. Mr. Beresford submitted that in this case the agents were acting on the landlord’s behalf and the effect was the same. Mr. Beresford also drew the Tribunal’s attention to the recent case of Octagon Overseas Ltd v. Cantlay [2024] UKUT 180 (LC), in which the Upper Tribunal held that this type of agency relationship was normal and commission was chargeable through the service charges. As to the suggestion that there was an overlap and ‘double charge’ for tasks connected with the insurance, it was averred that the managing agents had no involvement in that particular aspect of the Lease obligations. When questioned by Mr. Francis as to whether there was any proof (e.g. time- sheets) of work carried out by FMPLC on insurance administration, Mr. Currell stated that these were general services provided to the insurance brokers and the cost was covered within the overall premium. · Insurance revaluation The Respondent’s case is that the Lease requires ‘revaluation for insurance purposes from time to time…’. In this particular service charge year the revaluation had taken place in October 2022, and the cost was duly recoverable from the leaseholders. As[44]Year ending 31st March 2024 · Insurance commission As above, the Respondent submitted that the ‘commission’ or share of the premium paid to FMPLC was remuneration for services rendered in the course of arranging and administering the insurance, and regardless of who carried 12 out those services, the costs were recoverable from the leaseholders under the terms of the Lease. · Insurance revaluation The Respondent had originally argued that it was reasonable to charge a figure ‘on account’ towards future routine revaluations. When questioned on the justification for this, Mr. Davis said that Principle had simply carried on making an annual charge as their predecessors in management had done. Ultimately it was conceded by the Respondent that they would not charge for this element in future years unless a valuation was actually due. · Aerial Maintenance As in respect of the previous year, the Respondent submitted that anticipating and budgeting for possible management requirements such as this is sensible and in line with good property management. · Reserve Fund contribution The same arguments were put forward as in the previous service charge year.[45]Budget estimate year commencing 1st April 2024 [Page 160] · Insurance commission In respect of this year the same arguments were advanced by the Respondent as to why the insurance premium was recoverable in full from the leaseholders, including the ‘commission’ or payment to FMPLC for services rendered. · Insurance revaluation Similarly, the Respondent sought to justify the charge ‘on account’ for periodic revaluations. · Aerial Maintenance Another £600 charge was made for ‘Aerial system maintenance.’ This was justified in the same terms as above. · Reserve Fund contribution The same arguments were put forward in this as in the previous service charge year.[46]Budget estimate year commencing 1st April 2025 [‘Statement of Anticipated Expenditure’ at Page 161-162] · Insurance commission 13 In respect of this year the same arguments were advanced by the Respondent as to why the insurance premium was recoverable in full from the leaseholders, including the ‘commission’ or payment to FMPLC for services rendered. · Insurance revaluation Similarly, the Respondent sought to justify the £2,000 charge ‘on account’ for periodic revaluations. · Aerial Maintenance Another £600 charge was made for ‘Aerial system maintenance.’ This was justified in the same terms as above. · Reserve Fund contribution The same arguments were put forward in this as in the previous service charge year. In answer to questions as to why over-payments (e.g. payments for works scheduled by the PMP but not in fact undertaken) were not credited back to leaseholders, Mr. Davis told the Tribunal that the reserve fund was ‘ring- fenced’, to be accrued, and it was not used for balancing payments. · Professional fees Mr. Davis says [in his statement at Page 275] that £294 was included in the budget for this year in respect of costs expected to be incurred ‘...in relation to the issuance of communications to the leaseholders pursuant to the Fire Safety (England) Regulations 2022.’ In respect of the figure of £2,081 for the previous year, Mr. Davis stated that Principle’s predecessors had been in post at the relevant time and he was unable to comment. When asked why he had not responded to emails from Mr. Francis, asking questions about the accounts, he apologised and stated that he would look into it. He further stated that Principle were hoping to put together a ‘steering committee’ for leaseholder input going forward.[47]Mr. Beresford submitted that past ‘budgeted’ service costs, such as the annual contribution to insurance revaluation, had now been reconciled and the Tribunal had no jurisdiction to determine them.[48]As for the reserve contributions, Mr Beresford accepted that ‘reasonableness’ had to be assessed at the point of the demand, as per the Knapper v. Francis case, but he submitted that the demand was based on reasonable anticipated expenditure and it was consistent with the broad terms of the Lease. It was further submitted that the Tribunal had no power to direct repayment of any sums, as requested by the Applicant.[49]Mr. Beresford gave the Tribunal a detailed breakdown of the contributions demanded in each year for the different categories of reserve fund for specific types of works throughout the estate. He listed the balances held in each of these, and submitted that the amounts were all reasonable and proportionate. 14[50]Mr. Beresford defended the PMP as a professional and helpful document prepared by a qualified surveyor. He submitted that the Applicant’s case was illogical, in that Mr. Francis seemed to be arguing that the reserve fund contributions were too high, even though they were lower than recommended by the PMP.[51]It was averred that the Respondent had an unfettered discretion as to how much to charge for the reserve contributions, provided that their reasoning was objectively rational (as per the case of Assethold Ltd. v. Adam [2023] HLR 8). In respect of Mr. Francis’ criticism that the landlord and their agents were collecting excessive amounts, it was observed that all such funds were safely held in a trust account and the landlord had nothing to gain from keeping funds at a higher level.[52]As to the suggestion that the excessive collection of reserve funds was being used to evade the Section 20 consultation requirements, it was said that the Respondent would of course follow the correct procedure if major works were going to be undertaken.[53]In conclusion, it was submitted on behalf of the Respondent that objections to individual charges were ill-founded because budgeted figures were balanced and credits were applied at the end of each period in any event.[54]Section 20C limitation of Costs and Administration charges On behalf of the Respondent landlord it was argued that the Administration charges (as levied in respect of debt collection for unpaid service charges) were payable in accordance with the terms of the Lease, and the Applicant had no valid reason for refusing to pay the charges which were outstanding. In respect of costs of the proceedings, it was submitted that such costs were recoverable under the Lease, and any order limiting or preventing recovery would effectively penalise the Respondent for ‘...relying upon professional advice and seeking to engage in a manner designed to give a final determination on the points in question.’ [Position Statement Page 55]. It was said that the Respondent had not behaved unreasonably or improperly, and it would not be just or equitable to deprive them of their costs. FINDINGS AND DETERMINATION[55]The Tribunal makes findings under the various headings in relation to the disputed elements of the service charges as set out hereafter.[56]Insurance commission i) There was no challenge to the amount of insurance premium payable in any of the relevant years. The Tribunal accepted the evidence from the Respondent and the 15 witnesses that payment of the ‘commission’ or ‘remuneration’ to FMPLC was included within the invoice for the premium and did not increase the amount payable. ii) The Tribunal finds that, in accordance with the Williams and Octagon cases as cited above, the payments to FMPLC were for services rendered in the course of arranging and administering the insurance for the estate, and these payments were properly recoverable by way of service charges under the terms of the Lease. iii) The Tribunal further finds that, if FMPLC had not carried out the administrative tasks as listed, they would have to have been carried out by the brokers instead. It was accepted that it did not make any difference to the leaseholders (either financially or otherwise) who provided the service, and the landlords were entitled by the Lease to make such arrangements as they saw fit. The Applicant had not succeeded in persuading the Tribunal that there was any ‘unreasonableness’ in this system. Accordingly, the Tribunal determines that the full insurance charges are costs ‘reasonably incurred’ and of an amount that is reasonable, and the Applicant is liable to pay his proportion of those costs for all of the years in question.[57]Insurance revaluation i) For the year ending March 2023, the Tribunal finds that the actual cost of £799 for revaluation (in October 2022) was ‘reasonably incurred’ and the appropriate share of that amount was clearly payable by the Applicant (i.e. £33.29). ii) For the year ending March 2024 the Tribunal finds that it was not reasonable to charge £2,000 as a payment ‘on account’ for a valuation which was not required until the latter part of 2025. Although ‘balancing payments’ or credits could be applied at the end of the financial year, the Tribunal found that this figure was not reasonable at the time of the demand (as per the Knapper case). This cost was not reasonably incurred and the Tribunal determines that it should not have been payable by the Applicant. iii) For the year from April 2024 – March 2025 the same amount (£2,000) was budgeted for and demanded in advance from the Applicant. Under Section 19(2) of the 1985 Act such costs must be ‘no greater amount than is reasonable’. Given that no valuation was due to take place during this year, the Tribunal determines that the charge is unreasonable and it should not have been payable by the Applicant. iv) For the year from April 2025 – March 2026 the Applicant was required to pay on account his share of the cost of the scheduled RCA for that year. The cost of the revaluation and Health and Fire Safety Risk Assessments was broken down into three separate figures of £798 [Page 161-162], giving a total of £2,394 [as per the Cardinus invoice at Page 223]. 16 This appears to be an actual cost which was (in the course of that service charge year) reasonably incurred, and as an advance payment the Tribunal determines that Mr. Francis’ share of the total cost (at £99.75) was reasonable and payable.[58]Aerial maintenance The Tribunal finds that it was not reasonable for the Respondent to make an unsupported annual charge of £600 for this item. There were several years when no such costs were incurred at all, the costs (when they arose) were small, and charges could have been made as and when necessary in the normal course of service charge calculation. The fact that the payments were subject to balancing if no aerial works were needed does not render it reasonable to have made the demand in the first place. The Tribunal determines that these particular costs in the years 2022 – 2024 were not reasonably incurred. In the years 2024 – 2026, when sums were budgeted for potential aerial maintenance costs and speculative demands were made, the Tribunal also determines that the amount is not reasonable and not payable by the Applicant.[59]Reserve funds i) The Tribunal finds that the PMP is a thorough and valuable document to be used as a reference and guide in the management of the estate going forward, but there is no obligation on the Respondent or their agents to follow it exactly – or at all. The Tribunal is satisfied that it is an advisory document only. ii) As for the Applicant’s criticisms of the calculations and assumptions in the report, these are not generally found to be justified, in that the projected works to be carried out - and costs associated with them, e.g. VAT - are clearly dependent upon a number of variable factors and are not (and do not purport to be) ‘set in stone.’ iii) Mr. Francis’ dissatisfaction with Principle’s use of (and references to) the PMP is, however, understandable, in the light of the agents’ claim that they are following the PMP when contrasted with the inconsistent and apparently unsupported amounts that were collected for the reserve fund in the first few years after the report was commissioned. iv) The Tribunal takes the view that better communication and transparency could have improved the situation between the Applicant and the Respondent, and that the PMP should have been disclosed to Mr. Francis (and other leaseholders if they so requested) from the outset. Then, if a decision was taken to depart from the recommendations made by the PMP, the managing agents should have been ready to explain and justify both their revised figures and their different approach to scheduled works.. v) As for the Applicant’s submission that ‘affordability’ is not a valid consideration when setting service charge figures, the Tribunal bore in mind the case of The London Borough of Hounslow v. Waaler [2017 EWCA Civ. 45, in which it was held (amongst 17 other things) that financial impact on leaseholders could be a relevant factor when assessing ‘reasonableness’. vi) In the subject case, the Applicant Mr. Francis is criticising the landlord for charging a smaller contribution to the reserves than was advised by the PMP, whilst at the same time objecting to the amounts demanded on the grounds that they are/were too high. vii) The Tribunal finds that the Respondent and their agents have an unfettered discretion as to whether to follow the PMP or not, provided that they exercise that discretion rationally. Whilst it was a reasonable and sensible management decision to commission the report and look into the potential future costs of running a large estate such as this one, the Tribunal did not find that the decisions taken and contributions demanded were unreasonable. viii) It is noted that the Tribunal was not asked to determine whether works which had been carried out during the relevant period were done ‘to a reasonable standard’ in accordance with Section 19 of the 1985 Act. Although there were criticisms of the poor standard of general maintenance (bin stores, decorations etc.) at the property, and of a failure to respond to correspondence, the Applicant d[60]Professional Fees. The figure of £ 2,081 entered in the ‘Statement of Anticipated Expenditure’ under this heading in the column for the year 2024 – 2025 appeared to have been entered in error. The figure of £294 charged in the year from 2025 – 2026 was not satisfactorily explained or justified by the Respondent. In the absence of any clear or coherent evidence as to what this cost represents, the Tribunal is unable to find that it is either reasonably incurred or reasonable in amount. 18 Accordingly the Tribunal determines that these figures are not payable by the Applicant. CONCLUSION In respect of those ‘budgeted’ items and charges which have been found to be unreasonable and not payable as above, the Tribunal has no jurisdiction to order that the sums must be refunded to the Applicant. However, under Schedule 4 Part II Paragraph 3(c) of the Lease the Lessee (Applicant) is to be ‘allowed’ his proportion of the Maintenance Adjustment as calculated in respect of each service charge year where elements were disputed. Accordingly, the amounts found to be ‘unreasonable’ as set out above must be either credited to his service charge account specifically, or repaid directly to him.[61]Section 20C Costs and Paragraph 5A Administration charges. i) In respect of the £216 demanded as ‘administration charges’ for debt-collection of unpaid sums in November 2022 and January 2023, the Tribunal found that the Applicant was justified in requesting relevant information which had not been provided to him. Instituting debt collection processes was premature on the part of the Respondent. The Tribunal determines that this charge is not reasonably incurred and not payable. ii) In respect of the Section 20(C) application, the Tribunal is satisfied that the Respondent should have made greater efforts to communicate and negotiate with the Applicant, rather than just writing to him and proposing that he should accept that his arguments and objections had little prospect of success and withdraw his application. iii) The Tribunal is also satisfied that the costs of the proceedings have increased as a result of the Respondent’s failure to comply with Directions and their requests for extensions of time, despite ample time being allowed for submission of their case and documentation. iv) The Tribunal finds that the Respondent and their agents unreasonably withheld the PMP from the Applicant, whilst incorrectly claiming that it had been disclosed to him. v) Regardless of the relatively small amounts involved in the dispute (as highlighted by the Respondent) the Applicant’s case has succeeded in respect of four out of six challenged elements of the service charges as follows: · Insurance revaluation · Aerial maintenance · Professional fees, and 19 · Administration charges. vi) The Tribunal therefore finds that it is just and equitable to restrict the amount of the costs of the proceedings which are to be regarded as ‘relevant costs’ to be taken into account when determining the amount of service charge payable by the Applicant. The Tribunal makes an order under Section 20(C) that only 33.3% of these costs is so recoverable. vii) In respect of the application under Paragraph 5A of Schedule 11 of the Commonhold and Leasehold Reform Act 2002, the Tribunal finds that it is just and equitable to make an order that the Applicant is not liable to pay any administration charges relating to the Respondent’s litigation costs. Right to Appeal[1]A person wishing to appeal this decision to the Upper Chamber must seek permission to do so by making written application 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. Where possible you should send your further application for permission to appeal by email to rpsouthern@justice.gov.uk as this will enable the First-tier Tribunal to deal with it more efficiently.[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. 20