Breakspear House, Breakspear Road North, Harefield UB9 6NA LON/00AS/LSC/2020/0089
DECISION
Covid-19 pandemic: description of hearing This has been a remote video hearing which has been consented to by the parties. The form of remote hearing was V: CVPREMOTE. A face-to-face hearing was not held because it was not practicable and all issues could be determined in a remote hearing. The documents that we were was referred to are in a paper bundle comprising 12 section prepared by the Applicants and a digital bundle of some 195 pages, the contents of which we have noted. The orders made are as described below. Decisions of the tribunal(1) The tribunal makes the determinations as set out under the various headings in this Decision.(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 determines that the Respondent shall pay the Applicant Mr Brammer £300 within 28 days of this Decision, in respect of the reimbursement of the tribunal fees paid by the Applicants in this case. The application[1]The Applicant seeks 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 Applicants in respect of the service charge years 2014 to 2019. The hearing[2]The Applicants were represented by Mr Peter Brammer and the Respondent was represented by Mr Ben Rainford. The background[3]The property, which is the subject of this application, is a converted period building, Breakspear House (the House) containing 9 leasehold apartments, in which the Applicants each have leasehold interests. In addition, within the Estate grounds there are 9 freehold properties, which share certain services with the House and beyond the Estate a further 8 freehold properties that share sewerage facilities and road access.[4]In the present Covid pandemic an inspection was not undertaken[5]The Applicants hold long leases of their apartments, which require the landlord to provide services and the tenant to contribute towards their costs by way of a variable service charge. The specific provisions of the lease will be referred to below, where appropriate.[6]At the same time as this application was in process the Applicants had applied for a variation of their respective leases under claim LON/00AS/LVL/2020/0001, which has been compromised. Accordingly, this decision relates to the service charge issues under s27A of the Act alone.[7]It should be noted for the sake of completeness that within the lease variation action Mr Michael Kurzberg requested and was allowed observer status.[8]We also record that at the start of the hearing Ms Lisa Yacoub attended and told us that her father’s interest in apartment 4 had been transferred to her in 2019.[9]Mr Brammer had prepared detailed documentation, including a Scott Schedule, and a statement of case, which mirrored the Scott Schedule, but with some narrative. In addition, we were supplied with a number of “Support Attachments”: Accounts for the years in dispute, the lease to his apartment, which is common to all, and witness statements of Mr and Mrs Brammer and Lynne Simpson and Harry Sherwood, the latter being a couple who had been involved in earlier proceedings in the tribunal relating to their freehold property Tarleton Lodge.[10]For the Respondent Heritage (Breakspear) Limited, Clancy Developments acting on its behalf had filed, in digital format, a bundle responding to the allegations made and providing some invoices.[11]Although not a party to these proceedings Mr Kurzberg had been in regular contact with the tribunal. This contact continued to the second day of the hearing when he sent in an email with a detailed response to some of the evidence we had received the day before. The message included photographs of a bin store and copy invoices. With respect to him and, whilst we accept this contact was what he considered to be of assistance to the tribunal, he has no status and his evidence will have to be viewed in that light. The same may be said of the involvement of Leete Estate Management, who were the managing agents of the development, it would seem from 2014 to 2019. Although they were allowed to play some part in the hearing on the first day no witness statement had been produced and accordingly the weight we can give to the comments they made will have to be considered in that light.[12]Mr Brammer took us through his statement of case on an item by item basis and Rainford responded in the same manner. There were a number of issues which were compromised, withdrawn or conceded during the first day of the hearing.[13]For the second day of the hearing Mr Brammer had, overnight, produced an amended Statement showing the items agreed on the first day. We confirmed with Mr Rainford that the Statement accurately reflected the matters resolved the day before. In fact, there were further concessions on both sides on the second day and these are reflected in the attached updated Scott Schedule which reflects a reviewed statement of case which was agreed by Mr Rainford.[14]This decision addresses only those matters that remained in dispute at the conclusion of the hearing. For the overall position reference should be had to the Scott Schedule annexed hereto.[15]We are grateful to the parties for the attitude shown, which was both helpful and often conciliatory. We hope this bodes well for the future. Accounting[16]Mr Brammer confirmed that he was content with the definition of Statutory Charges to include the accountancy charges as well as management costs. They are shown under this heading in the accounts from 2017 onwards.[17]He did not understand what the certification fee was. The accounts refer to ‘Service Charge Accountant’ and there appears to be an accountancy charge both for the House and the Estate, which varies slightly each year but averages at around £565 for the Grounds/Estate accounts and around £508 for the House.[18]The lease at the Fifth Schedule paragraph (6) provides for the lessee to pay a fair proportion of the costs of maintaining and repairing various common facilities and structures and includes the phrase ‘Statutory Charges’, which does not appear to be further defined. It is accepted that the Applicants pay equal shares of the service charge costs and this, we were told, included apartment 1, the owner of which did not participate in these proceedings.[19]Paragraph 2.4 of the Eight Schedule to the lease says this: “The Lessor shall as soon as reasonable (sic) possible after the end of each accounting period (and in any event within 3 months) provide a detailed account showing expenditure incurred by the Lessor in providing the Services during the preceding accounting period and of the Lessee’s proportion payable by the Lessee for such period to be audited by the Lessor’s accountant which shall except in the case of manifest error be conclusive evidence for all matters referred to in the said account”[20]It was Mr Brammer’s case that there was no audit and that there were “manifest errors”. These errors were, for example, incorrect recording of management fees, wrong allocation of electricity costs and insurance premiums. It was also said that the accounts were frequently produced outside the period provided for in the lease.[21]For the Respondent Mr Rainford said he did not consider that it was necessary to carry out a full-blown audit. The accounts were prepared by a qualified accountant.[22]Mr Leete commented that they were using a mix of Prop Man accounting and Excel spread sheets and that it was possible that another accounting package would have picked up any errors. The tribunal’s decision[23]The tribunal determines that the amount payable in respect of the accounting charges is £2,880 in respect of the Estate (Grounds) and £2,710 in respect of the accounts for the House, made up as follows. Accounts Certification Fee Schedule 1 - Grounds Payments: 2014/15 £510 2015/16 £510 2016/17 £600 2017/18 £600 2018/19 £600 2018/19 £570 Total £2,880 Accounts Certification Fee Schedule 2 - House Payments: 2014/15 £340 2015/16 £340 2016/17 £600 2017/18 £600 2018/19 £600 2018/19 £570 Total £2,710 Reasons for the tribunal’s decision[24]We agree with Mr Rainford that the steps undertaken by the accountant meet the requirements of the lease. An Audit can be defined as the inspection of the accounts of a business and the production of a report by an outside person. If there are errors it would seem they were down to wrong information being given, which might have been prevented if the managing agents had better accounting facilities. We do not consider that the accountant has so failed that the fees charged are irrecoverable. Further, no alternative fee is suggested, and our knowledge and experience would suggest that the average fee charged is reasonable. Secretarial fee[25]We were told that these represented disbursements incurred by the managing agents Leete Estate Management (Leete). The Applicants challenged these costs as being unjustifiable and anyway should have been within the management fee.[26]These charges are as follows: 2015/16 £181.00 2016/17 £176.00 2017/18 £194.00 2018/19 £109.00 Total still disputed £669.00 The tribunal’s decision[27]The tribunal determines that the amount of £669 is not payable. Reasons for the tribunal’s decision[28]There is no management agreement as such, just the letter dated 20 October 2014. This letter, however, contains no terms. Apart from indicating the appointment lasts for a period of 6 months there are no other terms as to payment or other expenses. We shall have to address the question of the managing agent’s annual fees in due course. The sums claimed in respect of the House indicate an average charge of around £450. We find that the average charge for this item is under £20 per lease per year for the four years charged and should have been part of the annual charge, in the absence of any documentation to the contrary. Interest and charges for credit on Insurance premium[27]This, we were told, was a credit arrangement Leete had put in place to cover the costs of the annual premium. This was because there were insufficient funds in the service charge account at the time the premium was payable, which would seem to be August each year. The lease provides a paragraph 2.2 of the Eighth Schedule that there should be equal payments in advance against the service charge costs on 1 April and 1 October in each year. There appears to be a typographical error in that in the third line from the end of that clause; the second “Lessor” should be Lessee.[28]For the Applicants Mr Brammer asserted that the leaseholders at the House paid their service charges on time and it was as a result of the freehold owners not paying their contributions that there were potentially insufficient funds. This was, he said, because the freeholders were deeply unhappy with the managing agents, as evidenced by the statements of Lynne Simpson and Harry Sherwood and Mr and Mrs Brammer.[29]These charges are as follows: 2016/17 Disputed £496.92 2017/18 Disputed £490.77 2018/19 Disputed £582.47 Total Still disputed £1,570.16 The tribunal’s decision[30]The tribunal disallows the sum of £1,570.16 in respect of the credit arrangements for the insurance premiums for the years 2016 to 2019. Reasons for the tribunal’s decision[31]The sums claimed total £1,570.16 and it is accepted by the Respondents that a credit arrangement was in place for the years 2016 – 2019. We could understand the need for such an arrangement in the earlier years. However, from 2016 onwards the Respondent should have been fully aware of the insurance provisions and budgeted accordingly. It may be that there was a shortfall as a result of contributions from others, but steps should have been taken to recover those funds. It is not reasonable to penalise the Applicants for this problem. Irrigation Plant maintenance contract[32]Our records of the hearing show that the Respondent conceded half the sum claimed in 2016-17, which was in total £1860, and conceded on the sum of £702 for the following year. This left the balance in dispute of £930, which Mr Rainford says remains and upon which we should make a decision.[33]It was said by Mr Brammer that the plant was not working during this period. The original statement complained that the system was essentially not fit for purpose. It does, however, indicate that some works were undertaken by reference to solenoids sticking and cleaning and unnecessary watering.[34]The disputed charges are as follows: Year 2016/17 £1,860 Year 2017/18 £702 The tribunal’s decision[35]There have been substantial concessions made by the Respondent in respect of this particular overhead. The balance remaining of £930, seems a reasonable amount to pay in respect of this head and we therefore allow that amount. Reasons for the tribunal’s decision[36]It is with a certain element of pragmatism that we allow this sum. There was little evidence given to us. It does seem clear that the system is not functioning as well as it should. No contract was produced but it would appear that the system was up and running by November 2019. Although Mr Brammer indicated that the system was not working in 2016/17, there is insufficient evidence to be certain as to the periods it was in operation. It is, we find, reasonable to allow the balancing sum of £930. Treatment Plant Maintenance[37]The sum outstanding is £,2860 being the sum claimed for the year 2017/18. Full details of the repairs were requested both in the original statement and at the hearing, Indeed Mr Brammer indicated that, if supporting papers could be produced, the Applicants may abandon this complaint. We are not aware that any such documentation was produced.[38]We were told that the problem with this element was that a compressor had failed and was not replaced. The compressor, we were told, assisted in the breakdown of the slurry. It seems that Mr Brammer and Mr Sherwood had met an engineer who had explained that the problem related to the faulty/missing compressor, which it seems remained in this condition for some time.[39]The disputed charge is as follows: Year 2017/18 £2,860 The tribunal’s decision[40]We disallow the sum of £2,860 in respect of the year 2017/2018 Reasons for the tribunal decision 41 An offer was made by Mr Brammer to review the position on production of supporting paperwork, which does not appear to have been supplied. We accept Mr Brammer’s evidence concerning the missing/faulty compressor and that this was left unattended for some time. In those circumstances, given that the Applicants withdrew their complaint about the earlier year, it is, we find, reasonable to disallow this sum as there is no evidence as to what works were undertaken. Sewers De-sludge[42]The year in dispute is 2016/17. This is the year that the Applicants withdrew their challenge in respect of the treatment plant maintenance, but such withdrawal was on the basis that it reflected a certain wish to reach a compromise on matters.[43]The charges for this item of work averaged, over the three years not disputed, £1743. The claim for the year 2061/17 is £6319. The Applicants accept some de-sludging and put forward a figure of £2,250, leaving £3,799 still in dispute.[44]The disputed charge is Year 2016/17 £6,319 of which the Applicant disputed £3,799 and withdrew their challenge to £2,520, which they accepted should be payable. The tribunal’s decision[45]The sum of only £2,250 is allowed and payable. The balance of £3,799 is disallowed. Reasons for the tribunal’s decision[46]It is clear from the Applicants’ statement of case that there have been annual charges for de-sludging and that these have been paid. The year in dispute shows nearly a four-fold increase in the average charge for the other years. We are left to conclude, in the absence of any evidence from the Respondent, that this extra cost relates to the non-functioning plant. It appears to be accepted that the compressor was out of action for some time and we can accept that this would have resulted in additional payments. However, it is our finding that these additional payments were as a result of the failure of the Respondent, through its agent, to rectify the problem in a timely manner. Sewers pump repairs[47]We were told that this was a misnomer as there is no sewer pump, and this was conceded by Leete Estate Management; in fact the heading should be ‘Sewer Repairs’. A further clarification from Leete indicated that this was treatment plant repairs.[48]The sum claimed is not insignificant, being £2,664. It is noted that this sits as something of an outlier as the average of the costs before and after is only £348.[49]Details of the charges for this item are as follows: Year 2015/16 £322 Withdrawn Year 2016/17 £586 Withdrawn Year 2017/18 £2,664 Disputed Year 2018/19 £126 Withdrawn The tribunal’s decision[50]We find that the sum claimed is not reasonable and thus not payable. However, we find that there would likely be expenses, given the years before and after. The average claim is £348 and find that is the amount which we will allow for the year 2017/2018. Reasons for the tribunal’s decision[51]The sums sought for the years before and after are considerably less than for the year 2017/18, without explanation. We would have expected there to be some evidence of costs being spent on this head, but none were shown to us.[52]In the light of the lack of supporting evidence, and given that the Applicants have raised a valid complaint without response, we find that the sum of £2,664 should be disallowed but will allow the average of £348. Management fees for the House and the Grounds[53]The Applicants state that they were never consulted over the appointment of Leete Management to the role as managing agent. Their appointment appears to be based on a letter dated 20 October 2014 in which they indicate what their tasks will be, and that the appointment is for a period of 6 months. No mention of fees or disbursements is set out in this letter.[54]We did consider whether the Applicant’ complaint about non-consultation was relevant but conclude that the contract, being determinable after 6 months does not, on the face of it, constitute a qualifying long-term agreement, for which consultation would be required.[55]The management came to an end following a resignation letter dated 7 November 2019. It is suggested by Mr Leete that the estate is unmanageable, as a result of the faulty freehold provisions and the terms of the leases as well as a lack of communication and understanding of the works undertaken or suspended.[56]The charges made for this element are as shown below: Management Fees Grounds Annual Accounts Payments: Year 2014/15 £6,430.50 Year 2015/16 £6,000 Year 2016/17 £6,000 Year 2017/18 £6,000 Year 2018/19 £6,000 Total disputed £30,430.50 Management Fees House Annual Accounts Payments: Year 2014/15 £4,287 Year 2015/16 £4,000 Year 2016/17 £6,000 £4,000 Still disputed and £2,000 conceded Year 2017/18 £4,000 Year 2018/19 £4,000 Total disputed £22,287 The tribunal’s decision[57]Taking the matter in the round and considering the submissions made we conclude that it would be appropriate to reduce the Management fees for both the House and the Grounds by 50%. This means that the total sum allowed for the management of the House is £10,144, taking into account the agreed reduction of £2,000 for the year 2016/17. For the Grounds the total sum allowed is £15,215. Reasons for the tribunal’s decision[58]We are extremely surprised that the Respondent and Leete should allow the management of the Estate and the House to continue for 5 years without a review of the contractual arrangement, which would have revealed the lack of an agreement. In our finding this does go some way to explain the perceived lack of care which has been the cause of concern on the part of the Applicants.[59]In addition, there is evidence that the standard of management was at times lacking. It may be that Leete found the scrutiny they were put under difficult to deal with, but to a large extent that seems to be as a result of the failings both in the management of the Estate and the control exerted by the Respondent.[60]It would appear from exhibited correspondence that there was general dissatisfaction with the level of management and it is said that the alleged deterioration in the Estate has impacted on the value of the Applicants’ properties.[61]That being said there is no doubt, in our finding, that some management was taking place. The gardening was done, bills were paid and a number of items on the accounts were not the subject of challenge or, if they were, resulted in withdrawal or compromise.[62]Taking these issues into account we find that it would be reasonable to allow 50% of the fee claimed for each year. Application under s.20C and refund of fees[63]At the end of the hearing, the Applicants made an application for a refund of the fees that they had paid in respect of the application/ hearing . Having heard the submissions from the parties and taking into account the determinations above, we order the Respondent to refund all the fees paid for this claim in the sum of £300 within 28 days of the date of this decision. We shall address the fees in respect of the claim for a lease variation under reference LON/00AS/LVL/2020/0001, when that is finalised, but our present view is that the Respondent should contribute half the fees, namely £150.[64]In the application form and at the hearing, the Applicants applied for an order under section 20C of the 1985 Act. Although the landlord indicated that no costs would be passed through the service charge, for the avoidance of doubt, we nonetheless determine that it is just and equitable in the circumstances for an order 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. Name: Tribunal Judge Dutton Date: 20 April 2021 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).