Tribunal Judge I MohabirCollins Benson Goldhill LLP, solicitors for the Applicantn/a An application to determine the sums payable under paragraph 3(1)(b) of for the RespondentDate 18 February 2025Property: 44 Pagoda Avenue Richmond TW9 2HFType of application: Schedule 5 of the Leasehold Reform Housing and Urban Development Act 1993
DECISION
[1]This is the Applicant’s statement of case in support of its application for a determination of the appropriate sum due from the Applicant to the Respondent under paragraph 3(1) of Schedule 5 of the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”), in respect of a vesting order made by the County Court at Central London in claim number H02CL038 on 10 November 2023.[2]The factual background to this application has, helpfully, been set out in the Applicant’s statement of case and may be summarised as follows.[3]The Respondent is the registered freehold proprietor of 44 Pagoda Avenue, Richmond, TW9 2HF (“the Premises”).[4]The Applicant is a company limited by guarantee which was incorporated on 3 January 2020. It is the nominee purchaser under the 1993 Act on behalf of the participating qualifying tenants at the Premises, namely(a) Alexandra Elspeth Soltynski of Flat 1,(b) John Martin Ramos Quispe and Aziza Galimova Ramos of Flat 2, and(c) Savio Sertorio Fernandez of Flat 3.[5]The Premises is a semi-detached building comprising 5 flats. The non- participating tenants were Mr John Paul Christian Anderton of Flat 4 and Mr Daniel Itorho of Flat 5.[6]On 15 May 2020 the Applicant served upon the Respondent a notice pursuant to section 13 of the 1993 Act claiming the right to acquire the Freehold. The Respondent served a counter-notice pursuant to section 21 of the 1993 Act on 28 July 2020 admitting the right to purchase the Premises but disputing the terms of acquisition.[7]On 30 October 2020 the Applicant made an application to the Tribunal pursuant to section 24(1) of the 1993 for a determination of the terms of acquisition which remained in dispute, namely the purchase price.[8]On 27 May 2021 the parties agreed the terms of acquisition in the form of a draft TR1, recording an agreed purchase price of £30,250, following which the Tribunal application was withdrawn. Thereafter, the Applicant requested relevant service charge information to enable it to establish the total amount that would be payable to the Respondent under paragraph 3(1) of Schedule 5 of the 1993 Act. However, no service information was ultimately provided and the parties never entered into a binding agreement as, shortly after the terms of acquisition were agreed, on 22 June 2021 the Respondent was struck off the register at Companies House.[9]On 29 June 2022 the Respondent’s managing agent, HML, served upon leaseholders an Income and Expenditure account for the year ended 31 December 2019 which recorded a surplus of £10,152 to be credited to leaseholders.[10]On 10 September 2021 (due to limitation issues) the Applicant issued proceedings in the County Court at Central London in claim number H02CL038 seeking a vesting order of the Premises under section 24(a) of the 1993 Act.[11]On 28 January 2022 the Respondent’s director, Lorraine St Pierre, served a witness statement stating that when the Respondent had been restored to the register at Companies House, the Respondent would proceed to execute and provide to the Applicant the transfer of the Freehold in the terms previously agreed.[12]On 18 March 2022 the Respondent was restored to the register at Companies House. However, the Respondent failed to complete the transfer of the Premises to the Applicant or provide any service charge information to enable the Applicant to determine the appropriate sum.[13]On 10 November 2023 the County Court at Central London granted to the Applicant a vesting order in respect of the Premises; and transferred to the Tribunal, pursuant to section 176A of the Commonhold and Leasehold Reform Act 2002, the question of the appropriate sum to be paid by the Applicant to the Respondent pursuant to paragraph 3(1)(b) of Schedule 5 of the 1993 Act. Relevant Law[14]Paragraph 2(1) of Schedule 5 of the 1993 Act sates: “Where any interests are to be vested in the nominee purchaser by virtue of a vesting order, then on his paying into court the appropriate sum in respect of each of those interests there shall be executed by such person as the court may designate a conveyance which—(a) is in a form approved by the Tribunal, and(b) contains such provisions as may be so approved for the purpose of giving effect to the relevant terms of acquisition.”[15]Paragraph 3(1) of Schedule 5 of the 1993 Act provides as follows: “In the case of any vesting order the appropriate sum which in accordance with paragraph 2(1) is to be paid into court in respect of any interest is the aggregate of— (a) such amount as is fixed by the relevant terms of acquisition as the price which is payable in accordance with Schedule 6 in respect of that interest; and b) any amounts or estimated amounts determined by the appropriate tribunal as being, at the time of execution of the conveyance, due to the transferor from any tenants of his of premises comprised in the premises in which that interest subsists (whether due under or in respect of their leases or under or in respect of agreements collateral thereto).”[16]It is clear the amount payable in paragraph 3(1)(a) of Schedule 5 of the 1993 Act, is the purchase price in accordance with Schedule 6 of the 1993 Act, namely £30,250 as per the terms of acquisition. By paragraphs 2 and 6 of the Order dated 10 November 2023, the Applicant is entitled to deduct from this the sum of £10,644 payable by the Respondent to the Applicant in respect of the costs of County Court proceedings.[17]The issue is what further deductions the Applicant is entitled to make to determine the appropriate sum payable by the Applicant to the Respondent under paragraph 3(1) of Schedule 5 of the 1993 Act.[18]On 3 December 2024, the Tribunal issued supplementary directions to enable the determination to be made. The Applicant has complied with the directions. The Respondent did not and has not participated in these proceedings at all. However, it would appear that the Respondent has indicated in correspondence with the Tribunal that it does not oppose the application. Decision[19]The Tribunal’s determination took place on 18 February 2025 and was based solely on the documentary evidence filed by the Applicant. The application was, therefore, unopposed. In the absence of any evidence from the Respondent, there was no basis on which the Tribunal could not reach the conclusion it did below.[20]The Tribunal agreed with the Applicant’s submission that the only information the Applicant has regarding service charges provided to leaseholders within the Premises to enable it to assess the amount due under paragraph 3(1)(b) of Schedule 5 of the 1993 Act is the Income and Expenditure Account for the year ended 31 December 2019. This records that the surplus standing to the credit of leaseholders was £10,152. On completion of the transfer of the Freehold, this sum should be transferred to the Applicant, for the Applicant to hold to the credit of leaseholders.[21]The Applicant also alleged that the Respondent had breached of its repairing obligations under the leases by failing to carry out any repairs or maintenance and the Premises has fallen into a state of disrepair. In particular, the Applicant, via one of its directors, Alex Soltynski, has had to incur expenditure undertaking emergency repairs to the Premises to deal with leaks. On 7 January 2022 urgent damp repairs were undertaken by The Black Eagle KR Construction Limited in the sum of £2,768. On 20 December 2022 exterior works were undertaken at a cost of £6,144 to fill in cracks and apply a K-render system with reinforcement fibre mesh to deal with a leak at the Premises. The disclosure relating to the relevant invoices relating to this expenditure were in the hearing bundle. Accordingly, the Applicant submitted that this expenditure incurred on behalf of the Respondent is £8,822.00 should also be deducted from the service charge surplus under paragraph 3(1)(b) of Schedule 5 of the 1993 Act.[22]No guidance is provided by the 1993 Act about how this claimed deduction should be treated. The Tribunal did not consider that it could safely make a finding that the Respondent has in fact breached its repairing obligations as alleged because it heard no evidence from either party on this issue.[23]However, the Tribunal did not consider it was appropriate to leave the issue in abeyance so that the Applicant would have to commence further litigation to determine it with the attendant time and costs being incurred. The Tribunal was especially mindful of the fact of the Respondent’s non engagement in the litigation that taken place so far and that it did not oppose this application.[24]In the Tribunal’s judgement, the Applicant appeared to have a prima facie case in relation to the allegation about the Respondent’s breach of its repairing obligations under the leases. This in turn potentially gives rise to an equitable set off in relation to the remedial costs incurred by the Applicant. Therefore, the Tribunal accepted the Applicant’s submission that the further sum of £8,822.00 should be deducted from the service charge surplus.[25]Accordingly, the Tribunal determined that the appropriate sum payable to the Respondent under paragraph 3(1)(b) of Schedule 5 of the 1993 Act is £632. Name: Tribunal Judge I Mohabir Date: 18 February 2025 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).