Nonyelu Okoye v Gray’s Inn Capital Limited [2025] UKUT 195 (LC)

[2025] UKUT 195 (LC)Case No LC-2024-779
IN THE UPPER TRIBUNAL (LANDS CHAMBER)
AN APPEAL AGAINST A DECISION OF THE FIRST-TIER TRIBUNAL (PROPERTY CHAMBER)
Ref: LON/00AK/LSC/2023/0480
Venue Royal Courts of Justice, Strand,
Between
MR NONYELU OKOYEAppellantGRAY’S INN CAPITAL LIMITEDRespondent
20 June 2025
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LANDLORD AND TENANT – SERVICE CHARGES – reasonableness of insurance premiums – landlord insured for risks beyond those it covenanted to insure against – whether that fact is prima facie evidence that the charge for insurance was not reasonable
3, 12 and 17 Rossmore Close,Alexandra Road,Enfield,EN3 7EWUpper Tribunal Judge Elizabeth CookeDetermination by written representationsMr Hugh Rowan for respondent, instructed by Stevensons Solicitors© CROWN COPYRIGHT 2025The following case was referred to in this decision:Priyanj Shah v Assethold Limited[2025] UKUT 174 (LC)Date 2025-06-20

Introduction

[1]This is an appeal on a short point within a decision of the First-tier Tribunal about the reasonableness of service charges under a lease. It has been decided under the Tribunal’s written representations procedure. The appellant was not legally represented; written representations for the respondent were written by Mr Hugh Rowan of counsel.

The legal background

[2]Section 27A of the Landlord and Tenant Act 1985 gives the First-tier Tribunal jurisdiction to determine whether service charges in respect of leasehold property are payable. Section 19 of the 1985 Act provides:
“(1) Relevant costs shall be taken into account in determining the amount of a service charge payable for a period— (a) only to the extent that they are reasonably incurred, … and the amount payable shall be limited accordingly.” and the amount payable shall be limited accordingly.”
[3]It follows that to the extent that a cost was not reasonably incurred the related service charge is not payable. It is well-established that a tenant who wishes to challenge a charge on that basis must make a “prima facie case” that the cost was not reasonably incurred; in other words, he or she must produce some reason or evidence that indicates that the cost was not reasonable. The tenant cannot simply put the landlord to proof that it was reasonable.[4]That prima facie case might be, and often is, a cheaper quote for the same work or service; but it might be an observation that certain events or circumstances make the cost look unreasonable. For a recent example, see Priyanj Shah v Assethold Limited [2025] UKUT 174 (LC).

The factual background

[5]The appellant, Mr Okoye, holds long leases of three flats at Rossmore Close, Enfield, which comprises two purpose-built block of flats. The respondent, Gray’s Inn Capital Limited, is the landlord. The lease contains covenants by the landlord to provide services and by the tenant to pay a service charge. The appeal is from the FTT’s decision on the appellant’s application for a determination as to whether service charges demanded in the years 2014 to 2023 were reasonable, in its jurisdiction under section 27A of the 1985 Act. A number of items were challenged; this appeal is concerned only with the FTT’s decision about the charges for insurance in the years in question.[6]Clause 4.2 of the leases requires the tenant to pay a proportion of the landlord’s expenditure on insuring the property against the “Insured risks”, defined at Clause 1.1 as:
“fire lightning aircraft and other aerial devices (including articles dropped from aircraft) explosion riot civil commotion strikes labour or political disturbance theft. or attempted theft malicious damage storm tempest bursting and overflowing of water or oil pipes tanks and other apparatus flood impact by road vehicles earthquake subsidence and heave landslip falling trees branches and aerials and accidental damage to underground services.”
[7]The appellant raised a number of challenges to the charges for insurance. One was that the building was uninsured, which the FTT dismissed. Alternatively, the appellant said that the landlord was charging the tenants for his insurance which covered risks going beyond the “Insured Risks”, and that therefore the charge was not reasonable. The FTT explained:
“51. The Applicant asserted that the Respondent had over-insured the Property which had resulted in higher premiums. The Applicant referred the Tribunal to Clause 1.1 which defined and contrasted that with the insurance risk cover obtained by the Respondent in the Zurich policy, which included damage, business interruption, book debts, property owners liability (page 413 of the Bundle). The Applicant submitted that the Applicant had not agreed to this additional cover and, because the Respondent had chosen to insure the Property for more than the Lease required, this should not be at the cost of the Applicant.”
[8]After discussing some other points the FTT said:
“The Applicant contrasted [the definition of the Insured Risks] with the insured risk covered by the Respondent as set out at page 413 of the Bundle. However, the Applicant did not provide the Tribunal with alternative quotes but instead asked the Tribunal to exercise its discretion in considering the risks that the Applicant agreed to pay for in the Lease alongside the risks that were actually covered and reduce the amount of premium paid by the Applicant. The Tribunal therefore did not accept the Applicant s position that the Respondent had over insured the property given that the Applicant did not present the Tribunal with evidence of over insurance. 63. In particular, the Tribunal accepted the evidence of Shushanik Sargsyan, on behalf of the Respondent, and in particular page 153 of the Bundle and Exhibit SS10 which set out the reinstatement report and insurance policy at Exhibit SS11. The Tribunal found that the Property was insured for the full reinstatement value for the Insured Risks as defined by the Lease.”
[9]The FTT therefore allowed the insurance charges as having been reasonably incurred.

The appeal

[10]The appellant asked for permission to appeal on a number of grounds and was successful on one, namely “that the insurance premium charged to the applicants is for insurance of a range of risks beyond those the landlord has covenanted to insure against in the lease, and that that undisputed fact amounted to a prima facie case that the amount charged was not reasonable.”[11]To expand on that, the FTT appears from the paragraphs above to have rejected the argument that the landlord had over-insured the property on the basis that the appellant had not provided any evidence that it would be any less expensive just to insure the risks prescribed by the lease. That seemed to the Tribunal, in granting permission to appeal, to be troubling because the appellant said he was being charged for a much wider range of risks, including risks to the landlord’s business, and that he had raised a prima facie case that the charge was unreasonable which the landlord had failed to answer.[12]Following the grant of permission to appeal the respondent landlord has submitted grounds of opposition. It argues that the proposition that it had over-insured was not undisputed. The problem, it says, is that the insurance document to which the appellant referred, the “Zurich Real Estate Insurance Policy Document”, was a generic document, not specific to this property. However, also in evidence before the FTT were a number of documents headed “Summary of Cover” which the respondent said demonstrated that it had not in fact insured against, and was not charging the appellant for, the extra items that he said were covered. Hence, the respondent said, the FTT’s finding that “the Property was insured for the full reinstatement value for the Insured Risks as defined by the Lease.”[13]The appeal bundle provided by the appellant contained only the generic policy document and not the “Summary of Cover” sheets. At the Tribunal’s request the appellant has now produced those summary sheets.[14]From those sheets it is clear that the landlord is not insuring against “business interruption” nor against “book debts”. “Loss of rent” is listed and the sum insured is “£0”. The policy is clearly for building insurance as required under the lease, and for insurance of the “contents of the common areas”. “Terrorism” is listed but that is consistent with the requirement to insure against “malicious damage”; There is a further heading “All other damage” (£500) but again that seems to me to be consistent with the lease.[15]The only item insured against which is not obviously one of the Insured Risks under the lease is “Property Owner’s Liability”, where the sum insured is £5 million. I do not regard that one item as raising a prima facie case that the landlord has over-charged the leaseholders; to establish that there was an apparent problem I take the view that the appellant would have had to have shown both that it was possible to insure the building without that item and that it would be cheaper to do so without it.[16]Had the “Summary of Cover” documents been provided when permission to appeal was sought, or alternatively had they been referred to by the FTT, permission to appeal would probably have been refused. However, it is now apparent that these summary documents were in the FTT’s bundle, and they explain the FTT’s acceptance of the evidence of Mr Sargsyan and its finding that the property was insured as required by the lease and its rejection of the claim that it was overinsured.[17]The appeal therefore fails. Upper Tribunal Judge Elizabeth Cooke 20 June 2025 Right of appeal Any party has a right of appeal to the Court of Appeal on any point of law arising from this decision. The right of appeal may be exercised only with permission. An application for permission to appeal to the Court of Appeal must be sent or delivered to the Tribunal so that it is received within 1 month after the date on which this decision is sent to the parties (unless an application for costs is made within 14 days of the decision being sent to the parties, in which case an application for permission to appeal must be made within 1 month of the date on which the Tribunal’s decision on costs is sent to the parties). An application for permission to appeal must identify the decision of the Tribunal to which it relates, identify the alleged error or errors of law in the decision, and state the result the party making the application is seeking. If the Tribunal refuses permission to appeal a further application may then be made to the Court of Appeal for permission.

Cited in 5 later judgments