Leicester City Council v Masters LRX/175/2007 (links to a .pdf)

Pursuant to the Right to Buy provisions, the respondent purchased a leasehold interest in his flat in April 2005. As readers will know, where someone is purchasing a leasehold interest under the RTB provisions, the local authority will serve a notice under s.125 Housing Act 1985, setting out the anticipated level of service charge expenditure for the first five years of the lease. Save for increases for inflation, the s.125 notice operates to cap the level of service charge recovery during those first five years. .

In 2006, the local authority carried out a number of items of works which had been identified in the s.125 notice and sought to recover some £2,234.24 from the respondent. It appears (although the report is slightly unclear on this point) that some of this included a payment towards a reserve fund.

The respondent contended – successfully – before the LVT that there was no power under the lease nor under the s.125 notice to require him to make contributions towards a reserve fund. The local authority appealed.

The Lands Tribunal allowed the appeal. The terms of the lease did, correctly understood, permit the local authority to establish a reserve fund. One had to have regard to all the factual background, including the fact that the s.125 notice had made reference to a reserve fund and that the establishment of a reserve fund was in the best interests of both parties.

I’m not quite sure what to make of this, mainly because I didn’t find the factual background very easy to follow. Comments gratefully received.