Shersby v Grenehurst Park Residents Co Ltd LRX/142/2007 Upper Tribunal (Lands Chamber)
The appellant held a lease of a flat in a former mansion house. The wider estate comprised 17 such flats and a number of freehold houses and mews cottages. In total there were 40 residential units. All the units were obliged to contribute to the costs of repairing the main structure of the mansion house but, for the first five years of the lease, the service charge was capped by virtue of an agreement between the developer and the tenants.
It subsequently became clear that the cap could not be maintained as it was not sufficient to allow for the collection of any reserves. The freeholder house owners were not happy with this and pointed to the apparent unfairness of obliging them to repair not just their own homes but also the mansion.
The respondent – as freeholder and manager under the leases – was minded to move towards a scheme whereby the leaseholders would pay increased service charges. The lease did provide for the service charge percentages to be varied and the issue was whether or not the respondent had lawfully done so.
The appellant contended that it had not done so. In particular, he argued that the obligation to contribute towards the mansion was a collective obligation on both the leaseholders and freeholders and that the lease made no provision for dividing costs into separate “pots”. There were also sound policy reasons against construing a generous power of alteration to the respondent, if only because leaseholder were entitled to certainty regarding their proportion of the overall expenses. In addition, a subsidiary issue arose as to payment of insurance premiums.
The Upper Tribunal (Lands Chamber) dismissed the appeal. The lease entitled the respondent to vary the percentages payable if “in the opinion of the Manager” it was appropriate to do so. This had to be a genuine and bona fide opinion. The task of the Tribunal was to determine whether the respondent reached a lawful and reasonable decision. It was not the task of the Tribunal to substitute its own view but to ensure that the decision taken as one within the range of reasonable decisions.
The respondent took legal advice on the issue and advice from a surveyor. It gave detailed and careful consideration to the matter and came to a clear view. It was a bona fide decision. The fact that a different decision was possible was immaterial.
The insurance premiums had been paid between 1997 and 2004 and, in addition, had not been challenged at the time, whether in correspondence or in previous LVT proceedings between the parties. The charges had been admitted within the meaning of s.27A(4), Landlord and Tenant Act 1985 and were not capable of challenge in the LVT. In addition, premiums since 2004 were payable as charged.