Craighead v Homes for Islington & LB Islington [2010] UKUT 47 (LC) is a decision of Andrew Trott in the Upper Tribunal on an appeal from the LVT. 21 leaseholders faced bills of £30-40,000 for service charges between 2006 and 2008 relating to “external repairs & decoration, window/roof renewal”. Given the size of the bills it is not surprising that they went to the LVT. The respondents, Islington (the freeholder) and Homes for Islington (HFI – their ALMO), succeeded in the LVT. There were three issues on appeal before Mr Trott, which he identified at [8] as:

1. Whether the LVT erred in its conclusion that the sources from which the respondents obtained the funds to carry out the works was irrelevant to the appellants’ service charge liabilities;
2. Whether the LVT erred in its treatment of the Social Landlords Discretionary Reduction of Service Charges (England) Directions 1997;
3. Whether the LVT was right to conclude that replacing windows was a “repair” or “renewal” rather than an “improvement”.

Issue 1 concerned whether the costs had been reasonably incurred against the appellants due to the way in which they were funded. The respondents had secured funding from DCLG of £157 million to cover the cost of meeting the Decent Homes standard between 2004 and 2011. This funding would only need to be repaid if Islington’s housing stock was transferred to a housing association.

Mr Trott rejected the appellant’s reliance on Continental Property Ventures v White. In that case the works that had been charged for should have been carried out by calling in a guarantee, so that they could have been undertaken at no cost. He went on to conclude that there was no double counting or recovery by the respondents as he had seen no evidence that the total costs of works on the estate had been funded out of the £157 million. Instead he accepted that the particular pot of money had only been used to support the funding of works to the tenanted dwellings, not the leasehold properties.

Issue 2 was in theory an important point of public law. Justin Bates for the appellants argued that the LVT had jurisdiction to hear a public law challenge to a public authority landlord’s demand for service charges. The LVT had found that Islington had a blanket policy of not operating the discretion available to it under the Social Landlords Discretionary Reduction of Service Charges (England) Directions 1997 – directions that had been issued by the Secretary of State under s.219 of the Housing Act 1996. The Secretary of State’s directions gave Islington a discretion to reduce service charges where they were more than £10,000 for a single dwelling over a five year period. Regular readers will recall that blanket policies are not to be encouraged (those with a need for more citable authority should see something like Lord Browne-Wilkinson in R v SSHD ex p Venables). However, the LVT had also concluded that such a challenge had to be raised by way of judicial review and was outside of its jurisdiction.

In support of his contention that the LVT could entertain such a challenge within its jurisdiction Mr Bates relied on Jonathan Parker LJ in Ruddy v Oakfern Properties [2006] EWCA Civ 1389:

In my judgment there is no justification for implying any restriction in the entirely general words of section 27A of the [Landlord and Tenant Act 1985].

And HHJ Rich QC in Continental Property:

I can see no basis, however, for saying that the LVT lacks jurisdiction to determine any issue not expressly the subject of some other tribunal’s exclusive jurisdiction, if determination of that issue is essential to determining whether ‘a service charge is payable’. That is the issue which section 27A gives the LVT jurisdiction to determine. That must include any issue necessary for or incidental to such determination.

Mr Trott rejected this at [45], because directions made under s.219 “shall apply to social landlords making a service charge which is payable by a lessee…” (his emphasis). As the LVT’s jurisdiction is to determine whether a service charge is payable the Secretary of State’s directions only come into play once the LVT has exercised its jurisdiction. Mr Trott goes on to dispense with this issue for two other reasons at [47] and [48] – specifically that the discretion is for the council to exercise, not the LVT, and that the point had not been argued in this way by the appellants in the LVT – but for me it is the s.219 point that is the most important one.

Issue 3 arose because there were three forms of lease in play. The only material difference was that two of the forms of lease included expenses incurred in the repair maintenance and improvement” as service charges, while one of the forms of lease (held by four of the appellants) did not cover improvement. The LVT held that replacing single glazed windows with double glazed windows amounted to repair. For those four appellants this was an important finding of fact by the LVT.

As the experts for both sides had agreed before the LVT that the works to the windows were improvements I have to say that I was fairly surprised that the respondents didn’t just concede on that point. Ranjit Bhose for the respondents stuck to his guns and Mr Trott agreed with him and the LVT at [63] that “the cost of the double glazing work was incurred in effecting repairs and was properly and proportionately included within the service charge” , so it shows how much I know.