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Service charges: a welcome return to orthodoxy

By J

Whilst we’re waiting for Wednesday, (when the Supreme Court will give judgment in Pinnock, in case you were wondering), the housing law world doesn’t stop in the interim. Far from it. So, without further ado, lets turn to Regent Management Ltd v Jones [2010] UKUT 369 (LC), a service charge appeal to the Upper Tribunal.

The appellant, Regent Management Ltd, was a management company under the lease (for those of you who don’t practice in this field, many modern residential leases, especially of large developments, are tripartite leases, whereby the freeholder has very limited obligations and the usual repairs, services etc are provided by a management company, with whom the leaseholders covenant to pay service charges. Sometimes the leaseholders own the management company and sometimes the freeholder retains it).

The application and pre-trial phase suffered from the usual deficiencies in the LVT – inadequate particulars from the leaseholders and a failure by the LVT to properly grapple with these matters. It appears that matters were clarified shortly before the hearing (or possibly in the hearing itself – it’s not quite clear) but, for the most part, the leaseholders challenge was unsuccessful. The exceptions to this were certain costs in relation to parking signage and administration costs. The LVT appears to have decided that it was for the appellant company to justify its charges and, when it failed to do so, disallowed a proportion of the service charges.

The management company successfully appealed to the Upper Tribunal. It was not for the management company to prove every item of expenditure was reasonable; unless expressly challenged by the leaseholder, it was sufficient to give general information to justify a charge. In those circumstances, the LVT should be slow to disallow the costs claimed. In particular, the LVT need only conclude that the costs (or decision to incur the costs) was within the range of reasonableness. The LVT had substituted its own decision for that of the management company and, in doing so had fallen into error.

Nothing radical here, you might think. This “range of reasonableness” test is perfectly common and well understood by lawyers, and service charge lawyers in particular. I note it, however, because the Upper Tribunal had previously appeared to rejected this argument (see our note on Fleury v City of Westminster) and suggest that the LVT could assess reasonableness for itself (de novo, rather than by review). Fleury was plainly wrong on this point and Regent Management Ltd is right (and entirely in keeping with existing authority).

J is a barrister. He considers housing law to be the single greatest kind of law known to humankind and finds it very odd that so few people share this view.


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