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Service charges and reasonably incurred

By J

Garside and another v RFYC Ltd and another [2011] UKUT 367 (LC)

By s.19(1)(a), Landlord and Tenant Act 1985, leaseholders are only liable to pay service charges to the extent that they are reasonably incurred.

The property in question has something of an unfortunate history. Following many years of neglect and poor management, the leaseholders successfully applied to the LVT for the appointment of a manager under Pt. 2, Landlord and Tenant Act 1987. The manager then issued large service charge demands which caused some disquiet amongst some of the leaseholders and, in turn, the manager applied to the LVT to determine whether the sums contained in the demands were reasonably incurred.

There was no dispute that the work needed to be done, rather, the leaseholders contended that it should be phased over a longer period of time. The LVT (perhaps surprisingly) held that the ability of leaseholders to pay was not a relevant factor and, hence, determined that the costs were reasonably incurred.

The appeal was allowed. Whether something is reasonably incurred means considering whether (i) the action taken in incurring the costs was reasonable; and, (ii) whether the cost was reasonable. There was no reason why the financial impact on the leaseholders was an irrelevant factor when considering (i). This was one factor which both the manager and, in turn, the LVT, should consider. It did not, however, amount to a veto power for any individual leaseholder. If the manager (and LVT) properly and reasonably determined that the work was needed in one go, rather than in stages, then a leaseholder could not ‘plead poverty’ so as to impune that decision.

I’m not sure that this is particularly controversial. I see nothing unusual or wrong in a leaseholder saying to an LVT that the proposed works should be spread over a period of time, if the expert evidence allows for such an option (e.g. there is no danger of damage to the reversion). If you’re doing huge works after a period of neglect, then it may be that some (structural) would be done before others (e.g. gardening) and an LVT would be entitled to ensure that a landlord/manager had properly considered the matter.

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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