Some brief notes on recent Upper Tribunal (LC) service and administration charge decisions
Marshall v Northumberland & Durham Property Trust Ltd (2022) UKUT 92 (LC)
The First Tier Tribunal had been wrong to grant dispensation from section 20 consultation requirements on the basis that the freeholder “had started the consultation process and had kept the leaseholders of flats in the block informed until the works became sufficiently urgent that the respondent had had to carry them out without waiting for the consultation to be completed.”
The FTT had failed to consider prejudice to the leaseholders or to formulate it as an issue that it needed to decide.
The FTT had not adequately set out the steps the freeholder and taken, those it hadn’t and the consequence of that, and for what the freeholder required dispensation.
The focus on urgency of works was not sufficient in itself.
Mr Marshall QC submitted that an absence of prejudice cannot be assumed simply because there is a need to undertake work urgently (by which I mean within too short a period to allow the full statutory procedure to be followed). I agree. A proper assessment is required of the consequences of failing to take the particular steps which have been omitted. It must of course be recognised that the landlord is likely to be under contractual or regulatory obligations to provide an essential service or to carry out works to make premises or service installations safe, as it was in this case. But such obligations are part of the background to the whole of the statutory regulation of service charges and cannot be a reason for disregarding the safeguards provided for leaseholders or granting blanket dispensation simply because work was urgent. If in this case the FTT concluded that any possible prejudice was negated by the need to carry out works urgently, it did not say so. But even if it is assumed that that was the FTT’s unstated conclusion, I do not think it was in a position to make such an assessment, because it had not first considered what prejudice may have been caused or what, if anything could now be done to mitigate it.
One leaseholder who had recently purchased the lease had not had any consultation documents. Responses to pre contract enquiries were irrelevant as not a substitute for consultation.
The FTT had ignored the views and costings of a contractor instructed by that leaseholder, and treated it as ‘self serving’ in error, as it post dated works having been done. It was clear evidence of prejudice.
Appeal allowed, dispensation granted but recovery of costs of works limited to what would have been an achievable cost in a ‘more competitive environment’.
The First Tier Tribunal had erred in finding that a £30 plus VAT charge by the management company to each leaseholder for preparation of section 166 ground rent notices was payable under the lease.
The lease clause relied upon – to pay landlord’s expenses in “the collection of rents from the Building,” did not apply. A s.166 notice had to be served in order for the ground rent to be due. The notice was not, therefore, part of ‘collection of rent’ as collection could only take place once the rent was due.
Any lease clause allowing for recovery of the expense of preparing a s.166 notice would have to be express, or at the least refer to incidental or ancillary costs.
The FTT had further erred in allowing evidence in chief from an individual whose witness statement had not been admitted because very and prejudicially late.
‘On account’ service charge demands were not rendered unreasonable by a supposed failure to set off against them credits for prior service charge demands found to have been unreasonable in amount by the FTT.
The amout of the overpayment had in any event been expended on services to which no challenge was raised, and a complicated accounting exercise was not merited.
The FTT had no power to order a repayment of any ‘over payment’.
The FTT’s jurisdiction under section 27A is a declaratory one which does not allow the Tribunal to order the repayment of sums paid in excess of the relevant statutory service charge limit. For that reason, even if the appeal had succeeded on the first ground, I would have dismissed the second ground and held that any remedy to recover sums found to have been overpaid by the appellants would have had to be pursued in the County Court and could not have been the subject of an order for repayment made by the FTT.