Lessees held long leases of chalets on a leisure park. There were 91 chalets held under 21 leases. Each lease contained a covenant by the lessee to pay an annual service charge, typically ‘a proportionate part’ of the cost of providing the services, expressed to be £90 in the first year, rising by 10 per cent each year thereafter. The landlord argued that the leases provided for a fixed service charge of £90 with a yearly increase of 10 per cent. The lessees argued that it meant that they had to pay a fair proportion of the cost of providing the services, up to a maximum of £90 in the first year, that maximum figure rising by 10 per cent each year thereafter. HHJ Jarman QC held that the lessees were obliged to pay a proportionate part of the expenses and outgoings incurred, but limited to the figures in the leases. Morgan J allowed the landlord’s appeal. The Court of Appeal dismissed the lessees’ further appeal.

 

A long lease provided that lessors were entitled to recover as service charges 2.9 per cent of the amount spent by them. The question to be decided by the court was whether this included expenditure by both the head landlord and, after grant of a concurrent lease, the mesne landlord.

 

In a dispute about unpaid service charges, the Court of Appeal held that, although the lease was ‘unhappily drafted’, the function of the court was to ascertain the terms of the lease in accordance with the whole intentions of the parties evinced from the terms regardless of the use of inept words. The lease should be read as a whole.

 

It was held that a covenant in a long lease requiring a lessee to pay service charges was a term of the tenancy ‘relating to’ the property within the meaning of Landlord and Tenant Act 1954 s10(1). Accordingly, when the lease expired and the lessee became a statutory tenant, that liability was not extinguished. Service charges (including a proportion of the cost of insurance, lighting, cleaning, maintenance, employment of porter, etc) were payable, in addition to the rent registered by the rent officer.

 

The Court of Appeal held that a landlord was not entitled to charge to lessees interest payments on money borrowed to finance the provision of services, unless the lease contained clear and unambiguous words to this effect. It was, however, recognised that such express provision might be sensible and that ‘in some contexts a reference in general terms to expenditure in respect of the general administration of a block of flats might perhaps, on a liberal construction, be capable of including an interest element’ ((1987) 19 HLR at 142).

 

Leases of four flats in a building included covenants that the landlord would provide a resident caretaker and that the lessees would pay service charges. A dispute arose as to whether lessees were liable to pay a notional rent of £7,800 charged in respect of the caretaker’s flat.

 

The defendant exercised the right to buy under Housing Act 1985 Part 5 and covenanted to pay the council annual service charges in a sum representing the ‘due proportion’ of costs incurred in lighting, cleaning and maintaining the surrounding estate and ‘a reasonable and fair proportion’ of its management expenses. A district judge found that the covenant to pay service charges was void for uncertainty.

See also: Sutton (Hastoe) Housing Association v Williams (1988) 20 HLR 321, CA.

 

The Court of Appeal found that there was a distinction between the liability of a tenant to a landlord under a lease containing service charge provisions, and the liability of a member of a company to the company under separate contracts made under its Articles of Association. The two kinds of legal relationship can co-exist between the same parties, but they are different relationships, incurred in different capacities and they give rise to different enforceable obligations. In this case, the claim related only to the right to recover moneys owed by the defendant as a member of the company.

 

The Court of Appeal considered the construction of various clauses in a lease relating to the payment of service charges, and, in particular, a covenant requiring the landlord to submit a copy of the specifications of proposed works and estimates before starting work.

 

See Housing Law Casebook, 5th edition, Q2.19.

 

Leases of flats provided for the payment of service charges. Although no proper mechanism for the establishment of a reserve fund existed in the terms of the leases, lessees paid into a reserve fund sums to be used for improvements and repairs. Payments into the reserve fund regularly exceeded expenditure. The landlord kept the outstanding balance in the fund and used it to ameliorate any cash flow problems.

 

Ms Oliver was a long lessee in a block of council flats on the Lansdowne Estate. The council carried out citywide major works, which included works on the estate. Some of the works were eligible for a contribution from a commercial energy company as part of the Community Energy Savings Programme (CESP). In total, 15 of the 25 blocks on the Lansdowne Estate were eligible to receive CESP funding. The contribution to Ms Oliver’s block was £43,570.44. The council decided not to pass the CESP directly to the leaseholders as a set-off against their service charge contributions. Rather, it decided to attribute the money to the funding of works to its citywide housing stock. The effect of this was that every leaseholder’s service charge was reduced irrespective of whether their block had been entitled to CESP funding. The Upper Tribunal (UT) held that where funding has been provided from a third party and the purpose of the funding is specifically intended to meet the cost of certain works, it is impermissible to calculate the amount a leaseholder must pay under a service charge without reference to the receipt of that money.

 

Ms Akhtar and Stel LLC held the long lease of a flat, initially granted pursuant to the right to buy. It included an obligation to pay service charges. A schedule to the lease provided that estimated service charges for each year would be paid in advance in quarterly instalments. Before 1 April each year, the landlord would give notice setting out the estimated charge for the coming financial year and that sum would be collected in equal instalments on the following four quarter days. After the following 1 April, the tenant would be given a final account setting out the actual service charge for the year.

 

The plaintiffs were the management company for a block of flats. The defendants were the long lessees of 51 flats within the block. The leases provided that maintenance charges were payable to the plaintiffs ‘without any deduction by way of set-off’. The defendants claimed that service charges for the years 1993 to 1996 were unreasonable and that they were entitled to set off alleged overpayment during those years against the plaintiffs’ current claim. They claimed that the exclusion clause was unreasonable because of Unfair Contract Terms Act 1977 ss3 and 13. HHJ Howarth, sitting as a High Court judge, held that a right of set-off can be excluded by contract.

See now: Consumer Rights Act 2015 Part 2.

 

A lease provided for payment of service charges calculated according to rateable values. The tenant paid the service charges demanded by the landlord for years 1992 and 1993. The landlord then discovered that it had been mistaken as to the rateable values and sent the tenant new demands.

 

A lease included a covenant to pay a proportion of ‘all amounts sums costs and expenses of each and every kind whatsoever which may from time to time during the said term be expended or incurred or become payable by the landlord’. Before the expiry of the lease, the landlord entered into a building contract for works to be carried out, but no works were started and no sums paid by the landlord until after the lease had terminated.

 

The service charges clause in the lease included the words ‘to the extent that the liability incurred or amount defrayed by the landlord in respect of such items is reasonable …’

 

See Housing Law Casebook, 5th edition, Q2.31.

 

A roof which had been defectively designed was damaged in the great storm of 1987. There was a risk of collapse. The landlords carried out works which resulted in a different and improved roof structure. They sought to recover the cost of the works from the lessees. The service charges provision in the lease enabled the landlord to recover the ‘cost and expense of constructing, repairing, rebuilding … and maintaining all things’ connected with the premises. Another covenant obliged the landlord ‘to keep and maintain … and to renew or replace’ the building’s exterior and structure.

Assethold was the leasehold owner of a block of flats. Ms Watts and other respondents were the under-lessees of the 14 residential flats that comprised the block. The freehold owner of an adjoining property (Freetown Ltd) served Assethold with notice under the Party Wall Act 1996 of its intention to carry out works on the boundary with the block of flats. This resulted in various legal proceedings which resulted ultimately in Assethold being ordered to pay Freetown a proportion of its legal costs, which totalled £55,000. Assethold subsequently sought to recover both Freetown’s and its own legal costs through the service charge in reliance of two clauses of the lease that required the leaseholders to pay ‘all costs expenses and outgoings whatever reasonably and properly incurred by the Landlord during the Financial Year in or incidental to providing all or any of the Services’. The services included ‘all works installations acts matters and things as in the reasonable discretion of the Landlord may be considered necessary or desirable for the proper maintenance safety amenity and administration of the Development’. A LVT, found that the legal costs were not recoverable under the lease.

 

A number of leases in a mansion block provided that the annual amount of the service charge payable by the lessees was to be calculated by dividing the lessors’ expenditure by the aggregate of the rateable values in force at the end of such year of all the flats and then multiplying that amount by the rateable value of each flat. A number of subsequent leases also provided that in the event it became impractical or impossible to apportion the service charge on the basis of rateable values it should be apportioned on such alternative basis as was fair and equitable.

 

Corvan Properties Ltd, the freehold owner of a block of flats, entered into a management agreement with its agents. The agreement provided that it would ‘be for a period of one year from the date of signature hereof and will continue thereafter until terminated upon three months’ notice by either party’. Ms Mohamoud, a lessee, successfully argued in the First-tier Tribunal that the agreement was of indefinite duration and was accordingly a qualifying long term agreement as it was for a period of more than 12 months.

Barnet was the freehold owner of three blocks of residential flats which contained both secure tenants and long leaseholders. In 2008, Barnet decided to carry out major works in respect of the three blocks and obtained a grant in the sum of around £7m, from the Local Development Agency, to pay for some of the costs of the works with the remainder, around £2m, coming from Barnet’s own funds. The grant was said to comprise of £5.2m for improvements to flats occupied by secure tenants and £1.8m for the properties occupied by long leaseholders. Ms Edozie, who was the long leaseholder of two flats within the three blocks, contended that the total grant should have been deducted from the costs of the works so that she was only required to pay a contribution towards the remaining £2m. Barnet contended successfully before the First-tier Tribunal that as it had incurred the entire costs of the works, the leaseholders were all required to pay a contribution towards the full costs of the works (£9m) and that it was entitled to apportion the grant in any manner it saw fit.

Ms Ingram was the long lessee of a flat. In the First Tier Tribunal, relying on Landlord and Tenant Act 1987 s27A, she challenged the inclusion of VAT in service charge. The First Tier Tribunal rejected that challenge and held that the relevant items were recoverable. She appealed.

Ms Oliver was the long leaseholder in a block of flats on the Lansdowne Estate, which was owned by the Council. The Council carried out city wide major works, which included works on the Lansdowne Estate. Some of the works were eligible for a contribution from a commercial energy company as part of the Community Energy Savings Programme (‘CESP’). In total 15 of the 25 blocks on the Lansdowne Estate were eligible to receive CESP funding. The contribution to Ms Oliver’s block was £43,570.44. The Council decided not to pass the CESP directly to the leaseholders as a set off against their service charge contributions. Rather, the Council decided to attribute the money to the funding of works to its city-wide housing stock. The effect of this was that every leaseholder’s service charge was reduced irrespective of whether their block had been entitled to CESP funding.

In a dispute about whether a demand for estimated service charges was payable the Upper Tribunal held that:

A long lease required the council before the commencement of each year to make an estimate of the amount payable by the lessee as service charges. For the year 2012/3 Southwark served an estimate including ordinary or routine expenses, but it did not include any estimate for major works which were contemplated and, in particular, some emergency lighting works which were planned. Relying on the decision of Southwark LBC v Woelke (Southwark LBC v Woelke) Mr Proktor argued that this failure meant that he was not liable to pay any service charges for the year. The First-tier Tribunal agreed and decided under Landlord and Tenant Act 1985 s27A that no services charges were due for the year 2012/13. Southwark appealed.

 

Landlords incurred costs in supplying and fitting metal sub-frames as part of a programme of replacement of the windows in 28 of the 49 flats in a building. The First-tier Tribunal found that the leaseholders were not obliged to contribute towards those costs because the former timber sub-frames which surrounded the original metal windows, and those windows themselves, had not been in a state which justified their replacement at all. The First-tier Tribunal found that no part of the cost of the work fell within the scope of the landlord’s repairing covenant or the leaseholders’ obligation to contribute to it through the service charge. The landlords appealed.

The Anchor Trust was the freehold owner of a retirement complex comprising 28 flats and eight bungalows for people with low or no income. Each occupant had an assured shorthold tenancy that required them to pay rent and service charges. Anchor Trust decided to replace the fire alarm system in the complex at a cost of around £57,000. It sought to recover those costs through the service charge over a period of 15 years. This equated to each resident paying £8.85 per month. The LVT found that the work was of a reasonable standard and that the costs of the work had been reasonably incurred. The LVT, however, implied a term into the tenancy agreement that the expenditure had to be fair and reasonable. This meant that both the costs incurred and the subject matter of the charge must be reasonable. In this case it was unreasonable to expect the tenants to pay such a large amount of money for what was a repair to a ‘fixture and fitting which was part of the building’.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Birmingham undertook window replacement and balcony works to a flat as part of a programme of major works to the block. They sought to recover £5,909.57 as the costs of the works via the service charge. Mr Keddie and Mr Hill applied to the LVT for a determination that the amount claimed was not reasonable because the works had not been carried out to a reasonable standard. The LVT did not decide whether the works were carried out to a reasonable standard and instead decided that the work had not been necessary and was therefore unreasonable for that reason and disallowed the whole charge. Birmingham appealed on the basis that the LVT had breached natural justice by reaching a decision on grounds not raised in the application without giving it an opportunity to make submissions, and that in any event the decision was perverse, as there was no evidence before it about the condition of the old windows which were replaced.

Islington LBC brought a claim in the county court for unpaid service charges. Mr Cain sought to defend the matter by challenging the way his service charge had been apportioned under his lease. The county court ordered that ‘the matter be referred to the leasehold valuation tribunal … to determine the reasonableness of the service charges demanded’. The parties subsequently reached an agreement that Mr Cain would pay 50 per cent of his service charge. The First-tier Tribunal still determined the question of how his service charge was to be apportioned. On an appeal to the Upper Tribunal, Islington contended that the First-tier Tribunal had lacked jurisdiction to determine the matter on two grounds, first, the issue of apportionment had not been transferred to the First-tier Tribunal by the county court and, second, Mr Cain had admitted that he was liable to pay 50 per cent of the service charge.

 

Long lessees sought a determination in the LVT that service charges were not payable, on the ground that the costs had not been reasonably incurred. The LVT held that the works for a flat were made necessary because the landlord had neglected to carry out repairs to a leaking pipe within a reasonable time. If the landlord had complied with its repairing covenant the cost would have been far less. Accordingly, the sum reasonably incurred was only such sum as would have been incurred but for what was described as ‘the historic breach’. The landlord appealed.

 

Dr Lennon was the tenant of a flat. He disputed the amount of service charges payable in respect of an insurance premium. The landlord issued proceedings in the county court. A district judge ordered the question of the reasonableness of the insurance premium to be transferred to the Leasehold Valuation Tribunal (LVT). It determined that £350 (of £642.42 originally claimed) was reasonably incurred and payable. The LVT then proceeded to determine other issues between the parties (eg, whether Dr Lennon had overpaid service charges in earlier years and the reasonableness of certain administration fees). Dr Lennon appealed to the Upper Tribunal (Lands Chamber), contending that the LVT had no jurisdiction to determine these other issues as it was limited by the terms of the transfer order made in the county court.

 

B M Samuels Finance was the freeholder of two adjacent blocks of flats in Chatham. Mr MacGregor was the lessee of two flats. The freeholder applied to the LVT for a determination as to the amount of service charges payable by Mr MacGregor and a number of others. The freeholder’s application was largely successful. Mr MacGregor appealed to the Upper Tribunal. As a preliminary issue, he argued that, if he was successful in establishing that the relevant costs had not been reasonably incurred, the freeholder would be obliged to reimburse to the service charge account all the money that was shown not to have been reasonably incurred.

 

George Bartlett QC held that the LVT’s jurisdiction on transfer derives from the order of the county court making the transfer. As the county court is restricted to deciding issues which have been pleaded so is the LVT. Although a county court may give permission to amend a statement of case, the LVT does not have that power. In Staunton this meant that the tenant was precluded from arguing that his service charges were not payable because the landlord had failed to comply with Landlord and Tenant Act 1987 s48 and Landlord and Tenant Act 1985 s21B as he had not pleaded them in his defence. By deciding these matters the LVT had acted outside its jurisdiction, even though the order of transfer had asked the LVT to consider whether the service charges were payable.

 

It was a provision of a lease that the proportion of the landlord’s expenses which the tenant was liable to pay was to be determined by the landlord’s surveyor.

 

Under the terms of his lease, a lessee was liable to pay half of the lessor’s expenses in maintaining the main structure of the building. This included the roof. The lessors obtained three tenders for works to the roof. The cheapest of these cost £10,840. The lessee’s surveyor thought that only minor works, costing between £1,500 and £2,000, were necessary. The tenant applied for and obtained an ex parte injunction restraining the lessor from carrying out any works to the roof pending a determination on whether or not the works were necessary.

 

Mr Di Marco was a long lessee in a block comprising 104 flats. He had a long-running dispute about service charges. Morshead issued two new claims for rent and service charges. Mr Di Marco counterclaimed, challenging the validity and propriety of the demands and the use of the money raised without complying with the provisions of Landlord and Tenant Act 1985 ss21 (request for summary of relevant costs) and 22 (request to inspect supporting accounts). Breach of such provisions was a criminal offence. He sought mandatory injunctions under those sections. HHJ Hand QC struck out the counterclaims. Mr Di Marco appeal to the High Court succeeded.

Mr Ojo was the long leaseholder of a flat. He did not pay the service charge demanded and the lessor brought proceedings in the county court. Mr Ojo defended the claim and the matter was transferred to the tribunal. At the final hearing, after the issues had been determined, the tribunal, of its own volition and without giving the lessor an opportunity to adduce evidence in response, decided that the service charge had not been calculated in accordance with the lease and as a result was not recoverable. The lessor appealed.

Mr Cain contended that a number of service charge demands, dating back over 12 years, were not payable because the costs had not been reasonably incurred. He had, however, at the time they had been demanded paid all such charges without any qualification or protest. The First-tier Tribunal held that it could be inferred that Mr Cain had, by paying such charges without qualification over a long period of time, admitted that the charges were payable or, alternatively, that Mr Cain was prevented from challenging service charges that had been demanded more than six years before his application to the Tribunal.

 

A council tenant exercised his right to buy a flat. The council gave notice under Housing Act 1985 s125 outlining future likely service charge liabilities. The sale was completed in 2001. In 2004, the flat was sold and the lease was taken by Ms Smith. Before purchasing, she sought an assurance, which was given by the council, that service charges would be limited to those in the section 125 notice. The council later sought service charges in respect of major works at amounts beyond those in the section 125 notice. Ms Smith applied to the LVT, which found that the recoverable charges were limited by the notice.

Mr and Mrs Hemmise were lessees of Tower Hamlets. Their lease was for a term of 125 years. The building formed part of an estate known as Lincoln Estate (North). In May 2006, Mr and Mrs Hemmise made an application to the LVT challenging the reasonableness of the service charge. The LVT decided, amongst other things, that the lease did not allow Tower Hamlets to recover costs that had been arisen from the maintenance of the estate. Tower Hamlets did not appeal against this decision. Tower Hamlets continued, however, to charge Mr and Mrs Hemmise for the cost of maintaining the estate. The LVT in 2015 held that it was not bound by the decision of the previous LVT and determined that Tower Hamlets could recover the costs of maintaining the estate. Mr and Mrs Hemmise appealed to the Upper Tribunal.

 

The freehold applied for a determination that the appellant lessee was obliged to pay the service charge. The lessee did not respond to the application and the First-tier Tribunal decided the application in the freeholder’s favour. It asked that the freeholder serve each lessee with its decision. The lessee subsequently applied to set aside the decision on the basis that she had not been made aware of the proceedings or received the decision. The First-tier Tribunal refused to do so.

 

Westminster carried out major works to six blocks of flats and sought to recover the costs under the service charge. The leaseholders sought to challenge the amount of the service charges on the basis that they had not been lawfully consulted or alternatively some of the work was not of a reasonable standard. The tribunal found that the consultation requirements had not been complied with but granted Westminster dispensation. The tribunal also held that the works were carried out properly, at a reasonable price and to a reasonable standard despite also finding that the standard of the installation in the flats they had viewed was not good. The basis for this decision was that Westminster had given undertakings promising to investigate certain defects and to carry out additional repairs arising from any such defects. The tribunal held that as there were 35 leaseholders all raising separate complaints it was unable to decide what reduction should be made to the service charge bill and to whom and this was the only practical way of disposing of the application. Ms Nogueira appealed to the Upper Tribunal.

Parissis was the lessee of two separate flats, each with obligations to pay service charges. In November 2010, he made two separate applications to the LVT under Landlord and Tenant Act 1985 s27A challenging the service charges claimed for the years 2001, 2002, 2003, 2004 and/or 2005. The LVT decided that the length of time that he had taken to bring the proceedings was unconscionable and that the landlord would be significantly prejudiced by the delay. It also decided that it had no jurisdiction because Parissis was time-barred for periods which were more than six years before his applications. Parissis appealed.

 

Ms Robinson sought, amongst other things, to challenge the amount payable under the service charge for cleaning and estate management. Red Kite supplied a detailed breakdown of what constituted the cleaning / estate management charge and the services that were provided under it. Ms Robinson did not adduce any evidence of comparable quotations from other contractors to demonstrate that the charge was unreasonable. At the hearing the tribunal inspected the block and used its knowledge and experience as an expert tribunal to reduce the relevant service charge by £100. The tribunal did not explain how it had reached its decision and did not make clear whether this was because the cost of the work was too expensive or because the standard of cleaning was not adequate.

 

HHJ Rich QC held that:

The eighty respondents were long leaseholders of flats situated within ten blocks of flats on the St Saviours Estate in Southwark. Southwark owned the freehold of each block. Each lease obliged the council, amongst other things, to keep the ten blocks of flats in repair. This included the front entrance doors and all other parts of the building retained by Southwark, eg communal entrance doors, refuse chutes and cupboard doors. Between March 2013 and April 2014, the council carried out major works to each block, which included the replacement of the lessees’ front entrance doors, most of the communal doors and other works to improve the fire resistance of the blocks such as replacing cupboard doors and refuse hatches. In advance of the works, the council carried out fire risk assessments of each block. Those assessments recommended the replacement of a small number of front entrance and communal doors that no longer complied with fire safety requirements. Generally, those assessments recommended that further assessments of each door should be undertaken before any major works programme was carried out. Southwark’s contractors did not, in advance of carrying out the works, undertake a survey of the condition of each door; instead, a surveyor took a photograph of each front entrance door. The council sought to recover the costs of those works from each of the lessees as a service charge and the lessees sought a determination that the sums were not payable. The First-tier Tribunal rejected the evidence of the authority’s surveyor as he was not an expert in fire resistance. As such, other than where the fire risk assessments had recommended replacement, there was no evidence of the front entrance doors being in disrepair. The First-tier Tribunal therefore decided that the cost of replacing each front entrance door was not recoverable other than where the authority’s own fire risk assessments had recommended a door’s replacement. The First-tier Tribunal also decided that the authority was limited to recovering 50 per cent of the costs of the works in respect of the other fire resistance measures, as while it was not disputed that some of the doors, cupboards and refuse chutes had been in a poor condition, some of the works may not have been needed if a full survey had been undertaken.

 

Mr McNeil was the leaseholder owner of a flat. The appellant was the resident management company and the freehold owner of the flat. The lease provided the freeholder with the power to make reasonable restrictions for the good running and management of the estate. There were problems with parking on the estate and the management company proposed a parking scheme to alleviate those problems. Mr McNeil parked his car in breach of the scheme. His car was clamped and he was charged. Mr McNeil paid the charge. In 2009, Mr McNeil issued proceedings in the county court for a refund in respect of the charge. He alleged that the management company was not entitled – under the lease – to impose the car parking scheme and that his right of way on the estate had been infringed. At a directions hearing, however, Mr McNeil conceded that the management company had the power to impose such a scheme, but challenged the imposition of the charges made under the scheme. Mr McNeil, subsequently, discontinued his claim. The management company sought it costs of defending the county court proceedings from Mr McNeil under the service charge. Mr McNeil refused to pay and the management company made an application under Commonhold and Leasehold Reform Act 2002 s168 to the LVT for a determination that Mr McNeil was in breach of covenant. The LVT decided that the scheme was not permitted by the lease and the management company was therefore precluded from recovering its legal costs.

 

The leaseholder sought to challenge the amount she was required to pay in respect of water charges. The bill had been based on the consumption of around 10,000 cubic metres per annum for a development of 26 units. This equated to 11,500 showers per year for each of the 26 units. The LVT decided that while the bills were high in the absence of hard evidence that this water was not being used the service charge was payable.

 

Mr Brown and Mr Gaydon were the leasehold owners of two flats. Island Homes was the freehold owner of both. Mr Brown and Mr Gaydon made an application to the LVT to challenge the reasonableness of service charges. In support of their claim Mr Lee – an accountant – gave evidence which demonstrated that there were discrepancies between the service charge account for the year 2009/10 and Island Home’s ledger’s which detailed their actual expenditure, ie the service charge accounts appeared to detail expenditure that had not been incurred. Mr Lee’s witness statement was, however, filed late and Island Homes did not respond to it. The LVT admitted the witness statement, but in its decision preferred the evidence of Island Homes because Island Homes had had insufficient notice to refute the allegations raised by Mr Lee.

Mrs Kumari was a long lessee. Her lease contained provisions obliging her ‘to indemnify the Landlord … against all … costs losses expenses claims and demands arising out of any failure by the Tenant to observe or perform any of its obligations’. Chaplair brought county court proceedings to recover unpaid rent and service charges. That claim was allocated to the small claims track, but subsequently transferred to the leasehold valuation tribunal (‘LVT’). Chaplair sought to recover the costs of the claim and the proceedings in the LVT. District Judge Watson held that, as it was a small claim, the court could not award more than £200, the amount fixed by CPR 27.14. HHJ Wulwik, after referring to Gomba Holdings (UK) Ltd v Minories Finance Ltd (No 2) (Gomba Holdings (UK) Ltd v Minories Finance Ltd (No 2)), and Church Commissioners v Ibrahim (Church Commissioners for England v Ibrahim) allowed Chaplair’s appeal. He held that the limitation of costs on the small claims track did not apply because the costs were not payable under the Civil Procedure Rules but under the terms of the lease.

 

A clause in a lease stated that the lessor was entitled to recover as service charges a proportion of the money ‘expended’ in maintaining and running the block. The amount was to be ‘ascertained and certified by the [plaintiffs’] Managing Agents acting as experts and not as arbitrators’.

 

The lessees were each long lessees in a building containing six flats. The lease reserved the service charge as rent and it was also a term of the lease that the lessees must ‘pay all expenses including solicitors costs and surveyors’ fees incurred by the Landlord incidental to the preparation and service of a notice under Section 146 of the Law of Property Act 1925 or incurred in contemplation of proceedings under Section 146 … of the Act.’ In 2005 the freeholders carried out works to rectify damage caused by water penetration. They claimed a proportion from the defendants as service charges. The claim was disputed on the basis that there had been a failure to comply with the consultation requirements of Landlord and Tenant Act 1985 s20. A leasehold valuation tribunal dispensed with those requirements and determined the sums payable. In a subsequent county court claim District Judge Nightingale found that the the lease required the lessees to pay the freeholder’s legal costs before the LVT. The lessees appealed. HHJ Hollis dismissed their appeal.

 

The defendant was a ‘maintenance trustee’ appointed under the lease to manage a block of flats on behalf of the landlord and held a maintenance fund which was provided by contributions from the lessees. The tenants brought proceedings against both the landlord and the maintenance trustee to enforce repairing covenants.

 

A lease provided that the lessee was to pay, as service charges, a proportion of ‘all costs, sums, payments, charges and expenses properly incurred by the landlord in carrying out its obligations … and in the proper and reasonable management of in and about’ the property. The lessor claimed as service charges the costs of largely unsuccessful litigation against the lessee.

A clause in a lease which required the lessee ‘to pay to the lessor all costs and expenses (including legal costs and fees payable to a surveyor) which may be incurred by the lessor in or in contemplation of any proceedings under sections 146 and 147 of the Law of Property Act 1925 notwithstanding forfeiture is avoided otherwise than by relief granted by the court’ entitled the lessor to an indemnity for all his costs and required the court to assess his costs accordingly.

 

Construing a service charges covenant in a long lease, the Court of Appeal held that a freeholder was not entitled to pass on to lessees as a whole the cost of employing solicitors and counsel to recover arrears of rent and service charges from particular lessees, since the clause in question did not contain any specific mention of lawyers, proceedings or legal costs, but was, rather, concerned with maintenance, safety and administration. There must be a clear and unambiguous clause to persuade the court that costs of such proceedings can be recovered from lessees as a whole.

 

Underlessees who had been defending a claim for service charges made a payment into court, which was accepted by the plaintiff landlord. As a result, in accordance with RSC Order 62 r5 (see now CPR 36.13) the plaintiff was entitled to the costs of the action ‘up to the time of giving notice of acceptance’. The plaintiffs, relying on a provision in the underlease which entitled them to recover ‘all proper costs charges and expenses … incurred … in connection with any breach of covenant’ sought those costs on an indemnity basis.

 

The claimant held a long lease in a block of flats. A resident-owned management company incurred legal costs of £75,000 in earlier litigation against him. The claimant referred those costs to a costs judge for assessment and they were reduced to £25,000. The company then sought to recover the full £75,000 from all the residents by way of service charges. The LVT held that the lease entitled the company to recover its full costs. The Upper Tribunal refused permission to appeal from that decision. The claimant sought judicial review of the refusal of permission.

The First-tier Tribunal ordered Mr Whiteside to pay 20 per cent of the landlord’s costs of proceedings in the Tribunal under rule 13 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013. The landlord subsequently sought to recover the remaining 80 per cent as an administration charge under an indemnity clause in the lease. A tribunal held that the landlord could not do so as it had, by obtaining an order under rule 13, exhausted its remedies for recovering the costs it had incurred.

 

It was a term of the lease that Miss Barrett was required ‘to pay all reasonable costs charges and expenses (including solicitors’ costs and surveyors’ fees) incurred by the Lessor in or in contemplation of any proceedings or the preparation of any notice under section 146 of the Law of Property Act 1925 notwithstanding forfeiture is avoided otherwise than by relief granted by the Court.’ Miss Barrett was also required to contribute towards the cost of insuring her flat. The lease did not reserve the payment of that sum as rent. Miss Barrett applied to the LVT for a determination as to the amount she should have paid for insurance over the preceding six years. The LVT decided, on a concession, that a small sum should be deducted. It declined to make an order under section 20C. Mrs Robinson sought to recover all her legal costs as an administration charge relying on that clause and she sought a determination from the LVT that the legal costs were payable. The LVT held that Miss Barrett was liable to pay Mrs Robinson’s costs relying on Freeholders of 69 Marina, St Leonards-on-Sea v Oram (Freeholders of 69 Marina, St Leonards-on-Sea – Robinson, Simpson & Palmer v Oram and Ghoorun).

 

A long lease entitled the lessor to recover as service charges ‘All other expenses (if any) incurred by the Manager in and about the maintenance and proper and convenient management and running of the development.’ The lessor included as part of the service charge the sum of £11,100 in respect of its legal fees in a dispute with Mr and Mrs Pratt. The First-tier Tribunal disallowed that item in its entirety because proceedings had not commenced.

 

Mr Christoforou was a lessee. He covenanted to pay service charges and, as a separate covenant, to indemnify the freeholder in respect of costs arising out of any breach of covenant by him. Standard, the freeholder issued a claim in the LVT for a determination that unpaid service charges were due. It was largely successful. Standard then claimed the legal costs it had incurred in respect of the proceedings, stating that they were costs due under the terms of the lease as they arose from Mr Christoforou’s breach of covenant. Mr Christoforou refused to pay those costs. The freeholder issued further proceedings in the LVT. It found that the costs were payable under the lease and were reasonable.

 

It was a term of a lease that a lessor was ‘In the management of the building and the performance of the obligations of the landlord hereinafter set out the landlord shall be entitled to employ or retain the services of any appropriately qualified or experienced … advisers of whatever nature as the landlord may reasonably require in the interest of good estate management and the proper expenses incurred by the landlord in connection therewith shall be deemed to be an expense incurred by the landlord in respect of which the tenant shall be liable to make a contribution in accordance with the service chargepercentage …’.

 

 

It was a term of Mr Dougall’s lease that he would indemnify the lessor ‘in respect of charges for other services payable in respect of the Demised Premises’. The RTM company successfully argued before the First-tier Tribunal that this clause entitled it to the recovery of its legal costs incurred in obtaining a determination that Mr Dougall was liable to pay a service charge and that the failure by Mr Dougall to pay his service charge over a number years amounted to unreasonable conduct and as such should result in an order for costs being made against him under Tribunal Procedure (First-tier Tribunal)(Property Chamber) Rules 2013 r13.

Etal Court Maintenance Ltd (‘the company’) was the lessee owned freehold company of Etal Court. Mrs Fairbairn was the leasehold owner of a flat within the estate. Her lease required the lessor ‘to do all other acts and things for the proper management administration and maintenance of the blocks of flats as the Lessor in its sole discretion shall think fit’. It also required her to pay a contribution towards the service charge, which included any expenditure incurred by the lessor in performance of the preceding obligation.

It was a term of a lease that the lessee ‘indemnify the lessor against all actions proceedings costs claims and demands in respect of any breach non-observance or non-performance thereof’. The lessor sought the recovery of £50, as an administration charge, arising from the lessee’s failure to pay the ground rent. The lessee paid the ground rent, but refused to pay the administration charge. The lessor subsequently instructed solicitors to recover the unpaid administration charges. The First-tier Tribunal held that such charges were not recoverable. The lessor appealed to the Upper Tribunal.

Geyfords Ltd were the freehold owners of a block of flats. Ms O’Sullivan was the leasehold owner of a flat within the block. Ms O’Sullivan, and a number of other lessees, contended before the LVT that the service charge for a number of years was not payable. Geyfords, after instructing solicitors and counsel, successfully resisted the application. Geyfords subsequently sought the recovery of its legal costs from those proceedings as an administration charge under the lease. In doing so they relied on a clause of the lease which required the lessees to pay a proportion of ‘all other expenses (if any) incurred by the lessors or their managing agents in and about the maintenance and proper and convenient management and running of the Development’. Ms O’Sullivan and the other lessees contended before the LVT that legal costs incurred in the previous proceedings were not recoverable under this clause. The LVT agreed and Geyfords appealed to the Upper Tribunal.

 

A property management company sought to recover, through service charges, legal costs it had incurred in respect of legal advice about action that could be taken against the developer of its blocks of flats in relation to structural defects. The LVT held that no provision in the leases entitled the company to recover those charges.

 

In the context of an appeal against a decision of the First-tier Tribunal to award the respondent landlord a proportion of its costs, Martin Rodger QC, Deputy Chamber President, held:

 

Primeview were the freehold owners of a block of flats. Mr Ahmed was the lessee of one of the flats. Primeview obtained a written admission from Mr Ahmed’s predecessor that the costs of works to the block were payable as a service charge. Primeview sought a determination in the First-tier Tribunal that the admission meant that the First-tier Tribunal lacked jurisdiction, by Landlord and Tenant Act 1985 s27A(4), to determine whether the service charge was payable. Before seeking its determination, Primeview refused to mediate with the lessee. The First-tier Tribunal subsequently decided that the admission was in fact an agreement for the determination of the amount of the service charge that was payable and was therefore void by Landlord and Tenant Act 1985 s27A(6). In total, the First-tier Tribunal only reduced the sum that the lessee was required to pay by 5 per cent, but made an order against Primeview requiring it pay to pay a third of the lessee’s costs under Tribunal Procedure (First-tier Tribunal)(Property Chamber) Rules 2013 r13 on the basis that it should have sought to mediate the dispute and should not have sought a determination from the First-tier Tribunal that it lacked jurisdiction to decide the issue. Primeview appealed against the decision to make the costs order.

 

A LVT determined substantive issues regarding disputed service charges raised by five of 140 tenants of two blocks of flats. The LVT also made an order under Landlord and Tenant Act 1985 s20C limiting the landlord’s costs to 50 per cent and holding that they were to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by all (140) of the tenants.

 

The freeholder was a lessee owned company. Each flat was subject to a tri-partite lease in which a management company was responsible for, amongst other things, recovering the service charge. Each lease contained a provision that ‘all costs expenses and other liabilities which are incurred by the Manager shall be the subject of reimbursement recoupment or indemnity by the lessees of the Apartments so that no residual liability for any such costs expenses or liabilities shall fall upon the Manager’. The LVT held that this provision did not entitle the freeholder or the management company to recover its costs of proceedings before the LVT.

Sinclair Gardens brought a claim in the county court for a money judgment arising from the non-payment of service and administration charges. The claim was transferred to the LVT who decided that all of the sum claimed was payable. After the proceedings had returned to the county court the parties agreed a consent order in which Mr Clemo agreed to pay ‘the claimant’s costs of the action’ in the sum of £811. The sum of £811 did not, however, cover Sinclair Gardens’ costs before the LVT. Sinclair Gardens subsequently sought to recover those costs as an administration charge. Mr Clemo refused to pay them and argued that the county court had already dealt with the question of costs in the consent order. The First-tier Tribunal agreed. Sinclair Gardens appealed.

 

It was a term of a lease that the lessor could recover from the lessee ‘any other costs and expenses reasonably and properly incurred in connection with the Landlord’s Property including without prejudice to the generality of the forgoing (a) the cost of employing Managing Agents and (b) the cost of any Accountant or Surveyor employed to determine the Total Expenditure and the amount payable by the Tenant hereunder’

‘Unreasonable’ conduct includes conduct which is vexatious, and designed to harass the other side rather than advance the resolution of the case. It is not enough that the conduct leads in the event to an unsuccessful outcome. Conduct will only be unreasonable where there is no reasonable explanation for it. The unreasonable behaviour must also be related to the proceedings and is therefore unlikely to include an unreasonable refusal to pay service charges.