Landlord and tenant – Service charges – Costs – Section 20C of Landlord and Tenant Act 1985 – Appellant lessees appealing against decision of First-tier Tribunal (FTT) that costs of managing agents incurred in connection with earlier proceedings were relevant costs – Whether FTT in subsequent decision correct to allow those costs as relevant costs as reasonable and incurred regardless of proceedings – Appeal allowed
The appellants were members of Point Curlew Tenants Association and lessees of lodges and chalets at Atlantic Bays Holiday Park, St Merryn, Cornwall. They appealed against a decision of the First-tier Tribunal (FTT) in July 2019 concerning the determination of services charges for 2013-2016 under section 27A of the Landlord and Tenant Act 1985.
In March 2017, the same FTT panel had previously heard an application to determine the service charges for 2008-2012. The substantive issues in that application were determined and, on a separate application under section 20C of the 1985 Act. The FTT determined to make an order under section 20C in respect of the proceedings relating to the service charges from 2008-2012 so that the landlord’s costs incurred in respect of those proceedings might not be added to future service charges.
The appellants challenged an invoice dated 16 March 2015 from the landlords’ managing agent in the sum of £8,100 including VAT. The description of the services rendered was: “Reconciling [2010/2011/2012] Service Charge for FTT”. The sum of £2,250 (net of VAT) was allocated to each year; although the work done on the figures was in order to present them to the tribunal, it should have been done in 2010-2012 and had to be done anyway after the agent had been instructed to act.
The FTT found that the managing agents’ charge had been reasonable and accepted that the work had to be done irrespective of the tribunal proceedings and the lessees would have incurred the disputed charge had it been done at the appropriate time.
The appellants appealed under the tribunal’s written representations procedure.
Held: The appeal was allowed.
(1) The FTT’s section 20C order in 2017 had been made “in respect of the proceedings relating to the service charges from 2008 to 2012”. It was clear from a statement in their written representations that the respondents disputed whether the costs in issue were incurred in connection with the 2017 FTT proceedings. The fact that the disputed costs were not costs of legal services did not matter; no doubt an order under section 20C could be restricted to legal costs, but the order made by the FTT in October 2017 applied provided that the costs, of whatever nature, were incurred, or to be incurred, by the landlord “in respect of those tribunal proceedings.”
The argument that the disputed costs would have been incurred regardless of the 2017 proceedings did not mean they were not, in fact, incurred in connection with, or in respect of, those proceedings. The managing agent had acknowledged that those were costs incurred in connection with proceedings before the FTT and so stated on the face of the invoice itself.
(2) Whether the work covered by the invoice would have been done regardless of any FTT proceedings was not relevant; the evidence pointed clearly to the fact that the work was done in connection with such proceedings and the cost of such work was therefore incurred in connection with them. The only fact of significance was that the work was done to enable the respondents to present their case to the original FTT.
Accordingly, the costs of the disputed invoice were incurred in connection with the 2017 FTT proceedings and were therefore subject to the section 20C order made by the FTT in October 2017.
(3) The question was whether it was open to the FTT (the same panel) to allow those costs as part of the 2015 service charge in its subsequent decision in July 2019.
The 2017 section 20C order was not appealed and no new evidence had come to light subsequently. The respondents’ evidence about the invoice which was produced to the 2019 FTT could have been produced to the 2017 FTT when considering the section 20C order and been the subject of an appeal which was never brought. A request could have been made at that stage for the cost of reconciling the accounts to be excluded from the scope of any section 20C order, but that was not done. For the respondents to try and re-open the point by giving evidence to the 2019 FTT that was previously available to it was to re-litigate in 2019 that which had already been decided against them in 2017. Therefore, the costs described in the invoice from the managing agent dated 16 March 2015 were incurred in connection with proceedings before the FTT, and following the FTT’s section 20C order in 2017, which was not challenged and remained in force, they were not to be regarded as relevant costs which could be taken into account in determining the amount of the service charge payable by the tenants.
Eileen O’Grady, barrister
Click here to read a transcript of Sandoz and others v Francis and another
