In Assethold Ltd v Franco [2022] UKUT 285 (LC) the appellant landlord challenged the findings of the First-tier Tribunal as to the reasonableness and a payability of service charges and administration charges demanded from the respondent lessee.
The landlord was the freeholder of a building comprising three flats in Dagenham, east London. The lessee was the long leaseholder one of the flats.
Pursuant to clause 3(a)(v) of the lease, the lessee was required: “To pay all costs charges and expenses (including solicitors’ costs…) incurred by the lessor for the purpose of or incidental to the preparation and service of a notice under section 146 of the Law of Property Act 1925.”
Over the years the parties had been in engaged in a number of legal disputes concerning the reasonableness and payability of service charges and administration charges. In proceedings in 2017, the lessee was ordered to pay the landlord £5,282.09. In May 2018 the landlord’s managing agent invoiced the landlord the sum of £3,600 for services provided in respect of the 2017 proceedings. When the service charge demand was issued in June 2018, this sum remained unpaid by the lessee.
In June 2019 the landlord issued the lessee with a service charge demand of £995.44 for the service charge year 2018/2019. A demand in the sum of £1,208.72 was also made for estimated service charges for the year 2019/2020, which included the costs of works to be carried out to a meter cupboard.
In August 2019 the landlord issued a further service charge demand in the sum of £2,040 for administration costs and pre-issue solicitors’ fees incurred when it commenced a further claim against the lessee in the county court in September 2019 for arrears of ground rent, service charges and administration charges. The total sum claimed was £9,000.38.
The claim was ultimately transferred to FTT for all matters to be dealt with under the “double hatting” procedure. The FTT found that the sum of £3,673.16 only was reasonable and payable.
On appeal to the UT, that landlord argued that the FTT had erred in law in finding that the £1,208.72 estimated service charge demand and the £2,040 administration costs and pre-issue solicitors’ fees were not reasonable or payable.
The UT found that the FTT had erred in determining that the estimated service charges were unreasonable because firstly, they were “unsubstantiated” and secondly no consultation process pursuant to section 20 of the Landlord and Tenant Act 1985 had been undertaken in respect of the same. As the UT observed, it was a matter for the leaseholder to challenge the reasonableness of the charge and he had not done so. Additionally, there was no statutory requirement to follow the consultation process in respect of estimated service charges.
Additionally the UT found that the FTT had erred in concluding that the landlord was unable to claim the administration charges and the pre-issue solicitors’ fees in the sum of £2,040, as the lease did not make provision for the recovery of the same. Clause 3(a)(v) of the lease was a standard “section 146 clause” that enabled the landlord to recover, as an administration charge under the lease the costs of county court and FTT proceedings brought as a precursor to forfeiture proceedings. It enabled the landlord to recover costs incurred “for the purpose of or incidental to the preparation and service of a notice under section 146.”
Elizabeth Dwomoh is a barrister at Lamb Chambers
