Service charge – Reasonableness – Application to leasehold valuation tribunal under section 27A of Landlord and Tenant Act 1985 – Respondent applying to LVT disputing amount of service charge charged by appellants for window replacement – Respondent alleging poor workmanship – LVT determining charge unreasonable since not reasonable to replace windows – Whether LVT entitled to reach decision on point not advanced by parties – Whether exceeding jurisdiction – Appeal allowed
In 2006 to 2007, the appellant local authority landlords carried out a programme of major works to a block of flats, including works to replace windows and balconies. After those works were completed, the respondents purchased one of the flats in the block. The appellants sought to recover the £5,909.57 cost of the works to that flat from the respondents as part of the service charge payable under their lease. The respondents applied to the leasehold valuation tribunal, under section 27A of the Landlord and Tenant Act 1985, for a determination of whether the charge was reasonable within section 19(1). They argued that they should be offered compensation, or a significant discount from the cost of the works to the windows, since the standard of workmanship was poor and ongoing repairs were needed.
The LVT disallowed the cost of the works on the ground that it had not been reasonable to replace the old windows. Although the respondents had not advanced such a contention, the LVT took the view that its jurisdiction extended to determining the entire service charge, not just the matters in dispute as pleaded or otherwise specifically identified in the application.
The appellants appealed. They contended that the LVT had breached the rules of natural justice by reaching a decision on grounds that were not raised in the respondents’ application without giving the appellants an opportunity to make submissions on the point; they further argued that the LVT’s decision was perverse since there had been no evidence before it about the condition of the old windows that had been replaced. The respondents agreed that the appeal should be allowed, since their only complaint was as to the standard of workmanship, and the parties reached agreement on the sum reasonably recoverable.
Decision: The appeal was allowed.
The LVT did not have jurisdiction, under section 27A, to determine the entire service charge, beyond the matters in dispute as pleaded or otherwise specifically identified in the application. On a section 27A application, the application form and the parties’ statements of case set out the nature and scope of the issues in dispute. Those documents served the functions of: (i) identifying the issues on which the parties sought the resolution of the LVT; (ii) enabling the parties to know the matters to which they needed to address their evidence; (iii) vesting the LVT with jurisdiction and focusing its attention on what needed to be resolved; (iv) setting the parameters of, and providing the tools for, case management of the application by the LVT; and (v) by confining the issues to what was actually, rather than might theoretically be, in dispute between the parties, assuring economical and expeditious disposal of the dispute while promoting efficient and economical use of judicial resources at first instance and appellate levels. The LVT’s jurisdiction was both a creature of statute and a function of what the applicant and the respondent wished it to resolve. The function and jurisdiction of the LVT was therefore to resolve the issues that it was asked to resolve, provided that they fell within its statutory jurisdiction. The LVT was not an inquisitorial tribunal. It had no jurisdiction to embark on its own inquisitorial process and identify and resolve issues that neither party had asked it to resolve. To do so was inimical to the party-and-party nature of applications to the LVT and would greatly increase the costs and difficulties attendant to service charge disputes, which, by their nature, were frequently fractious, involving relatively small sums within a complex matrix of divers items of expenditure.
There might there be rare cases in which it was appropriate or necessary for the LVT, in order to properly determine the issues expressly in dispute, to raise issues that were not expressly raised by the parties but that fell within the broad scope of the application. Even then, the issues had to fall within the scope of the application and could not relate to something that arose outside it: Regent Management Ltd v Jones [2012] UKUT 369 (LC) applied. In such cases, the LVT should give the opportunity to both parties to make submissions and, if appropriate, to adduce further evidence on the new issue before it reached its decision. A failure to do so was not only unfair but might also give the impression that the LVT had descended into the fray and adopted a partisan position, which could undermine the parties’ confidence in its impartiality.
In the instant case, the LVT had had no jurisdiction to determine whether it was reasonable to replace the old windows. It had not been asked to determine that issue and it was clear from the application that the respondents agreed or accepted that replacement was reasonable.
Justin Bates (instructed by the legal department of Birmingham City Council) appeared for the appellants; the first respondent appeared in person for the respondents.
Sally Dobson, barrister