Landlord and Tenant Act 1985 – Service charge – Reasonableness – Challenge to reasonableness of service charge under section 27A of 1985 Act – Relevant charges relating to replacement of electronic door entry system and extensive programme of works to block of flats – Respondent constituting only tenant required to contribute to works as long leaseholder of flat under right-to-buy legislation – Whether that a relevant factor in determining whether charges reasonably incurred – Whether leasehold valuation tribunal falling into procedural error – Appeal allowed
The respondent held a long lease of a ground-floor flat in London E5, which she had acquired from the appellant local authority under the statutory right-to-buy scheme. The flat was one of five in a modern, three-storey block owned by the appellants. The respondent’s lease provided for her to pay a service charge; however the tenants of the other four flats, who had not exercised the right to buy, had no service charge responsibilities.
The respondent applied to the leasehold valuation tribunal, under section 27A of the Landlord and Tenant Act 1985, to challenge the reasonableness of two sums invoiced to her by way of service charge in respect of works carried out to the block. The first related to the replacement of the electronic door entry system, for which the respondent was charged just over £5,000 of the £17,077 cost. The second related to an extensive programme of works, including roof re-covering, repairs and damp eradication, window and door replacement, removal of asbestos and redecoration works, carried out as part of the appellants’ Decent Homes scheme; the respondent was invoiced for £26,628 out of a total cost of £96,668. Prior to carrying out the works, the appellants had consulted tenants in accordance with the statutory consultation requirements and a borough-wide framework agreement for works. They had served notices on the respondent, under section 20 of the 1985 Act, informing her of the reason for the works, the estimated cost and her contribution.
The LVT found the sums charged to be unreasonable notwithstanding the appellants’ compliance with the consultation requirements. It considered it relevant that, although many of the works under the Decent Homes scheme were carried out with the benefit of grants and benefited the short-term tenants in the block, the respondent, as the sole long leaseholder, had to face two very large bills within a short period of time although no grant was available to her. After considering the reasonable cost of the relevant works, it concluded that the respondent’s liability should be reduced to £15,553. The appellants appealed.
Decision: The appeal was allowed.
The LVT had exceeded its jurisdiction in its efforts to assist the respondent out of sympathy for her where she was faced with a demand for service charges exceeding £30,000. Although a tribunal could assist landlords or tenants in order to understand what their case was, it could not create for a party a case that that party had not advanced. To the extent that a tribunal sought to raise questions that could fairly be said to fall within the ambit of the party’s case, it had to ensure that it: (i) reached its decision on the basis of evidence that was before it; (ii) refrained from reaching a conclusion on the basis of evidence that had not been exposed to the parties for comment; and (iii) gave reasons for its decision: Arrowdell v Coniston Court (North) Hove Ltd [2007] RVR 39 applied. The tribunal was obliged to follow those requirements in order to ensure that the other party had a fair opportunity of dealing with the questions raised. It could only reach conclusions that were open to it on the evidence before it.
The LVT had failed to adhere to those requirements in the instant case. It had found the cost of the works to be unreasonable on grounds that the respondent had not herself advanced. It had not been entitled, based only on the respondent’s assertion that the charges were too high, to single out particular elements for reduction. It had made purely arbitrary reductions, which were not based on any discernible evidence, without putting the matter to the appellants for comment, and had given reasons that were manifestly inadequate. Its decision was procedurally unfair for that reason. In relation to the works carried out under the framework agreement, the correct consultation procedures had been followed. So far as the LVT had assumed that certain of the works could have been carried out at a lower cost outside that agreement, its assumption was unexplained. It did not appear to have considered how the appellants could have had the works done outside the agreement; nor was there any evidence to suggest that, had they done so, the overall costs in relation to the block would have been less. Underlying the LVT’s conclusion was the view that the appellants should have ensured that lower costs were incurred because the respondent was a right-to-buy lessee. That matter could not affect the issue that the LVT had to decide, namely whether the cost of the works was reasonably incurred.
The LVT’s decision should be quashed since it had reached conclusions that were not open to it on the evidence before it and that its decision was vitiated by procedural errors. On the evidence, it was reasonable for the appellants to carry out the works and to do so under the framework agreement. The appellants were entitled to recover the amount demanded for the door entry system and £19,743 for the other works.
Amanda Gourlay (instructed by the legal department of Hackney London Borough Council) appeared for the appellants; the respondent did not appear and was not represented.
Sally Dobson, barrister
Landlord and Tenant Act 1985 – Service charge – Reasonableness – Challenge to reasonableness of service charge under section 27A of 1985 Act – Relevant charges relating to replacement of electronic door entry system and extensive programme of works to block of flats – Respondent constituting only tenant required to contribute to works as long leaseholder of flat under right-to-buy legislation – Whether that a relevant factor in determining whether charges reasonably incurred – Whether leasehold valuation tribunal falling into procedural error – Appeal allowedThe respondent held a long lease of a ground-floor flat in London E5, which she had acquired from the appellant local authority under the statutory right-to-buy scheme. The flat was one of five in a modern, three-storey block owned by the appellants. The respondent’s lease provided for her to pay a service charge; however the tenants of the other four flats, who had not exercised the right to buy, had no service charge responsibilities.The respondent applied to the leasehold valuation tribunal, under section 27A of the Landlord and Tenant Act 1985, to challenge the reasonableness of two sums invoiced to her by way of service charge in respect of works carried out to the block. The first related to the replacement of the electronic door entry system, for which the respondent was charged just over £5,000 of the £17,077 cost. The second related to an extensive programme of works, including roof re-covering, repairs and damp eradication, window and door replacement, removal of asbestos and redecoration works, carried out as part of the appellants’ Decent Homes scheme; the respondent was invoiced for £26,628 out of a total cost of £96,668. Prior to carrying out the works, the appellants had consulted tenants in accordance with the statutory consultation requirements and a borough-wide framework agreement for works. They had served notices on the respondent, under section 20 of the 1985 Act, informing her of the reason for the works, the estimated cost and her contribution.The LVT found the sums charged to be unreasonable notwithstanding the appellants’ compliance with the consultation requirements. It considered it relevant that, although many of the works under the Decent Homes scheme were carried out with the benefit of grants and benefited the short-term tenants in the block, the respondent, as the sole long leaseholder, had to face two very large bills within a short period of time although no grant was available to her. After considering the reasonable cost of the relevant works, it concluded that the respondent’s liability should be reduced to £15,553. The appellants appealed.Decision: The appeal was allowed.The LVT had exceeded its jurisdiction in its efforts to assist the respondent out of sympathy for her where she was faced with a demand for service charges exceeding £30,000. Although a tribunal could assist landlords or tenants in order to understand what their case was, it could not create for a party a case that that party had not advanced. To the extent that a tribunal sought to raise questions that could fairly be said to fall within the ambit of the party’s case, it had to ensure that it: (i) reached its decision on the basis of evidence that was before it; (ii) refrained from reaching a conclusion on the basis of evidence that had not been exposed to the parties for comment; and (iii) gave reasons for its decision: Arrowdell v Coniston Court (North) Hove Ltd [2007] RVR 39 applied. The tribunal was obliged to follow those requirements in order to ensure that the other party had a fair opportunity of dealing with the questions raised. It could only reach conclusions that were open to it on the evidence before it.The LVT had failed to adhere to those requirements in the instant case. It had found the cost of the works to be unreasonable on grounds that the respondent had not herself advanced. It had not been entitled, based only on the respondent’s assertion that the charges were too high, to single out particular elements for reduction. It had made purely arbitrary reductions, which were not based on any discernible evidence, without putting the matter to the appellants for comment, and had given reasons that were manifestly inadequate. Its decision was procedurally unfair for that reason. In relation to the works carried out under the framework agreement, the correct consultation procedures had been followed. So far as the LVT had assumed that certain of the works could have been carried out at a lower cost outside that agreement, its assumption was unexplained. It did not appear to have considered how the appellants could have had the works done outside the agreement; nor was there any evidence to suggest that, had they done so, the overall costs in relation to the block would have been less. Underlying the LVT’s conclusion was the view that the appellants should have ensured that lower costs were incurred because the respondent was a right-to-buy lessee. That matter could not affect the issue that the LVT had to decide, namely whether the cost of the works was reasonably incurred.The LVT’s decision should be quashed since it had reached conclusions that were not open to it on the evidence before it and that its decision was vitiated by procedural errors. On the evidence, it was reasonable for the appellants to carry out the works and to do so under the framework agreement. The appellants were entitled to recover the amount demanded for the door entry system and £19,743 for the other works.Amanda Gourlay (instructed by the legal department of Hackney London Borough Council) appeared for the appellants; the respondent did not appear and was not represented.Sally Dobson, barrister