Landlord and tenant – Service charge – Application under section 27A of Landlord and Tenant Act 1985 for determination of whether service charges payable – Respondent leaseholders disputing entitlement of appellant landlord to recover historic arrears for period before appellant acquiring estate – Tribunal deciding that issue and also making determination on reasonableness of charges for later years – Whether tribunal giving adequate reasons for decision – Whether procedural unfairness occurring – Whether tribunal having jurisdiction to determine charges for later years – Appeal allowed
The respondents were the long leaseholders of a flat on an estate in Astley, Greater Manchester. The appellant, a limited company whose shareholders were residents of the estate, had acquired the freehold of the estate in 2009 following a history of poor relations between the previous owner and the leaseholders. In leasehold valuation tribunal (LVT) proceedings in 2007, the annual management fee charged by the previous managing agent had been reduced from £188 to £50. The respondents were not shareholders of the appellant company and had not participated in the 2007 LVT proceedings.
When the appellant took over the estate, it sought to collect arrears of service charge. Although the respondents’ service charge account was in credit, the appellant considered that the respondents were not entitled to the benefit of the 2007 determination since they had not participated in the proceedings. It accordingly drew up a new service charge statement purporting to show a debit balance of £641.98 as at July 2009.
The respondents applied to the first-tier tribunal (FTT), under section 27A of the Landlord and Tenant Act 1985, for a determination of whether the charges were payable. Their application form listed the years from 2004 to 2013 as being in issue, primarily in relation to the alleged arrears and the recalculated service charge statement. At a pre-trial review, the FTT recorded the parties’ agreement that were no ongoing issues in respect of service charges after the service charge year ending June 2009, save in respect of a charge for the installation of UPVC windows. Although, at one point, the respondents sought to extend their challenge to dispute the reasonableness of the charges for the years from June 2009, they later wrote to the LVT indicating that their application was “in abeyance” so far as it related to the later years.
At the hearing, the LVT nonetheless addressed both the historic arrears and all the charges for the years from July 2009, and made adjustments to the charges accordingly. On appeal from that decision, the appellant challenged the adequacy of the LVT’s reasons and also alleged that there had been procedural unfairness since it had understood that there was no issue in relation to charges for the period after it acquired the estate and had prepared for the hearing on that assumption.
Held: The appeal was allowed.
(1) The written reasons which the FTT was obliged to provide for its decision, by virtue of r 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, did not need to be elaborate but did need to identify the issues for decision and provide a summary of the tribunal’s basic factual conclusions. Although the reasons did not have to recite the evidence in detail, they had to explain briefly why the FTT had arrived at its conclusions. The FTT’s decision in the instant case fell below the minimum standard required by r 36(2). It lacked the required explanation so far as the FTT had simply listed what items it considered to have been reasonably incurred and in what amounts. Although the decision comprehensively recorded the determinations made and the submissions received, it made no connection between them. No facts were found and no conflicts of evidence were addressed. The quality of services for which charges were made was not considered, nor was it obvious, even to the parties who were present, how the FTT had reached its conclusions. The necessary connection between what the parties argued and what the FTT decided did not need to be lengthy or complicated. A very few additional sentences would probably have been sufficient for the purpose, but, without them, it was not possible to understand the FTT’s thinking or determine whether the appellant had justifiable grounds of complaint.
(2) There had been reasonable grounds for the appellant’s expectation that the matters under investigation before the FTT would not include charges after 2009, save for the UPVC windows. The respondents’ letter of July 2013, indicating that other matters were “in abeyance”, was a clear signal that they did not intend to pursue the later years at the forthcoming hearing. There was nothing to alert the appellant to the need to prepare for a hearing on broader issues. It was not possible to assess whether the appellant was in fact significantly disadvantaged, or whether the outcome would have been the same had proper notice been given, in part because of the absence of reasons for the FTT’s decision.
(3) If the above issues were the only matters in the appeal, it would be appropriate to remit the case to the FTT for reconsideration and the provision of additional reasons. However, it was neither necessary nor permissible to remit the proceedings since the FTT lacked jurisdiction to determine the service charges payable for the years ending June 2010 to 2012. By section 27A(4) of the 1985 Act, the FTT had no jurisdiction to make any determination on a matter that had been agreed or admitted by the tenant. The policy of the Act was that there should be finality in those issues. While section 27A(5) made it clear that payment of a service charge was not sufficient to amount to an agreement or admission for that purpose, the respondents had not only promptly paid each of the periodic service charges in response to the demands made by the appellant but had also, more importantly, made it clear in their section 27A application that they made no challenge to those charges, save to the extent that they included the sum carried forward from the year ending June 2009. Having already paid the other sums demanded, as they emphasised, their answers to the questions on the application form amounted to an admission that the other sums had been properly claimed and were payable.
It made no difference that the respondents had described their payments, when making them, as “without prejudice”. Although the correspondence did not spell out what rights the payments were made “without prejudice” to, it was obvious that they were without prejudice to the dispute over the historic arrears and not the current charges. In relation to the current charges, which were paid, the description of the payments as “without prejudice” did not add anything to the effect of section 27A(5). Thereafter, when the section 27A application was made and the matters in dispute were identified in terms which clearly demonstrated that the current charges were not challenged, the “without prejudice” label previously attached to the payment of those sums did not detract from the admission which was then being made. If no payment at all had been made, the section 27A application would still have amounted to an admission that only the arrears carried forward were in dispute.
It was not possible was possible for the respondents, having paid and admitted the continuing service charges, later to withdraw their admission and challenge their liability for such matters Such a change of position was not permissible in proceedings under section 27A, for the simple reason that section 27A(4) prevented an application from being made at all in respect of a matter which had been agreed or admitted. An agreement or admission was definitive of the parties’ rights, at least as far as any questioning of those rights before the FTT was concerned. It followed that where an application to the FTT included an admission, it would be inconsistent with section 27A(4) for the FTT to permit the application to be amended to challenge any service charge which fell within the admission. The FTT’s decision should therefore be set aside in relation to the service charges for the years ending June 2011, 2012 and 2013.
The husband of one of the long leaseholders appeared for the appellant; the second respondent appeared in person for the respondents.
Sally Dobson, barrister
