Estate charges – Estate management scheme – Appellant resident seeking variation of scheme – Section 159(3) of Commonhold and Leasehold Reform Act 2002 – Scheme providing for expenses to be certified and divided in specified proportions – Whether charges in question “variable estate charges” or charges calculated in accordance with a formula specified in the scheme – Leasehold Valuation Tribunal declining jurisdiction to determine application – Appeal allowed
The appellant was a resident of Hampstead Garden Suburb, which was subject to an estate management scheme administered by the respondent trust as landlord. The scheme governed the use, appearance and maintenance of the property on the estate and provided for an annual management charge to be paid in respect of each separately rated residential unit or shop. The management scheme specified the amount of that charge for each year up to 1982, following which it provided for the charge to be “a proportionate part of the expenses of the Trust in operating the scheme in an economical, efficient and consistent manner during that financial year…as certified by the Trust’s auditors, the proportion to be calculated by dividing the said expenses by the number of enfranchised properties on the 6th April in the financial year”.
Several residents became dissatisfied with the way in which the estate charges were levied, and applied to the leasehold valuation tribunal (LVT) to vary the estate management scheme pursuant to section 159(3) of the Commonhold and Leasehold Reform Act 2002. That section enabled anyone that was subject to estate charges to apply for variation of the scheme on the ground that any estate charge specified in the scheme, or any formula specified in the scheme according to which the estate charge was calculated, was unreasonable. The LVT held that the charge in question was a “variable estate charge” within the meaning of section 159(2) of the 2002 Act, namely one that was not specified in the scheme or calculated according to a formula specified therein, with the consequence that section 159(3) did not apply and that the LVT lacked jurisdiction to determine the application. It held that the “formula” referred to in section 159(3) had to be one whereby the estate charge was calculated without reference to actual costs, for instance by the application of the retail prices index (RPI) to an amount fixed at the outset. It did not cover cases where, although the means of calculating the charge was specified in the management scheme, it depended upon the expenses of operating the scheme incurred by the respondent in any given year. The appellant appealed.
Decision: The appeal was allowed.
The definition of a variable estate charge in section 159(2)was such as to exclude a figure that was calculated in accordance with a formula specified in the scheme. The charges under consideration in the instant case were calculated in accordance with just such a formula. The fact that the inputs to the formula were themselves unknown until after certification did not deprive the formula of its quality as a formula specified in the scheme: Coventry City Council v Cole [1994] 1 EGLR 63; [1994] 06 EG 133 distinguished. Otherwise, no householder in a scheme that used the commonplace method of certifying and allocating expenses according to a formula could ever challenge that formula under section 159(3); that provision would be rendered otiose in all cases save those involving a particular kind of formula under which an adjustment was made to a known sum, for instance by using an RPI adjustment of defined figures. Section 159 did not require or permit such a restrictive interpretation. It followed that there was jurisdiction under section 159(3) in the instant case.
The appeal was decided under the written representations procedure; the respondent did not respond to the appeal.
Sally Dobson, barrister