Section 19(1) of the Landlord and Tenant Act 1985 provides that service charge costs in relation to residential properties must be reasonably incurred and the services/works to which they relate must be of a reasonable standard. In Nogueira v Westminster City Council [2014] UKUT 327 (LC); [2014] PLSCS 272 the Upper Tribunal had to consider whether tenants were liable to pay the full cost of work, despite the existence of defects that needed to be put right.
The landlords, who were the freehold owners of six blocks of residential accommodation comprising 750 flats, had entered into three major works contracts for repairs to the buildings. A small group of tenants complained about defects in the work in the common parts and about defects in work that affected them all differently (since the complaints related mostly to different defects in the work on the windows in their flats).
The First Tier Tribunal found that the work was carried out properly, at a reasonable price and to a reasonable standard. If that had been the end of it, the tenants would have had no grounds for challenging the service charge costs. However the tribunal was able to find that the work was carried out to a reasonable standard only because it had proceeded on the basis that the landlords would comply with the terms of undertakings that they had given to put the defects right.
In other words, the First Tier Tribunal found that the work would become work of a reasonable standard if and when the landlords complied with their undertakings. The tribunal explained that it had decided the case in this way because it would be incredibly difficult, if not impossible, to determine which leaseholders should have what reduction made to their individual service charge bills. The Upper Tribunal decided that this was unacceptable and has asked the First Tier Tribunal to consider what deductions should be made from the bills of the leaseholders who pursued their case to the Upper Tribunal.
The judge reminded the First Tier Tribunal that, rather than making individually priced reductions in respect of each separate lease, it could make a global deduction from the service charge costs to reflect the defects. Alternatively, if the facts justified it doing so, the First Tier Tribunal could divide the flats into categories according to the seriousness of the defects that affected them and then make different deductions to reflect the extent of the outstanding work: Westminster City Council v Allen [2010] UKUT 460 (LC).
The judge also considered that the First Tier Tribunal should not have accepted the landlords’ undertakings at all. It did not have the jurisdiction to accept undertakings that work will be done, or to order landlords to do such work, and would not, therefore, have had the power to enforce the undertakings given. In addition, the terms of the undertakings were much too imprecise to be accepted. However, the judge did suggest that it would be open to the First Tier Tribunal to decide that £X was recoverable in full and that £Y was a reasonable sum for the outstanding works, once they were done properly, and to conclude that this additional £Y would be recoverable once the defects had been cured.
Allyson Colby is a property law consultant