Service charges: reasonableness of estimated charges

The Upper Tribunal (Lands Chamber) has underscored that in relation to estimated charges, no greater amount than is reasonable is payable. The outcome achieved by the landlord must be reasonable, and that does not necessarily mean that the cheapest price or the best possible solution must be attained. In Yambasu v London Borough of Southwark [2023] UKUT 152 (LC), the appellant was a long leaseholder of a flat situated in North Peckham, London SE15. The respondent local authority was her landlord and the freehold owner of the estate. Under clause 4(5) of the lease, the landlord covenanted to provide a number of services including central heating and hot water and to ensure so far as practicable that those service were maintained at a reasonable level. Under clause 2(8) of the lease, the lessee covenanted not to disconnect the flat from the district central heating system, if such system served the flat, without the consent in writing of the landlord. The heating system did serve the lessee’s flat. She had written to her landlord requesting she be disconnected from the same owing to the expense of maintaining it, but the request was refused. In February 2016, the landlord sent the lessee an estimated service charge demand in the sum of £4,375.95. The demand was in respect of the estimated costs of major works to the heating system. The lessee refused to pay and in July 2019 the landlord issued proceedings to recover the service charges in the county court. The matter was transferred to the First-tier Tribunal to determine the reasonableness and payability of the charges. The lessee argued that: (a) the landlord had failed to comply with the consultation requirements; (b) the landlord had incorrectly apportioned the service charges as the leaseholders were paying to heat other properties owned by the landlord; and (c) the service charge was unreasonable because the landlord was running an antiquated heating system that was expensive and unreasonable in cost to maintain and she should be permitted to disconnect from the same. The FTT found against the lessee. In upholding the FTT’s decision, the UT found the landlord had complied with the consultation requirements. Further, the landlord’s evidence showed that the service charges had been correctly apportioned. On the issue of reasonableness, the UT underscored that in relation to estimated service charges, no greater amount than was reasonable was payable. This did not mean the landlord had to carry out the cheapest solution, the best solution or the solution favoured by the tribunal. In the present case, the landlord’s additional costs were reasonable and were part of the costs of upgrading works that had commenced. To abandon the same would result in wasted expenditure. Further, there was no evidence before the FTT that the estimated charges were unreasonable in amount. Elizabeth Dwomoh is a barrister at Lamb Chambers