Landlord and tenant – Service charge – Reasonableness – Application to leasehold valuation tribunal for determination of service charges payable to appellant freeholder in respect of two blocks of flats – LVT ignoring appellant’s figures for cost of relevant services and substituting own reduced figures on basis of its expertise and experience – Whether LVT erring in reaching decision on issues not raised by parties – Whether reaching conclusions contrary to evidence before it – Appeal allowed
In 2010, the appellant acquired the freehold of two purpose-built blocks of flats, containing 48 flats in all, with commercial units on the ground floor of one of the blocks. The respondents were the long leaseholders of flats in the blocks.
In January 2011, the respondents applied to the leasehold valuation tribunal (LVT), under section 27A of the Landlord and Tenant Act 1985, for a determination of their liability for service charges for the years 2007 to 2010. That application was heard together with a claim, transferred from the county court, by which the appellant sought to recover service charges of £3,606.58 from the first respondent.
The respondents’ primary ground of challenge to the service charges was that they were being charged for services that had not been provided. In its decision, the LVT found that the appellant was entitled to recover sums for cleaning, pest control, refuse collection, car park clamping, repairs and maintenance. However, it stated that no invoices or audited accounts had been produced for the years 2007 and 2008 and it proceeded to produce its own figures for those years, said to be based on its knowledge and experience as an expert tribunal. It found that the reasonable costs recoverable for the services were substantially lower than those charged by the appellant and it reduced the service charge accordingly.
The appellant appealed. It contended that the LVT had erred in: (i) reaching a decision on grounds that had not been raised by the parties; (ii) adopting unrealistic figures that were not based on any of the evidence before it; and (iii) failing to give reasons for the substantial reduction in costs that it made.
Held: The appeal was allowed.
It was not for the LVT to raise matters of its own motion that were not in issue between the parties. It was unfair and impermissible for a court or tribunal to determine a dispute on the basis of a case that no party had not put forward and the court or tribunal had not raised with the parties: Regent Management Ltd v Jones [2010] UKUT 369 (LC) and Thinc Group v Armstrong [2012] EWCA Civ 1227 applied. The complaint that no audited accounts had been produced for the years 2007 and 2008 was a criticism of the LVT’s own making and was not an issue that had been raised by the respondents. Moreover, there had in fact been accounts before the LVT that contained details of the actual expenditure on services for the relevant years. That information was clearly relevant to the LVT’s determination of what was a reasonable figure. The LVT had erred in failing to refer to those figures and in reaching conclusions based on its knowledge and experience as an expert tribunal in circumstances where it had concrete evidence before it as to the amounts being claimed. Although an LVT might properly exercise its own judgment, relying on its own expertise and experience, it was not entitled to reach conclusions that were contrary to the evidence before it without justifying those conclusions.
The LVT had had no, or very little regard, to the available evidence. It had failed to take into account the cost of providing the services as put forward by the appellant, the size and nature of the building and the particular difficulties of the blocks. It had erred in failing to give reasons for its determinations, with the result that it appeared simply to have imposed its own views in an arbitrary manner, so denying the appellants a proper opportunity of understanding the basis of its findings: Havering London Borough Council v Macdonald [2012] UKUT 154 (LC); [2012] 3 EGLR 49; [2012] 36 EG 100 applied.
The LVT’s decision should therefore be set aside on the grounds that it had failed to have any proper regard to the actual costs of the services in 2007 and 2008, despite having that evidence before it, and had replaced the actual costs with substantially reduced costs without providing any justification for those reductions. The matter was remitted for redetermination by the LVT accordingly.
Nicola Muir (instructed by Conway & Co, of Henley-on-Thames) appeared for the appellant; the respondent appeared in person.
Sally Dobson, barrister