Service charges – Section 27A of Landlord and Tenant Act 1985 — Application to leasehold valuation tribunal (LVT) for determination of service charges – LVT reducing sum payable in respect of management fees on ground of management failures in dealing with service charge arrears – Further reason relating to fees for comparable properties given in refusing permission to appeal – Whether legally sustainable reasons given for decision – Whether permissible to supplement reasons in substantive decision in decision on permission application – Appeal allowed
The appellant owned the freehold of a property that contained flats, two of which were held on long leases by the respondents. The latter applied to the leasehold valuation tribunal (LVT), under section 27A of the Landlord and Tenant Act 1985, for a determination of the service charge payable for the years 2003 to 2006. The LVT found that the sum that the appellant had charged was reasonable in respect of all items, save for management fees, which it reduced to take account of what it considered to be failures in management in dealing with the recovery of service charge arrears. It stated that it had seen was little evidence of strategic planning to deal with that problem. Refusing the appellant’s application to appeal, the LVT added a further reason for reducing the management fees, namely that the lower figure reflected the sum charged for management fees for other similar properties in the area.
The appellant renewed its application to the Lands Tribunal (LT), which gave permission to appeal. On the appeal, the appellant contended that the LVT had given no legally sustainable reasons for reducing the management charges in the body of its decision, and that a further reason included in the subsequent refusal of permission to appeal had not cured that omission. It submitted that: (i) it was not permissible for an LVT to seek to justify a decision, which was required to be given with reasons, by subsequently adding reasons that had not been contained within the substantive decision; (ii) the LVT’s failure to put its additional reason to the parties during the substantive hearing was a substantial procedural defect that had prejudiced the appellant; and (iii) in stating that the reduced management fees reflected those of similar properties in the area, the LVT had put forward a mere assertion, unsupported by evidence of comparables upon which the parties could comment.
Decision: The appeal was allowed.
The LVT’s substantive decision did not contain any clear and sufficient reason for reducing the management charges. Its justification for reducing the management fees, as contained within the substantive decision, was the lack of strategic planning to deal with the problem of service charge arrears. This was an insufficiently particularised criticism to justify such a reduction. The LVT had failed to explain what form of strategic planning it would expect of a reasonably competent managing agent and to what extent the appellant’s managing agent had fallen short of that standard.
Even supposing that it had been open to an LVT, having given the reasons for its decision, thereafter to advance additional reasons, the further reason advanced in the instant case could not justify upholding its decision since the point had not been raised with the parties. The appellant had been prejudiced by a substantial procedural defect in that it had been unable to deal with the point. Moreover, the additional reason was wholly unparticularised and did not identify any allegedly comparable properties within the area where the management fees were in the order of the reduced sum.
Having reached that conclusion, the LT was not obliged to find that the full amount of management fees were payable, but it was entitled to reach its own decision as to the appropriate fees, if it could do so on the material before it.
David Nicholls (instructed by Teacher Stern LLP) appeared for the appellant; the respondents did not appear and were not represented.
Sally Dobson, barrister
