Automated Summary
Key Facts
Two leaseholders, Mrs. Meena Kalia and Mrs. Usha Kalia, disputed service charges for roof replacement work and building insurance at Ashworth House, Cannock. The First-Tier Tribunal found the service charges for roof replacement excessive and reduced them, also determining that the insurance claims handling fee was unreasonable. The County Court awarded costs to the freeholder, Ashworth House Limited, but significantly reduced the amount payable by the leaseholders, ordering them to pay £1,980 each in costs.
Issues
- The Tribunal assessed whether the estimated service charge for roof replacement was reasonable. It found the requested £125,000 was excessive compared to alternative quotations of approximately £59,175. The Tribunal reduced the reasonable amount to £75,000, including professional fees and VAT.
- The Tribunal evaluated the reasonableness of buildings insurance costs. It found the insurance covered excessive items like three years' loss of commercial rent and residential rent protection beyond lease terms. The Tribunal determined 80% of the premium was reasonable for lessees, excluding 20% for excessive coverage.
- The Tribunal considered whether administration charges for litigation costs should be reduced. It made an order under paragraph 5A that administration charges for litigation costs would be limited to £270 per applicant, the amount already accepted at the case management conference.
- The Tribunal considered whether costs incurred in proceedings should be included in service charges. Based on the Applicants' success in reducing service charges, the Tribunal made an order under section 20C that costs would not be regarded as relevant costs for determining future service charges.
- The Tribunal reviewed the apportionment of costs between commercial and residential units. It found the Respondent's revised apportionments were incorrect, as they penalized lessees for the lessor's error in property sales. The Tribunal recalculated apportionments based on floor area measurements from the Reinstatement Cost Assessment.
Holdings
- The Tribunal ordered Mrs Meena Kalia to pay £9,197.07 service charges and £270.00 administration charges for 10 Ashworth House. The County Court ordered her to pay £52.50 ground rent, £1,980.00 costs, and £211.57 interest. The Tribunal and County Court both ordered that costs not be regarded as relevant costs for service charges.
- The Tribunal ordered Mrs Usha Kalia to pay £6,644.15 service charges and £270.00 administration charges for 12 Ashworth House. The County Court ordered her to pay £17.50 ground rent, £1,980.00 costs, and £175.43 interest. The Tribunal and County Court both ordered that costs not be regarded as relevant costs for service charges.
Remedies
- Orders under Paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 reducing administration charges to £270 (Tribunal) and £1,980 (County Court).
- Orders under Section 20C of the Landlord and Tenant Act 1985 that costs incurred in proceedings are not to be regarded as relevant costs for service charges.
- Order that each applicant pay 66% of the Respondent's costs, resulting in £1,980 inclusive of VAT and court fees.
Legal Principles
- The court applied costs principles from CPR 44 and relevant case law (Barnes v Time Talk, Church Commissioners v Ibrahim), determining that the successful party (Respondent) was entitled to 66% of costs. The court reduced the claimed costs to £3,000 each for the Applicants, finding the original claim of £11,598.45 disproportionate to the claim value.
- The Tribunal applied section 19(2) of the Landlord and Tenant Act 1985 to determine whether on-account payments for roof repairs and insurance premiums were reasonable. The Tribunal reduced the requested amounts for the roof repairs and insurance, finding the Respondent had not properly considered alternative, cheaper roofing systems or properly apportioned the insurance costs.
Precedent Name
- Garside v RFYC Ltd
- The London Borough of Hounslow v Waaler
- DeHavilland Studios Ltd v Peries
- John Romans Park Homes Limited v Hancock
Cited Statute
- Landlord and Tenant Act 1985
- County Courts Act 1984
- Commonhold and Leasehold Reform Act 2002
- Civil Procedure Rules
- Law of Property Act 1925
- Senior Courts Act 1981
- Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013
Judge Name
Judge Gandham
Passage Text
- In addition to this, there was no evidence that the Respondent had any regard for the modest income of the lessees when deciding what type of roofing system to install. The difference in the quotations provided by the Applicants for an EPDM roof were significantly lower than those provided by the tenders using the Bauder system and, based on the Tribunal's own knowledge, a EPDM roof would have been similar in price to a standard mastic asphalt roof.
- As such, the Tribunal determined that the proper costs that should have been demanded on 25th March 2018 on account from each of the Applicants towards the reasonable costs for the works to the roof amounted to £5,472.14.
- The Tribunal considered that it would be reasonable to suggest that 20% of the premium related to those additional items and should only be payable by the Respondent or the tenants of the commercial units. The Tribunal determined that the remaining 80% of the costs of the premium were to apportioned as per the service charge apportionment figures.