Flat 50, Aegon House, 13 Lanark Square, London E14 9QD ((Leasehold) disputes (management) - Service charges) -[2021] UKFTT LON_00BG_LBC_2019_0117- (31 August 2021)

Key Facts

Issues

• The Tribunal reviewed expenditures such as survey fees and managing agent fees. Most were deemed reasonable, though the 2016 survey fee for enfranchisement was partially invalidated. The Respondent’s explanations for charges aligned with lease terms in most cases.
• The Applicant claimed poor transparency, but the Tribunal noted that requested documents were provided. Allegations of withheld information were not substantiated, as evidenced by the extensive documentation available for review.
• The Applicant alleged inadequate maintenance despite higher service charges. The Tribunal found no evidence to support this, noting that the charges covered estate management and that the Applicant's claims were based on assertions rather than documented proof.
• Allegations of directors misusing funds for personal or unrelated purposes (e.g., enfranchisement claims) were partially addressed. The Tribunal ruled that while some expenditures were improper, there was no compelling evidence of fraud or systemic misconduct beyond the enfranchisement survey fee.
• The Tribunal assessed whether the substantial increases in service charges for 2016-2018 were arbitrary or unjustified, concluding the increases were primarily due to estate charges from Melrose, over which the Respondent had no control. The Applicant's claim of incompetence was rejected due to insufficient evidence.

Holdings

• The service charges for 2016-2018 are generally payable, except for £928 in 2017 for professional fees and £21,970.11 in 2016 for a survey fee (reduced to £4,394). The Tribunal declined to determine 2019 charges due to insufficient evidence.
• Professional fees of £928 in 2017 were ruled non-payable as they related to a loan for legal proceedings at a neighboring block, which the Applicant's lease did not authorize.
• The Tribunal found that the Respondent's management commission and estate charges for 2016-2018 were reasonable and payable, despite the Applicant's claims of lack of transparency. A detailed breakdown of estate charges was provided but not contested.
• The £21,970.11 survey fee in 2016 was reduced to £4,394 because part of the cost was improperly used for enfranchisement purposes, which is not a lawful use of service charge funds.
• The Tribunal dismissed allegations of reckless or negligent spending by the Respondent, noting the Applicant failed to provide evidence of such misconduct or unauthorized expenditures.
• The Tribunal rejected the Applicant's claims that service charges for insurance, refuse removal, water treatment, and other standard maintenance services were unreasonable, finding them within market norms and necessary for property management.

Remedies

• The Tribunal determined that the Applicant must pay service charges for 2016-2018 inclusive, with exceptions: (1) £928 for professional fees in 2017; and (2) the 2016 'Survey Fee' of £21,970.11 reduced to £4,394. The 2019 charges were not determined.
• The Tribunal declined to make a determination regarding service charges for 2019. All parties retain the right to seek a fresh application for a decision on these charges.
• The Tribunal outlined procedural directions for costs applications: (1) Parties must notify intentions by 13th September 2021; (2) Submit written representations by 20th September 2021; (3) Replies due by 4th October 2021. Costs will be decided without a hearing based on submitted documents.

Legal Principles

• The Tribunal emphasized the standard of proof required for challenging service charges, noting that bare assertions without supporting documentation or alternative evidence (e.g., quotes, invoices) were insufficient to establish unreasonableness. This standard was applied consistently across multiple contested items.
• The Tribunal applied the principle of burden of proof, determining that the Applicant did not provide sufficient evidence to challenge the reasonableness of the service charges. Without evidence, the Applicant could not meet the legal threshold to demonstrate that the charges were unreasonable or improperly applied.

Cited Statute

Judge Name

Passage Text

• The service charges levied by the Respondent for the years 2016-2018 inclusive are payable by the Applicant save for those arising from the following costs incurred by the Respondent: (a) £928 for professional fees in 2017; (b) The costs of £21,970.11 incurred in 2016 and categorised as 'Survey Fee' is reduced to £4,394.
• The charge of £928 in 2017 was apparently for a loan to those managing the neighbouring block, Balmoral House, to defend proceedings in the First Tier Tribunal. The Tribunal could not identify any provision in the Applicant's lease which could make her liable for service charges arising from such a loan.
• The Applicant challenged the payment for set-up costs of £300 in 2016 because she was not clear what it was for. The Respondent explained it was an additional fee charged by HAUS when they took over the management of the building. The Tribunal agrees with the Respondent that this is not uncommon industry practice and is satisfied that it is reasonable and payable.