65 Hainault Road, Leytonstone, London E11 1EA ((Leasehold) disputes (management) - Service charges) -[2022] UKFTT LON_00BH_LSC_2021_0042- (19 April 2022)

Key Facts

Issues

• The Tribunal ruled the Respondent cannot recover its costs of representation from the Applicants. Lease terms only permit recovery of litigation costs in cases of possible forfeiture, which does not apply to tenants' service charge challenges. Orders were made to prohibit such recovery under section 20C of the 1985 Act and paragraph 5A of the 2002 Act.
• The Tribunal assessed the reasonableness of service charges claimed by Foxglade Properties Ltd. for 2016-2019. Applicants argued no services were provided, citing issues like lack of cleaning, disrepair, and unexplained costs. The Tribunal concluded management costs should be £600 annually (vs. claimed £400+ per flat), allowed repair/maintenance charges with evidence, and disallowed carpet cleaning costs. Total reasonable charges totaled £4,065.48 of the £8,056.27 claimed.

Holdings

• Repair and maintenance charges were allowed only in accordance with the invoice evidence supplied, but the Tribunal noted concerns about the reasonableness of certain costs such as £349.48 for replacing a front door lock and keys. Applicants were required to provide evidence for reasonable costs, which they failed to do.
• Carpet cleaning costs for the communal hallway were entirely disallowed as there was no evidence of services being provided. The Tribunal found that the carpet had not been cleaned or replaced in 20 years and that the lack of power supply in the common parts prevented effective cleaning.
• The Respondent was prohibited from recovering any costs of representation in these proceedings from the Applicants as service charges or administration charges under sections 20C of the Landlord and Tenant Act 1985 and paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002. The leases do not permit such costs in this context.
• The Tribunal determined that the reasonable annual management cost for the residential part of the building should be £600 per annum including VAT, significantly lower than the previous charges which were increasing by around £1,200 per year. This conclusion was based on the lack of sufficient services provided and the absence of a proper power supply in the common parts.

Remedies

• The Tribunal determined that the Respondent must refund £3,990.79 to the tenants of the three flats at 65 Hainault Road for overcharged service charges between 2016 and 2019. This amount is calculated by subtracting the reasonable and payable charges (£4,065.48) from the total claimed (£8,056.27). The refund is due by 13th May 2022. Additionally, any amounts paid for 2020 service charges must also be refunded as no justification was provided for these charges.
• The Tribunal issued orders under section 20C of the Landlord and Tenant Act 1985 and paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002. These orders prohibit the Respondent from recovering any costs of representation incurred during these proceedings from the Applicants as service charges or administration charges. The leases only permit recovery of litigation costs in cases of possible forfeiture, which does not apply here.

Monetary Damages

Legal Principles

• The tribunal emphasized that applicants challenging service charges must provide evidence to support their claims of unreasonableness, as the tribunal cannot create its own evidence. This aligns with the general legal principle that the burden of proof lies with the party asserting a claim.
• The tribunal concluded the respondent cannot recover costs of representation from the applicants under the lease terms, as the application was initiated by tenants and did not involve steps leading to possible forfeiture. This reflects the principle that costs of representation are only recoverable if explicitly permitted by lease provisions.

Cited Statute

• Commonhold and Leasehold Reform Act 2002
• Landlord and Tenant Act 1985

Judge Name

• Bruce Edgington
• Susan Coughlin

Passage Text

• 26. The Tribunal concludes (a) that the costs of management of the residential part of the building for all of the relevant period should be £600 per annum including VAT (b) that the repair and maintenance charges will be allowed in accordance with the invoice evidence supplied and (c) none of the carpet cleaning costs will be allowed.
• 16. Ms. Siladi did not object to the photographs lodged just prior to the hearing being considered by the Tribunal. It was pointed out to her that one of these was of a sheet completed by cleaners which said clearly that there was no power supply in the common parts enabling them to undertake the cleaning... She agreed that there was no power and, after consultation with the tenants, she had stopped appointing cleaners.
• 24. The Tribunal infers that the Applicants are asking for orders that the monies paid for service charges since 2016 should be refunded. Their evidence is that no services have been provided. The Respondent has satisfied the Tribunal that some services have been provided and the reasonableness of the cost of these services will therefore be considered even though there is very little evidence about this – one way or the other.