Service Charges & Estate Management - July 2012 updates

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SERVICE CHARGES AND ESTATE MANAGEMENT

JULY 2012 UPDATE

London Borough of Havering v MacDonald [2012] UKUT 154 (LC)

Summary: This was an appeal in a service charge dispute that raised some general points about the decision making process of the LVT and how that tribunal should express its decisions.  In particular the Judge addressed the important question of whether, and if so to what extent, the LVT can at the permission to appeal stage, seek to amplify the reasons given in support of its decision.

Facts:  The LVT determined that the service charge for the provision and maintenance of communal television and radio signals to the tenant’s flat was not reasonable.  The costs charged arise from a contract entered into on 6 May 1992 and subsequently varied in 1997 and 2001 for the provision and maintenance of radio and television signals. The purpose of these variations was purportedly to upgrade the services provided. In the 1997 variation the reception of additional satellite signals and Channel 5 was added.  The variation in 2001 provided for the phased upgrade of the communal antenna systems to accept digital television signals. Both variations allowed for an increase in the sums payable under the agreement and for an extension of the original term.

The cost charged to the respondent tenant for the period 1 April 2008 to 31 March 2009 was £66.56 and for the period 1 April 2009 to 31 March 2010 was £70.20 (this being below the annual threshold of £100, the costs are not subject to the statutory consultation requirements).

The tenant contended that it was not reasonable for him to pay for the cost of a satellite signal as it was his case that he neither sought nor received such a signal.

The LVT found that the evidence before them was limited and that there was no evidence as to the competitiveness of the 1992 agreement and that the large difference in the costs of satellite and television signals was unexplained. It was further found that a contract of significant length was reasonable in order for the contractor to recoup its capital outlay, but that the original term of the agreement (15 years) was unreasonably long; that the variations to the agreements were unexplained and inexplicable; that the costs charged to the respondent were unreasonable; and that, while there was a range of reasonable charges, the top of the range of reasonable charges was £26 per annum.

On appeal: The primary criticism of the LVT made by the appellant local authority landlord was that the LVT’s decision letter failed to set out any, or any adequate, reasons as to how the conclusion was reached that the service charges levied by the appellant for 2008/9 and 2009/10 were unreasonable.  The LVT’s decision letter set out that the evidence before the LVT “was limited”; that a contract of a significant length was appropriate in the circumstances of this matter but then, without any reason or justification given, finds that 15 years was unreasonable; that the increases in prices brought about by the two variations to the agreement were “inexplicable” despite an explanation being provided within the body of the variations to the original agreement; that it was acknowledged that it would not be fair to follow the Barking & Dagenham charges as set out in the “Rita Greenwood Report” as the basis of those charges was not known; but then comes to a conclusion, without any reasoning being expressed, that there was a range of reasonable charges and that the top of that range was £26 per annum, or 50 pence per week.

The issues on the appeal were thus as follows:

 

  1. The LVT failed to give any, or any sufficient, reasons for their decision;

 

  1. The failure to give any, or any sufficient, reasons for their decision cannot be cured on the refusal to give permission to appeal and, even if it could, the LVT failed to do so in this instance;

 

  1. The findings on reasonableness were not open to the LVT on the evidence before the LVT;

 

  1. The LVT came to a conclusion that no reasonable Tribunal could have come to on the evidence before it.

In summary, allowing the appeal, HHJ Walden-Smith found:

There is a statutory requirement for both the decision and the reasons for the decision to be recorded in writing.  That requirement arises in any event as an incident of the principle of natural justice.

 

  1. Where the basis of an appeal is inadequacy of reasons, then when “appropriate” it is open to the LVT to amplify its reasons at the permission to appeal stage.

 

  1. The reasons must have been properly in the mind of LVT at the time the decision was made and formed the basis (or at least part of the basis) for the decision being reached.

 

  1. The power to amplify reasons does not prevent a party appealing on the basis that the very existence of the gaps in the reasoning makes the decision unlawful or that the reasons given at the permission to appeal stage cannot have been the reasons for the decision, on a proper reading of the decision.

The Judge also took the opportunity to consider a number of important points regarding the conduct of hearings before the LVT.  She reaffirmed:

 

  1. What had been said by the President in Arrowdale as regards the use to be made by the LVT of its “expertise” and the importance of ensuring that any “knowledge and expertise” relied upon must be raised before the parties to give them the opportunity to comment.

 

  1. The test to be applied in cases concerning the “reasonableness” of service charges: namely, whether the charge that was made was reasonable not whether there were other possible ways of charging that might have been thought better or more reasonable.

 

  1. That in such cases (where the reasonableness of service charges is in issue) it is for the tenant to advance a prima facie case that identifies the expenditure complained of and the general nature of the case, and only then is it for the landlord to establish the reasonableness of the challenged charge(s).

 

  1. That there is no presumption for or against the reasonableness of the standard of or the costs as regards service charges; the decision on reasonableness is to be made on all available evidence.

Comment: This decision, although given in the context of a service charge dispute, deals with matters that are of general application to all proceedings before the LVT.

Eaglesham Properties Limited v John Jeffrey [2012] UKUT 157 (LC)

Issue: Does the LVT have jurisdiction to extend an interim management order made pursuant to Part II of the Landlord and Tenant Act 1987 once the initial period specified in the order has expired.

Held: Once the interim order has lapsed and the functions of the management of the block have reverted to the freehold owner, through their appointed manager, there is no jurisdiction to extend the original order.  While there may be very good reason for an interim order to be extended, there cannot be such an extension once the interim order has come to an end.  That would not be an extension, but a new order, and that requires the service of a preliminary notice under section 22 (unless dispensed with under section 22(3)). If there was an extension after the original order had come to an end that would lead to complete confusion as to who is responsible for managing the property between the end of the original order and the extension granted after the interim order has come to an end.

JONATHAN UPTON

TANFIELD CHAMBERS

JULY 2012