Service Charges & Estate Management Update – October 2013

1st October 2013

London Borough of Southwark v Paul & Benz [2013] UKUT 0375 (LC)

The local authority landlord was entitled to recover indirect costs, described as ‘overhead costs’, such as staff costs and the cost of accommodation in arranging and managing works, as such costs fell within the provision “all costs of or incidental to [the carrying out and provision of various works and services]”.


Two differently constituted LVTs disallowed ‘overhead charges’ which were part of the service charged demanded by the local authority. In the first appeal, the local authority worked out on an annual basis what staff time was allocated to specific jobs and applied a percentage figure which varied from year to year. In the second appeal, the local authority included a charge to cover its ‘own administration’ in dealing with matters which the contractor would not deal with and also in dealing with the cost of the ‘home ownership department’. In both cases, the local authority argued that these overheads were costs which were properly recoverable under the leases. In each case, the LVT disallowed the costs.

On Appeal

The Upper Tribunal (HHJ Walden-Smith and Mr Trott FRICS) held that the there was a clear line of authority, most recently with a decision of the Chancellor in Wembley National Stadium v Wembley London Ltd [2008] 1 P&CR 3, for the proposition that the overhead costs incurred in the maintenance and management of the building and estate fell within the provision “all costs of or incidental to” so that the costs and expenses of or incidental to the provision of services under the terms of the lease were not limited to the direct costs of the provision of services. The indirect costs of providing the services, for example, the staff costs and the cost of accommodation in arranging and managing those works were all part of the costs and were properly chargeable under the lease. The UT then determined that the local authority’s method of borough-wide apportionment was reasonable and appropriate and approved the “ABC” method of allocating staff time even though this may be less accurate than time-sheeting.

Philip Rainey QC of Tanfield Chambers appeared for Southwark.

Fairhold Mercury Ltd v HQ (Block 1) Action Management Co Ltd [2013] UKUT 487 (LC)

The First-tier Tribunal should be slower to grant permission to appeal where the point on which permission is sought is a purely technical one than in cases of more substance.


This is an RTM case in which the LVT held that the respondent was not prevented from being an RTM company, and so unable to exercise the rights of an RTM company, because the letters “RTM” do not appear in its name. The Deputy President agreed and dismissed the appeal. As a post script he said: “When permission to appeal is requested in a case such as this, raising a discrete question of the interpretation of a statutory provision, the first-tier tribunal should consider whether there is a reasonable prospect of the applicant demonstrating that the tribunal has wrongly interpreted or applied the relevant law. The first-tier tribunal should ask itself whether the appeal has a real or realistic prospect of success, as opposed to only a fanciful prospect. If the first-tier tribunal, having heard the argument and made its own decision, is satisfied that there is no real prospect of the Upper Tribunal coming to a different conclusion, it should refuse permission; if it considers that the point in issue remains fairly arguable, it should grant permission. If the point on which permission is sought is a purely technical one, as it was in this case, the first-tier tribunal should be slower to grant permission than in cases of more substance.” The Deputy President described the appeal as “flimsy”.


This may be a helpful case to deploy (depending on which side of the argument you are on) on applications for permission to appeal before the FTT. There is no reason why the principle should be limited to RTM cases.


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