A recent appeal decision of the Upper Tribunal (Lands Chamber) could influence the interpretation of “reasonableness” of service charge items in compliance with the Landlord & Tenant Act 1985 when dealing with improvements.
The dispute related to the payment of service charges demanded by Miss Waaler’s landlord the London Borough of Hounslow in the sum of £55,195.95. The Tribunal’s decision was that, subject to some relatively minor adjustments, the sum was payable.
However, permission to appeal the decision was given by the Deputy President of the Upper Tribunal (Lands Chamber) where he observed:
“Without wishing to encourage false hopes for the applicant, it seems to me to be arguable that when the F-tT (First-tier Tribunal) considered whether the very substantial works undertaken by the landlord were reasonably incurred and properly the subject of service charges totalling more than £55,000 per leaseholder, it ought to have given greater consideration to the quantum of the total bill and the resources of the leaseholders expected to contribute towards it.”
This recommendation and increased obligation when charging for improvements with regard to leasehold property could prove a major headache for landlords in future.
The ruling could see the administrative burden on landlords and their managing agents increase as they will need to demonstrate they have considered alternative approaches.
Ultimately some costs to leaseholders could be increased as landlords will need to seek tenant opinions and assess the financial impact of improvements on the tenants before proceeding.
As reported by www.thelawyer.com Ogier’s Katharine Marshall wonders “whether the decision is perhaps of more relevance in a residential context than for commercial tenants, especially the requirement to consider tenant means, but only time will tell.”
In Waaler v Hounslow the tenant was disputing an obligation to pay through the service charge for replacement windows in a block of flats where the hinges were inadequate for the weight of the glass in the tilting windows. At first instance the First Tier Tribunal had upheld payment but the Upper Tribunal ruled that a landlord must show, when arguing that a service charge relating to improvements (as distinct from repairs) is “reasonable”, that he has considered both:
- The availability of an alternative and less expensive remedy; and
- The views and financial means of the tenants who will be required to pay for the works
Katharine Marshall added: “Although only a Lands Tribunal decision, and set in the context of the protection offered by the English Landlord & Tenant Act 1985 to tenants of “reasonable” service charges, this case may nevertheless influence … [a] court if a tenant challenged a charge…”
Lands Tribunal Service Charge Decision Affects Landlords – http://t.co/dJqXAByBi3
— LandlordZONE (@LandlordZONE) March 11, 2015