Leasehold Valuation Tribunal                                             LON/00AU/LBC/2010/0040

                                                                                                LON/00AU/LSC/2010/0625

                                                                                                LON/00AU/LLC/2010/0005

 

London Rent Assessment Panel

Commonhold and Leasehold Reform Act 2002 section 168(4)

Landlord and Tenant Act 1985 sections 27A and 20C &

Commonhold and Leasehold Reform Act 2002 schedule 11

 

Address:                                 Ground Floor Flat, 3 Waterloo Terrace, London N1 1TQ

 

Applicant:                               Mr.Barry Shirley

Represented by:                   In person

 

Respondents:                       Mr. David Weiland, Mrs Rosemary Weiland & Miss Katie Weiland

Represented by:                   Mr. Tom Beasley, counsel

 

Tribunal members:               Mr. T J Powell LLB (Hons)

                                                Mrs. A Flynn MA MRICS

                                                Mr. C Piarroux JP

 

Applications dated:               25 June, 6 September and 3 November 2010

Paper directions:                              19 August 2010

Oral pre-trial review:                        6 October 2010

Hearing:                                             29 November 2010

Decision:                                            20 December 2010


Decisions of the Tribunal

(1)                    The Tribunal determines that the Respondents have not breached clause 2(r)(x) of their lease;

(2)                    The Tribunal determines that any sums charged by Mr. Shirley in respect of insurance premiums over and above the 25% default position in clause 3(g) of the lease are not “fair and reasonable” and are therefore neither reasonably incurred nor payable under the 1985 Act;

(3)                    The Tribunal determines that none of the legal costs charged by Barber Young Burton & Rind solicitors or by J E Kennedy & Co. solicitors are reasonable/ reasonably incurred or payable by the Respondents; and

(4)                    The Tribunal determines that it is just and equitable to make an order under s.20C of the 1985 Act, preventing Mr. Shirley as landlord from passing any of his costs of the Tribunal proceedings through the service charge.

Background to the applications

1.                  Mr. B Shirley is the freeholder of a building known as 3 Waterloo Terrace, London N1 1TQ.  That building is a terraced house converted by Mr. Shirley many years ago into four flats on the basement, ground, first and second floors.  On 2 March 2007 Mr. Shirley granted a new lease of the ground floor flat (Flat 1) to the Respondents, at the same time granting a Licence for Alterations relating to the flat, which the Respondents proposed.  Mr. Shirley retained ownership of the other three flats.  For the past three years there has been considerable conflict and animosity between the parties.

2.                  By application dated 25 June 2010 Mr. Shirley sought a determination under s.168(4) of the Commonhold and Leasehold Reform Act 2002 that breaches of covenants in the lease had occurred.  In particular, Mr. Shirley complained that the Respondents had installed timber flooring in their flat, which provided insufficient sound insulation and so caused a nuisance to adjoining tenants.

3.                  Paper directions for the application under s.168(4) were given on 19 August 2010 with an initial hearing date fixed for 28 October 2010.  Subsequently, Mr. Shirley made two further applications on 6 September 2010.  The first was under s.27A of the Landlord and Tenant Act 1985 for the determination of the payability and reasonableness of unpaid service charges for insurance and legal costs arising in 2008, 2009 and 2010.  The second application was made under Schedule 11 to the Commonhold and Leasehold Reform Act 2002 in respect of legal costs for the same periods. 

4.                  An oral pre-trial review on these matters was held on 6 October 2010, when it was ordered that the new applications should be heard at the same time as the original application under s.168(4) of the 2002 Act.  A new hearing date for all three applications was fixed for 29 November 2010. 

5.                  The Respondents subsequently made an application under s.20C of the 1985 Act, which was listed to be heard at the same time as Mr. Shirley’s applications.

The property/ inspection

6.                  The papers included particulars from a selling agent Copping Joyce in respect of the flat, which included photographs, and also plans of the flat before and after the Respondents’ alterations.  The Tribunal therefore did not consider that there was a need to inspect the property; and neither party asked the Tribunal to do so.

The law

7.                  S.168(4) of the 2002 Act states:

“A landlord under a long lease of a dwelling may make an application to a Leasehold Valuation Tribunal for a determination that a breach of a covenant or condition in the lease has occurred.”

8.                  Service charges and relevant costs are defined in section 18 of the 1985 Act.  The amount of service charges which can be claimed against the lessees is limited by a test of reasonableness, which is set out in section 19 of the 1985 Act as follows:

“19 (1) Relevant costs shall be taken into account in determining the amount of a service charge payable for a period—

(a) only to the extent that they are reasonably incurred, and

(b) where they are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard;

and the amount payable shall be limited accordingly.

(2) Where a service charge is payable before the relevant costs are incurred, no greater amount than is reasonable is so payable, and after the relevant costs have been incurred any necessary adjustment shall be made by repayment, reduction or subsequent charges or otherwise.

(2A) A tenant by whom, or a landlord to whom, a service charge is alleged to be payable may apply to a leasehold valuation tribunal for a determination—

(a) whether costs incurred for services, repairs, maintenance, insurance or management were reasonably incurred,

(b) whether services or works for which costs were incurred are of a reasonable standard, or

(c) whether an amount payable before costs are incurred is reasonable.

9.                  The Tribunal’s jurisdiction is set out in s.27A(1) of the 1985 Act as follows:

“An application may be made to a leasehold valuation tribunal for a determination whether a service charge is payable and, if it is, as to—

(a)               the person by whom it is payable;

(b)               the person to whom it is payable;

(c)               the amount which is payable;

(d)               the date at or by which it is payable; and

(e)               the manner in which it is payable.”

10.              Administration charges must also be reasonable: see Schedule 11 to the Commonhold and Leasehold Reform Act 2002. The definition of an administration charge is to be found in paragraph 1 of the Schedule:

“(1) In this Part of this Schedule “administration charge” means an amount payable by a tenant of a dwelling as part of or in addition to the rent which is payable, directly or indirectly—

(a) for or in connection with the grant of approvals under his lease, or applications for such approvals,

(b) for or in connection with the provision of information or documents by or on behalf of the landlord or a person who is party to his lease otherwise than as landlord or tenant,

(c) in respect of a failure by the tenant to make a payment by the due date to the landlord or a person who is party to his lease otherwise than as landlord or tenant, or

(d) in connection with a breach (or alleged breach) of a covenant or condition in his lease.”

11.              By paragraph 2 of Schedule 11:

“A variable administration charge is payable only to the extent that the amount of the charge is reasonable.”

12.              Section 20C of the 1985 Act provides that a Tribunal can make an order preventing the lessor recovering its costs of proceedings through the service charge, if the Tribunal considers it to be just and equitable.

The lease

13.              The lease is dated 2 March 2007.  It is for a term of 125 years from and including 25 December 2006.  The relevant clauses are set out below.

14.              By clause 2(r)(x) the lessee covenants:

“to cover with sound insulation material the whole floor space of the flat in accordance with relevant statutory requirements …”

15.              By clause 2(k) the lessee covenants:

“to pay on an indemnity basis all costs charges and expenses (including solicitors’ counsel’s and surveyors’ fees) incurred by the Lessor either hereunder or under the provisions of any headlease(s) in or in contemplation of or incidental to any proceedings in respect of this Lease including the preparation and service of a Schedule of Dilapidations and Notice to repair or any Notice under Section 17 of the Landlord and Tenant (Covenants) Act 1995 or under Section 146 or Section 147 of the Law of Property Act 1925 (or any statutory re-enactment or modification thereof) notwithstanding that forfeiture is avoided otherwise than by relief granted by the Court.”

16.              By clause 5(b) the lessor covenants to keep the building and the lessor’s fixtures and fittings insured to the full reinstatement value thereof and by clause 2(p)(i) the lessee covenants not to effect any insurance of the flat in duplication of the lessor’s insurance.

17.              By clause 3 the lessee covenants to pay:

“by way of further and additional rent within 14 days of the same being demanded the due proportion of the expenses and outgoings incurred or to be incurred by the Lessor under Clause 5 hereof…” 

18.              Clause 5 contains the usual lessor’s covenants.  By clause 3(g) of the lease:

“The “due proportion” hereinbefore referred to shall be 25% or such other proportion as shall be determined by the Lessor from time to time as being fair and reasonable in respect of any expense or outgoing of the Lessor and of which written notice is given to the Lessee.”

The hearing

19.              Mr. Shirley appeared in person at the hearing to present his applications.  The Respondents were represented by Mr. Tom Beasley of counsel.  David Weiland and his daughter, Rosemary, also appeared.

20.              The Tribunal had been provided with submissions/statements from both parties on each of the issues in dispute, together with copies of relevant documents upon which both parties intended to rely.  One or two additional documents were handed up to the Tribunal during the hearing, but these were documents that both parties had previously seen, for example, the completion statement in relation to the sale of the ground floor flat to the Respondents in March 2007. 

21.              Having heard oral evidence from Mr. Shirley and from Mr. Weiland, together with legal submissions from Mr. Shirley and Mr. Beasley, and having read the documents submitted by both parties, the Tribunal has made the following determinations on the issues in dispute.

Alleged breach of covenant: lack of sound-proofing

22.              Mr. Shirley gave oral evidence that he had been occupying the basement flat in the building when he sold the ground floor flat to the Respondents.  He had ensured that clause 2(r)(x) was inserted in the lease, because he wanted the Respondents to provide sound insulation when they bought the flat.  Mr. Shirley had also agreed that the Respondents could carry out refurbishment works to the flat after the purchase, as he had signed the Licence for Alterations at the same time. 

23.              Mr. Shirley’s evidence was that at the time of sale, there was laminate flooring in the kitchen and bathroom, but carpeting in the two bedrooms.  He complained that when the floorboards were lifted by the Respondents as part of the refurbishment works they failed to take the opportunity to fill the cavity below the floorboards with a sound-proofing material; and that they had failed to secure the floorboards properly afterwards, because they creaked when people walked on them.  Mr. Shirley said that he was not a party to the Respondents’ instructions to their builders and he had not inspected the works, because he relied upon clause 2(r)(x) of the lease.  However, after the works were completed it was patently obvious to him that the Respondents had not sound-proofed the floor properly, because of the noise that he could then hear in his basement flat. 

24.              In a letter dated 29 January 2008 Mr. Shirley complained that the Respondents had “failed to provide and install suitable sound-proofing materials in the sitting room and bedroom as required in the Contract, in particular in filling between the joists, which your builder stated would happen.  The consequence of this is that the downward noise level is intolerable, particularly with footfalls, base stereo and television”.  Mr. Shirley’s solicitor’s letter of 14 July 2008 elaborated that the lack of sound-proofing “is causing an embarrassment to our client and his family in that noises of a personal nature and that of preparation of cooking etc. can quite clearly be heard.” 

25.              There was a considerable exchange of correspondence between the parties and their solicitors relating to the alleged noise nuisance.  The Respondents’ position was summed up in their letter of 7 July 2008, which stated “There is no statutory requirement to sound-proof the floors and no provision was made in the Schedule of Work to do this.  Insulating material was found and left between the floor joists throughout the flat.  The floor was covered originally with laminate floor finish throughout, except a small piece of carpet in the bedroom.  We have provided additional under-boarding and a thicker wood floor finish throughout.”  An earlier letter had stated “The floor is therefore the same specification as you [Mr. Shirley] provided in your earlier conversion.”

26.              In oral evidence, Mr. Shirley did not pursue the allegation that the noise nuisance included base stereo and television.  However, he did say that sounds from certain parts of the flat had caused him considerable embarrassment and that footfalls from the ground floor flat were clearly audible in the basement flat.  He criticised the expert sound engineer’s report obtained by the Respondents, saying that no sound readings were taken from the basement flat and therefore it was of limited benefit. 

27.              It was no part of Mr Shirley’s case that the Respondents should put down carpets throughout the ground floor flat.  He just wanted insulating material to be placed in the cavity beneath the floorboards to take out “the drum effect” of the floorboards.  When pressed to state what the current statutory requirements are for sound-proofing, Mr. Shirley was unable to produce a copy of “Document E” upon which he relied in the papers, but he said in any event that current standards were “loosely written”.  He also denied that by having signed the Licence for Alterations he had in any way waived his rights under the lease to require the flooring of the ground floor flat to be sound-proofed.

The Tribunal’s Decision

28.              The Tribunal determines that the Respondents have not breached clause 2(r)(x) of their lease.


Reasons for the Tribunal’s Decision

29.              When the lease to the ground floor flat was granted to the Respondents, the bulk of the flooring was covered in laminate.  There was also some pre-existing sound insulating material beneath the floorboards.  Mr. Shirley signed a Licence for Alterations at the same time as granting the lease.  The Licence contained a schedule of proposed works, which included at paragraph 16: “Lay new wood panel flooring as provided by client, to the front room and kitchen area.  Lay new ceramic floor tiles to the bathroom as provided by client.”  By clause 5.3 of the Licence, the alterations had to be carried out within nine months “and must conform to the statutory and local regulations and byelaws applicable to them and in accordance with such all relevant planning consents and permissions obtained for them.” 

30.              The Respondents prepared a proper schedule of proposed work and submitted that together with scale plans of the flat as existing and as proposed to Building Control Services at the London Borough of Islington.  The Respondents engaged proper builders, who carried out the work to the satisfaction of the local authority, which on 29 January 2008 provided a Certificate of Completion confirming that “the substantive requirements of building regulations have been satisfied.”

31.              There was existing under-floor insulation, although the Tribunal accepts that Mr. Shirley raised a factual dispute about the extent of that insulation.  However, subsequent to the complaints by Mr. Shirley the Respondents went to the expense of obtaining a report from Mr. Edward Davis of Showcase Acoustics Limited, environmental noise consultants.  The noise assessment report was prepared on 6 October 2010 for the express purpose: “to conduct an assessment [of] sound insulation conditions and the extent of any potential nuisance from the premises.”  The report was verified by a statement of truth.

32.              Mr. Davis concluded at paragraph 3.1 that the current floor construction was an improvement to the original flooring, noting that the Respondents had also placed carpeted sections in the premises through what are deemed high traffic areas.  He stated that “the current measures are more than adequate to allow compliance to current World Health Organisation guideline noise levels within premises.  The current average noise levels within the premises have been observed and deemed to be reasonable in nature.”  More importantly, he concludes at paragraph 4.1 “that the noise sources referred to do not constitute a nuisance” and at paragraph 4.2 “that the refurbishment works to the flat have been carried out in accordance with statutory requirements at that time.”  (emphasis added)

33.              In addition, there was evidence from the adjoining neighbours at No. 2 Waterloo Terrace that they had heard no noise nuisance whatsoever from the ground floor flat at No. 3 (dispelling Mr. Shirley’s allegation that there was noise nuisance from base stereo and television).  There was also evidence from the current occupants and tenants of the basement flat at No. 3 Waterloo Terrace in the form of a letter verified by statement of truth, which states “since April [2010] our experience has been that although footfalls can be heard from the ground floor flat, these are/ have not been sufficiently loud to cause us any annoyance or disturb our peace.  In addition, we have never heard any noise from a base stereo or a television.”

34.              Mr. Shirley relied upon current statutory requirements for sound-proofing, but he did not produce so-called “Document E” upon which he relied.  Even on his own evidence the “statutory requirements” were loosely framed.  In any event, he was unable to counter the email from the Building Control Service that “part E only applies to new build and material change of use”, i.e. not refurbishment, although Mr. Shirley cast a vague aspersion on the reliability of this email because, he said, Mr. Weiland also worked for Islington Council. 

35.              The specific wording of clause 2(r)(x) was a covenant “to cover with sound insulation material the whole floor space of the flat in accordance with relevant statutory requirements …” (emphasis added).  Mr. Shirley produced no evidence that the work carried out by the Respondents fell short of any statutory requirements, or indeed any evidence of what those statutory requirements were.  He is able neither to rebut the Respondent’s evidence that the new floor covering was sufficient sound-proofing or that they had complied with relevant statutory requirements.  Mr. Shirley was also unable to demonstrate that a noise nuisance was caused by reason of any breach of this clause; indeed all the evidence pointed to there being no such nuisance.

36.              Even if Mr. Shirley had been able to establish a breach of clause 2(r)(x), the Tribunal determined that he had clearly waived any breach or any prospective breach by having signed the Licence for Alterations, which gave details of the Respondents’ proposed works (from which they did not deviate) and by failing to superintend the works and inspect them as he was entitled to do under clause 5.2 of the Licence.

Allocation of the insurance premium

37.              Prior to the completion of the lease in March 2007 the solicitors acting for the Respondents requested an increase to the buildings insurance cover, that is to say to increase the sum insured from £244,007 to £260,000.  This had been requested by the Respondents’ mortgagees.  Mr. Shirley acceded to this request, although he was at pains to stress that he had been happy with the existing sum insured, which he felt more than adequately covered the rebuilding costs.  The insurance premium from 2006 to 2007, when the sum insured was £244,007 was £346.49 plus insurance premium tax.  The premium for the following year, when the sum insured had been increased to £260,000 was £348.40 plus tax: an increase of £1.91 plus tax.  However, both in writing and verbally Mr. Shirley said that he had been charged £9 for the increase in the sum insured and that he had passed this on to the Respondents at the time of completion which, he said, they had settled. 

38.              Thereafter, Mr. Shirley said that the Respondents had spent a considerable sum of money on alterations to the ground floor flat, reducing the number of bedrooms from two to one, installing central heating and an internal fireproof partition plus system-built kitchen units.  He contrasted the new refurbished condition on the ground floor flat with the other flats in the building, which were not centrally heated.  Mr. Shirley’s point was that the insurance cover must take into account the replacement costs, i.e. he said the higher replacement costs that would be incurred in respect of the ground floor flat in its improved condition. 

39.              Mr. Shirley said that all four flats in the building are not equally valued for insurance purposes and he provided a letter from his brokers CC Flint & Co. Limited, dated 20th February 2009, which stated “I can confirm that the buildings insurance policy held with AUA Insurance is for the property 3 Waterloo Terrace as a whole building.  The insurance cover is not equally split into four flats.  The distribution of the insurance and administration costs by the policyholder, the freeholder of the building, is not an insurance matter.”

40.              Mr. Shirley therefore took a decision to change the allocation of the insurance premium between the flats.  Instead of charging the Respondents 25% of the insurance premium, he made adjustments so that they would pay what he determined was “such other proportion as shall be determined by the Lessor from time to time as being fair and reasonable” under clause 3(g) of the lease. 

41.              In the first service charge year 2007/2008 when the insurance premium had increased by £1.91 plus tax, he sought to charge the Respondents an additional £38 for an increased premium, but despite many requests for clarification Mr. Shirley never explained to the Respondents where that figure had come from. 

42.              There was an added problem in that the Respondents identified that the buildings insurance included significant additional premiums for the insurance of Mr. Shirley’s personal possessions and contents, which should not have been passed on to the Respondents.  In fairness, when he discovered this Mr. Shirley immediately removed the personal items from the buildings insurance, but this clearly would not have happened had it not been for the Respondents pointing it out.  In 2008 to 2009 the sum insured increased automatically from £260,000 to £270,036 and the premium increased by a further £13.43 plus tax.  In that year Mr. Shirley sought to charge an additional £28 to the Respondents.  In 2009/2010 the sum insured increased automatically to £286,508 and the premium increased by a more significant £89.92 plus tax.  In the current year 2010/2011 there was no change in the sum insured nor in the annual premium.

43.              However, for 2009/2010 Mr. Shirley sought to charge the Respondents 31% of the total insurance premium (including tax) and for 2010/2011, 41% of the premium.

44.              Throughout this period the Respondents had been demanding clarification of how the apportionment had been calculated, but neither Mr. Shirley nor his solicitors had been able to give a coherent account over a number of years of protracted correspondence.  It was agreed that the Respondents had always paid their 25% of the premium and that they only disputed the additional sums, which Mr. Shirley now sought to justify as being “fair and reasonable” within the terms of clause 3(g) of the lease, and reasonably incurred and payable in terms of sections 19 and 27A of the 1985 Act.

The Tribunal’s Decision

45.              The Tribunal determines that any sums charged by Mr. Shirley in respect of insurance premiums over and above the 25% default position in clause 3(g) of the lease are not “fair and reasonable” and are therefore neither reasonably incurred nor payable by the Respondents under the 1985 Act.

Reasons for the Tribunal’s Decision

46.              In cross-examination Mr. Shirley was unable to give any satisfactory explanation for any of the additional charges that he had made to the Respondents in respect of additional insurance premiums.  He simply could not account for the figures that he had demanded.  Although he had instructed solicitors to pursue the extra insurance payments, those solicitors had failed, it seemed, to understand the derivation of the figures and had failed to provide any explanation of them to the Respondents. 

47.              Mr. Shirley claimed that he had deviated from the default 25% charge under the lease because of the works carried out by the Respondents.  However, the works had not even started when he first increased the insurance premium payable by the Respondents.  Nothing that the Respondents had done to the flat increased the risk to the building.  There was no evidence about the respective likely rebuilding costs of the different parts of the building.  If anything, the risk involved as a result of the refurbishment work was much lower, because the Respondents had installed internal fireproofing, thicker floor coverings and modern electrical equipment as well as rewiring the entire flat to modern standards.  In the Tribunal’s view these works would have no material effect on the sums insured or the buildings premium.  There was no objective evidence from Mr. Shirley that it would do so. 

48.              Mr. Shirley provided no evidence about the respective rebuilding costs of different parts of the building.  There was evidence that the basement flat was larger in size than the ground floor flat, but this did not appear to have been taken into account by Mr. Shirley.  When asked by the Tribunal to account for the £38 increase premium in 2007/2008, a figure repeated by his solicitors, Mr. Shirley could not account for it.  Verbally he said that the increase in the premium had been £9, but the documents showed clearly that it had only been £1.91 plus tax.  Equally, he could not explain why it was that he was charging 31% of the insurance premium in 2009/10 and 41% in 2010/11, when there had been no increase in the premium.  Mr. Shirley did not even realise that he was charging different percentages in those two years and he accepted in oral evidence that it appeared to be overcharging; he said that he had not examined the figures in detail.

49.              In the absence of any explanation or any objective evidence to support his case, all that Mr. Shirley could rely upon was the wording of clause 3(g) of the lease.  He said he had an entitlement to vary the proportion payable by the Respondents and that his judgment was final.  He said that he was acting in a way that was fair and reasonable under the lease. 

50.              In the absence of any evidence to justify his position there was nothing that Mr. Shirley could point to that supported his judgment that he was being fair and reasonable.  It was abundantly clear to the Tribunal that a fair and reasonable proportion payable by the Respondents was the 25% default proportion in clause 3(g).  By failing to keep to that simple 25%, by failing to explain his figures in correspondence, as they increased year on year and by the failure of his solicitors to understand and explain the increased premiums, Mr. Shirley’s actions had generated masses of unnecessary correspondence and paperwork, and had caused great concern to the Respondents, even though the sums of money were very small indeed. 

Claim for solicitor’s costs

51.              Mr. Shirley included the issue of legal costs in both his applications under s.27A of the 1985 Act and his application under Schedule 11 to the 2002 Act.  However, his submission relating to solicitor’s costs stated explicitly “The total sum concerned is £2,635.68.  This submission is submitted under administrative charges.”  The Tribunal’s approach was therefore to consider whether these charges were “reasonable” within the meaning of Schedule 11.  However, the Tribunal was also mindful that the costs could be considered as service charges where the Respondents’ due portion was 100% (under clause 3(g) referred to above) and it bore in mind the alternative test of whether such charges were “reasonably incurred” under s.19 of the 1985 Act. 

52.              The solicitor’s costs arose from two invoices from Barber Young Burton & Rind solicitors for £352.50 and £373.75, the firm which had drawn up the original lease.  Mr. Shirley said in oral evidence that he had been getting nowhere in his correspondence with the Respondents relating to the alleged lack of sound insulation and the non-payment of the additional insurance premiums.  Although Mr. Shirley claimed that Mr. Weiland had initiated the correspondence with his solicitors, despite going through the papers he was unable to provide evidence of this.  In oral evidence Mr. Shirley then said that he felt it was unwise for him to continue corresponding with the Respondents and that he had put it in the hands of his solicitors.  The two invoices from Barber Young Burton & Rind refer to acting on behalf of Mr. Shirley in entering into correspondence with Mr. Weiland in connection with his responsibilities as the long lessee of the ground floor flat, and one also appears to include liaising with insurance brokers.

53.              The insurance dispute had another twist to it.  The ground floor flat suffered from water penetration from above and the Respondents wanted to submit a claim for damage to the buildings insurer.  Mr. Shirley refused to do so, claiming that the Respondents were not entitled to submit a claim, because they had not met the full amount of the insurance premiums that he had charged them.  Eventually, in late 2009 the Respondents issued proceedings against Mr. Shirley in the Clerkenwell County Court to force him to submit an insurance claim.  On 6 December 2009 the Respondents had obtained a judgment in default of defence, but by a consent order dated 20 March 2010 that was set aside, with Mr. Shirley agreeing to submit an insurance claim to the brokers, a claim which was eventually paid in part.  The costs in the county court consent order were stated to be “costs reserved”.

54.              In order to deal with the county court proceedings Mr. Shirley had instructed another firm, J E Kennedy & Co. solicitors.  That firm incurred costs of £1,909.43.  J E Kennedy & Co. later broke down that figure to £909.25 regarding county court proceedings and £728.75 regarding the current LVT proceedings. 

55.              Mr. Shirley’s submission was that both sets of legal costs were covered by clause 2(k) of the lease and were payable in full by the Respondents. 

56.              On behalf of the Respondents Mr. Beasley made submissions that all of the costs were unnecessarily incurred and that the amount of the costs was too high.  In oral evidence Mr. Shirley said that he felt the costs were reasonable and neither firm had overcharged him.  He said that clause 2(k) was wide enough for him to recover his costs regardless of the outcome of the county court proceedings, but in any event, by reason of the fact that it was a consent order neither party had “won”.  Mr. Shirley said that the Respondents should have obtained their own clarification of the lease from their own solicitor, and not sought it either from him or from his solicitors. 

The Tribunbal’s Decision

57.              The wording of clause 2(k) of the lease is sufficiently clear and wide enough to permit Mr. Shirley to recover his solicitor’s costs, subject only to them being reasonable (if claimed as administration charges) or reasonably incurred (if claimed through the service charge).  However, in the circumstances of the present case the Tribunal determines that none of the legal costs charged by Barber Young Burton & Rind or by J E Kennedy & Co. are reasonable/reasonably incurred or payable by the Respondents.

Reason for the Tribunal’s Decision

58.              The wording of clause 2(k) is very wide indeed.  It specifically mentions the recovery of solicitors’ fees incurred by the lessor either under the lease or incidental to any proceedings in respect of the lease or in other specified situations.  Unlike many other charging clauses, it is not limited to the preparation and service of a notice under s.146 of the Law of Property Act 1925.  The plain and clear meaning of the clause is that the landlord may recover his solicitors’ fees.  That recoverability is subject only to statute, namely the power of this Tribunal to determine whether such charges are reasonable (if administration charges) or reasonably incurred (if service charges), and payable. 

59.              The substantive dispute between the parties related to sound-proofing and insurance premiums.  In respect of the former Mr. Shirley alleged a breach of the lease, but he produced no objective evidence of such and his claim failed.  In respect of the latter he claimed additional insurance premiums from the Respondents, but his approach was very confused and inconsistent, he failed to provide information when requested and was unable to provide any explanation either then or to the Tribunal to justify deviating from the default 25% charge in the lease.  When the Respondents wished to submit an insurance claim, because of water penetration to their flat from one of Mr. Shirley’s flats above them, he refused to do so, in the Tribunal’s view unreasonably. 

60.              The Tribunal agrees with Mr. Weiland who said that by his actions Mr. Shirley did not leave the lessees with any option but to dispute these issues. 

61.              In oral evidence the Respondents mentioned that on completion they had paid an initial payment towards the service charge of £200 and evidence for that was found in the completion statement provided to the Tribunal.  They pointed out that Mr. Shirley had never accounted to them for the £200 advance payment towards service charges and had he done so there would be no alleged arrears of service charge payments under the lease.  Mr. Shirley admitted to the Tribunal that he had not realised that £200 had been paid on completion towards the service charge, he had not accounted for it and he had not taken it into account when pursuing the Respondents for the additional sums that he required from them in respect of insurance premiums.

62.              Unable to explain his actions to the Respondents, Mr. Shirley put this matter in the hands of his solicitors.  Had they managed to understand the figures and provide a proper explanation, Mr. Shirley may have been able to justify claiming some of their costs from the Respondents.  However, the solicitors did not analyse the figures themselves and by failing to do so compounded the confusion created by Mr. Shirley.

63.              The fact that the Respondents had paid £200 towards the initial service charge on completion meant that they were not in any arrears of insurance premiums, even on Mr. Shirley’s figures.  Therefore, Mr. Shirley’s justification for refusing to submit an insurance claim to the brokers had no foundation whatsoever.

64.              The Tribunal considered that the extended correspondence with the Respondents that Mr. Shirley had conducted, both personally and through his solicitors, was completely unnecessary and wasteful.  By no stretch of the imagination could it be said that the solicitors’ costs were reasonable/reasonably incurred in these circumstances and certainly the Tribunal finds them not payable by the Respondents.

Reserved costs in the county court

65.              This Tribunal has no jurisdiction over county court costs.  However, if this matter were to return to the county court the Tribunal would invite the Judge to take into account the Tribunal’s findings in relation to the circumstances of this case and costs when reaching his or her own conclusion as to whether or not to make any award of costs against either party. 

Costs/ fees

66.              Mr. Shirley applied for the refund of the Tribunal fees that he had incurred.  He opposed the application by the Respondents for an order under s.20C of the 1985 Act.  Both parties made submissions to the Tribunal. 

67.              Mr. Weiland said he had done his utmost over the previous four years to resolve these issues, but had met a brick wall when it came to Mr. Shirley.  Mr. Shirley said that he answered every point which the Respondents had raised, often the next day and he always tried to explain his actions.

The Tribunal’s Decision

68.              In the light of the fact that Mr. Shirley has lost on every single point, the Tribunal declines to order the Respondents to refund these to him and determines that it is just and equitable to make an order under s.20C of the 1985 Act, preventing Mr. Shirley as landlord from passing any of his costs of the Tribunal proceedings through the service charge.

Concluding remarks

69.              The first four years of the relationship between the parties has been marred by unnecessary conflict.  The Tribunal hopes that this decision will enable the parties to draw a line under the past disputes.  Given the problems that have arisen, the Tribunal considers that Mr. Shirley would do well to seek independent professional advice about property management for the future.  He has power under clause 5(l) of the lease to employ a respectable firm of managing agents to manage the building and it may well be beneficial to the relationship of both parties if he were to do so. 

 

 

Chairman:

 

 

 

Timothy Powell

Date:

20 December 2010