RESIDENTIAL PROPERTY TRIBUNAL SERVICE
IN THE LEASEHOLD VALUATION TRIBUNAL
LANDLORD AND
TENANT ACT 1985 – SECTIONS 27 & 20C
LON/00AC/LSC/2009/0761
______________________________________________________________
Premises: Flats 27, 38 & 39 Danescroft,
Applicant: Inspired Holdings Limited
Represented by: Mr. S Unsdorfer, Parkgate Aspen, Managing Agent
Respondent: Mr. D Kritzler
Represented by: Ms. F Ratcliffe, Counsel instructed by Bude Nathan Iwanier solicitors
Tribunal: Ms. LM Tagliavini, LLM, DipLaw, BA Hons, Barrister
Mr. C White, FRICS
Mr. D Wills, ACIB
Hearing
Date: 17th and 18th March 2010
1.
This is an application,
that by a consent order made between the parties, and
approved by District Judge Stephenson at
(i) Flat 27: Service charges from 2005-2009; £8,209.11
(ii) Flat 38: Service charges from 2005 to 2009; £8,920.86
(iii) Flat 39: Service charges from 2006 to 2009; £6,742.39
2. The subject premises are situate in an estate of 64 purpose-built flats and comprised of 8 separate blocks. Each of the blocks has its own entrance and rear escape staircase. There are central gardens and a perimeter road with private garaging. There are no lifts or communal heating services. Flat 27 is held on a lease dated 21 March 1977 and was acquired by the Respondent on 18/1/05. Flat 38 is held on a lease dated 14 June 1999, made between the Applicant and the Respondent and Aviva Linda Kritzler, and transferred to the Respondent’s sole name also on 19/08/05. Flat 39 is held on a lease dated 22 June 1998 and acquired by Mr. Kritzler and Mr. M Berger on 28/3/06.
3. The service charges claimed, concerned both the annual charges due for the relevant years in addition to charges for major work carried out to the drains and roadways in 2007/08. Routinely, the service charges include sums for wages, grounds maintenance, cleaning, electricity, insurance, repairs and maintenance, TV satellite system, entry phone system, pest control bank charges, legal and professional fees, management fee and accountant’s fees. A detailed list of service charges was set out in the certified service charge accounts, and provided to the Tribunal. It is the Applicant’s case that all sums have been reasonably incurred and are payable by the Respondent. The Respondent asserts that the management fees are excessive because the managing agents had failed to discharge their functions properly. Specifically:
(i) Roadways had become dangerous.
(ii) Drains not repaired and gullies allowed to overflow.
(iii) Old and defective electricity supplies allowed to continue in situ.
(iv) Gutters and down pipes allowed to overflow.
(v) No form of planned maintenance implemented.
(vi) External decorations not carried out for some 10 years.
(vii) Rear staircases allowed to fall into disrepair.
(viii) Front doors have been replaced by individual tenants to the detriment of the appearance of the block.
Drains/Major Works to Roadways:
4. The Respondent also challenged the cost of works to the drains. He asserted that it had been known for a considerable period that replacement works were needed, and that works of repair and maintenance were inappropriate. The failure of the managing agents to carry out works of replacement had resulted in unnecessary deterioration and increased costs of carrying out works to drains and driveways.
Works to Flats/Insurance Claim:
5. The Respondent stated that sums invoiced in the service charges appeared to include sums more properly charged to individual lessees. In other instances, charges appeared to be eligible for insurance claims, but it was not clear whether such claims had been made. The Respondent asserted he did not know what, if any sums had been received from insurers and how that sum had been allocated or repaid.
Accountant Fees;
6. Accountant’s fees were said to be excessive and unclear.
Water Leaks:
7. It was asserted that an excessive number of claims in respect of water leaks had been made, part of which, should have been paid by individual lessees. The main pipes were said to be original and causing damage. As a result insurance premiums have increased.
Tree Management:
8. It was asserted that there had been a failure to properly manage the trees on the estate, which had caused damage to the buildings and pathways. As a result, a substantial policy excess had been incurred due to resulting subsidence.
Rubbish Removal:
9. Rubbish more properly attributable to individual lessees had been billed to the service charge account.
Garages:
10. A separate account had been prepared for the garages. However, in respect of certain flats, the demise included the garage or parking space and in which case there is a single global allocation of 1.53% of expenses payable in respect of the demised premises. The lessor had separately invoiced for Ground Rent and service charges on garages, which needed to be recalculated in accordance with the lease. This item was however, no longer pursed in the amended Schedule relied upon by the Respondent and the Tribunal was not required to make a determination upon it.
Sundry Items:
11. Insurance premiums were not reasonable as the managing agent refused to consider alternative quotations. Some garages were used for commercial purposes rather than residential, and a claim could be denied on the basis that it breached policy conditions.
The Hearing:
12. The Tribunal was provided with a large amount of documentation, some of it provided only at the hearing itself by the Respondent. This included a large bundle of invoices as well as a Scott Schedule. The Tribunal also carried out an inspection of the building and grounds on 17 March 2010. The Respondent sought to rely on a Schedule listing disputed service charges from 2005 to 2009 itemising the heads referred to above. In the main, the Respondent sought a 25% deduction from the cost of these items although did not indicate on what basis that deduction was reached.
13. At the hearing, Mr. Unsdorfer for the Applicant informed the Tribunal that no service charges for the properties in question had been paid at all for the relevant years in dispute. Therefore the Applicant sought a determination that the sums claimed are reasonable and payable in full.
14. Mr. Unsdorfer told the Tribunal that the managing agent’s fee is a fixed fee in accordance with the contractual terms entered into, a copy of which was provided to the Tribunal. This stated an annual fee of £16,455 plus disbursements and VAT was payable and said to equate to £215 per flat, per annum rising to £239 per flat, per annum in 2009.
15. Mr. Unsdorfer told the Tribunal that the rear staircases were for emergency purposes, and as they were not glazed in, were subject to dust and debris being blown about. Currently, they were in the process of being redecorated on a block-by-block basis. Despite the need to keep emergency exits clear, occupiers would regularly store personal items on the staircase and landings, which on occasion necessitated an extra rubbish removal. On occasion, the identity of those leaving large items for disposal could not be identified; this meant extra charges had to be added to the service charge account. A non-resident caretaking service was provided on the estate. Duties included the cleaning of entrances and staircases and the collection of rubbish sacks from flats.
16. The roadway/drainage works had been carried out in two stages for logistical and economic reasons as the cost of the works was higher than originally estimated and there were only two opportunities in the year to collect service charges to fund such works. BV & Partners had been responsible for the management of the contract which had been given a practical completion date of January 2009. Mr. Unsdorfer did not accept that the drains had shown symptoms of disrepair on the surface until undulation in the roadway became apparent and was then acted upon. External decoration had not been carried out for some ten years because it was felt that there was little significant deterioration in the external decorations in that period. This was evidenced by the absence of any adverse mortgage reports. Mr. Unsdorfer stated that the large reserve fund that had been built up, was better applied to the replacing and renovating of the drains than external redecoration. Mr. Unsdorfer accepted that there was no formal Planned Maintenance Programme simply because it was known to the Applicant what work needed to be done, namely Phase II of the works to the roadways and external redecoration. To have such a report prepared now would entail unnecessary costs. Mr. Unsdorfer did not accept that an arbitrary 25% deduction from the service charges that the Respondent sought was warranted, and he did not understand how that figure was arrived at.
17. Insurance premiums were obtained through the services of a broker, who regularly carried out a market exercise amongst leading insurers on every renewal. The Tribunal was also provided with a breakdown of insurance claims made as well as the marketing exercises carried out. Mr. Unsdorfer confirmed no commission was paid to the landlord or the managing agents in respect of the subject property. Copies of insurance schedules were copied to the Tribunal. The Tribunal was also provided with a breakdown of accountant’s fees. Accounts were prepared by Kybert Carroll, a firm specialising in accounts for residential properties and aware of the legislation and special declarations required. Invoices were individually checked rather than a random sample chosen.
18. In evidence to the Tribunal, Mr. Kritzler sought to rely on a Scott Schedule to set out 269 items in dispute and a large number of invoices, which he asserted proved his case. However, this approach was abandoned mid-way through the hearing, with Mr. Kritzler reverting to an amended Schedule of the far smaller number of 8 service charge items he claimed were unreasonable. The Respondent also sought to rely upon a number of photographs to illustrate various items in disrepair. In particular, Mr. Kritzler relied on his witness statement dated 05/03/10 as his evidence in chief, in which he informed the Tribunal that he is semi-retired chartered building surveyor. He also sought to rely on a further statement prepared by himself as an “expert” identifying himself as D B Kritzler BSc FRICS FBEng FCIARB of Ord Carmell & Kritzler, where he was a former partner and now a consultant to the practice. The Tribunal was also referred to a witness statement of Helen Ginsbury (Flat 47) a signed copy of which was provided to the Tribunal after the close of the hearing. Ms. Ginsbury raised concerns over the delay to works to the driveways, leaking drainpipes, inadequate floodlighting and puddling to the new driveway after work was carried out in 2008/09.
19. Mr. Kritzler asserted that he did not challenge the management fee charged per unit, even though he thought the fees per unit on the high side, but rather with Parkgate Aspens’ failure to manage. In summary, he disputed in his amended and shortened Schedule the following items and issues:
(i) The management fee generally, as well the addition of a 5% management fee charged on the major works programme to the drives and drains as inappropriate as there was nothing special about the works.
(ii) The substantial deterioration that had been allowed to occur to the external staircase including structural defects and lack of cleaning and redecoration;
(iii) There was no planned maintenance programme.
(iv) Works to the drains too late and too costly.
(v) Items appearing on the service charges should be charged to individual lessees. This included rubbish removal where it had been dumped by residents.
(vI) Insurance premiums are too high and not competitive.
(vii) Water damage is being allowed to repeatedly occur.
The Tribunal’s findings
20. On inspection the Tribunal found the estate to be clean, well maintained and well decorated both externally and in the common parts. The Tribunal noted there were isolated areas where paint was peeling from soffit boards and evidence of water staining to the brickwork. However, overall the appearance was of a well cared for estate.
21. The Tribunal finds that the Applicant has properly managed this estate and that the charges incurred are reasonable and payable in full by the Respondents. The Tribunal found that the force of Mr. Krtizler’s complaints was reduced to some extent by the fact that despite having been unhappy with the management of the block for some time, he nonetheless went on to purchase two further properties. As an experienced landlord himself, the Tribunal would also have expected the Respondent to have paid at least the sum they had conceded was reasonable to pay towards the service charges, namely the demanded amount less 25%. However, nothing at all had been paid. The Tribunal did not accept that Mr. Kritzler could properly be both the Respondent and an independent expert in his case, and that it was a misjudgment on his part to have held himself out as such in this instance.
22. In considering the major issues raised by the Respondent, the Tribunal found that the major works had been properly and reasonably consulted upon, planned and executed. That there had to be two phases of works was accepted as reasonable, in the circumstances in light of the lack of co-operation on the part of certain lessees to comply with their obligations and pay their service charges, or at least that proportion that was not disputed.
23. The Tribunal found no merit in the Respondent’s challenge to the level of insurance premiums. It accepted Mr. Unsdorfer’s evidence of how premiums are sought competitively through a broker. Similarly, the Tribunal could find no reason to regard the accountant’s fees as unreasonable and were satisfied with the breakdowns provided by the Applicant that the charges made were properly substantiated. Although, the Respondent himself or his company may have charged lesser sums for similar work, the Tribunal finds that some disparity does not necessarily make a higher charge unreasonable.
24. The Tribunal finds that the fixed fee for management fees are reasonable and within the range of what is considered acceptable. Similarly, an additional percentage charge incurred during the course of major works programme was not unreasonable, and again within the range of what the Tribunal regards as acceptable and might properly be expected.
25. The Tribunal did not accept that the rear fire staircase had been neglected to the extent claimed by the Respondent. It accepted that this staircase was intended for functional purposes only, and it could be regarded as an unreasonable expense were the same level of repair and redecoration expended upon it as the main common parts.
Conclusion
26. Despite being presented with a large file of invoices after the start of the hearing by the Respondent, the Tribunal could find nothing that supported the Respondent’s case that he was being wrongly charged. It is the Tribunal’s conclusion, therefore that the sums claimed for the relevant service charge years by the Applicant are payable in full by the Respondent.
Section 20C
27. The Tribunal finds that the Seventh Schedule of all three leases makes provision for the collection of costs of these proceedings through the service charges. In this instance, Mr. Unsdorfer told the Tribunal that the Applicant intended to recover its costs limited to £2,000, although the actual account incurred was in excess of that. Mr. Kritzler opposed the adding of any legal costs incurred by reason of the LVT litigation, saying that he was still not getting responses from the Applicant to queries raised.
28. Mr. Unsdorfer also sought an order for costs from the Respondent limited to £500. Mr. Unsdorfer asserted that Mr. Krtiztler had abused the processes of the Tribunal, and had conducted proceedings in a vexatious manner by seeking to assert and rely on a disproportionate number of service charge items which he later abandoned at the hearing. Mr. Krtitzler vigorously denied that such an order would be appropriate.
29. In this instance, the Tribunal finds that in all the circumstances it is not just and equitable to exercise its discretion to make an order pursuant to section 20C of the Landlord and Tenant Act 1985. The Tribunal considers it is reasonable for the costs of this litigation to be added to the service charges.
30. The Tribunal finds that the conduct of this experienced professional landlord has been less than exemplary before the LVT. The late production of a very large number of invoices taking the Applicant by surprise, only to abandon most of the points raised, was not conducive to the smooth running of the hearing. The Tribunal finds that reliance on these unmeritorious issues served only to unnecessarily lengthen these proceedings. However, the Tribunal is of the opinion that the issue of costs should more properly be dealt with by the Barnet County Court and remits this matter back for any further determinations sought.
Chairman: LM Tagliavini
Dated: 12 June 2010