LON/00AC/LSC/2009/0711
Address: Flat
E,
Applicant: Miss K. Griffiths
Respondent: Stayton Homes Limited
Application: 2 November 2009
Inspection: Not applicable
Hearing: 11
March 2010
Reconvene: 20 April 2010
Appearances:
Tenant
Mr A
Roberts
Miss R
Soudbaksh
Miss K.
Griffiths Leaseholder
For the Applicant
Landlord
Mr C Neaves ) Stayton Homes Limited
Mr Krhaczowshi )
Members of the Tribunal
Mr I Mohabir LLB (Hons)
Mr K M Cartwright JP FRICS
Mrs S Justice BSc
IN THE LEASEHOLD
VALUATION TRIBUNAL
LON/00AC/LSC/2009/0711
IN THE MATTER OF SECTION
27A OF THE LANDLORD & TENANT ACT 1985
AND IN THE MATTER OF FLAT E,
BETWEEN:
KAREN GRIFFITHS
Applicant
-and-
STAYTON HOMES
LIMITED
Respondent
Introduction
1. This is an application made by the
Applicant under section 27A of the Landlord and Tenant Act 1985 (as amended)
("the Act") for a determination of her liability to pay and/or the
reasonableness of various service charges claimed by the Respondent in each of
the service charge years from 2002/03 to 2007/08. It was accepted by the Respondent that the
Applicant has no contractual liability for any sums claimed for 2002/03 because
she was not jointly registered as a proprietor until 18 May 2004. The remaining
heads of expenditure and quantum in issue are considered below.
2. The Applicant is the present
leaseholder of the subject property. The
Tribunal was provided with a copy of the lease relating to Flat D in the same
property ("the lease"). It
seems that this flat was renamed as Flat E, the subject property, by the London
Borough of Barnet approximately 2-3 years ago, but the lease has not been formally
varied as yet.
3. It is not necessary to set out in
detail the relevant service charge terms of the lease because it was not the
Applicant's case that these sums issue were not recoverable as relevant service
charge expenditure under the terms of her lease. The relevant terms can be summarised as
follows. By clause 2(6)(b), the lessee
covenanted, inter alia, to pay a 25%
proportion of the landlord's costs in complying with the covenants contained in
clause 4 with payments to be made in accordance with clause 3 of the
lease. Clause 3 provides, inter alia, that at the lessee shall pay
a contribution of £25 ("the maintenance charge") on account towards
the expenditure incurred by the landlord in carrying out its obligations under
clause 4 to be paid in advance on the same day as the rent reserved, that is,
when demanded. Alternatively, if the
expenditure so incurred by the landlord in any given year exceeds any payments
made on account, the lessee is required to pay the excess expenditure incurred
within 28 days of the landlord having served audited accounts certifying the
expenditure.
4. The present managing agent is Hurford
Salvi Carr, having entered into a management agreement dated November 2006
("the management agreement").
The previous managing agent was
The Relevant Law
5. The substantive law in relation to the determination of this application can be set out as follows:
Section 27A of the Act provides, inter alia, that:
"(1)
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.
(2)
Subsection (1) applies whether or not any payment has been made.”
Subsection (3) of this section contains the same provisions as subsection (1) in relation to any future liability to pay service charges.
6. Any determination made under section 27A is subject to the statutory test of reasonableness implied by section 19 of the Act. This provides that:
"(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 works, only if the services
or works are of a reasonable
standard;
and
the amount payable shall be limited accordingly.”
Decision
7. The hearing in this matter took place
on 11 March 2010. The Applicant was
represented by Mr Roberts and Ms Soudbaksh, both from
VAT
(2003/04-2005/06)
8. For each of these years the Respondent
had sought to charge VAT of £70, £70 and £82.59 respectively of the advance
maintenance charge on account. However,
it was accepted by the Respondent at the hearing that a VAT liability did not
arise in respect of this advance payment and a total credit of £222.59 had to
be applied to the service charge account.
Insurance
Management Fee (2005/06)
9. By any invoice dated 12 April 2006, the
Respondent demanded a 15% management fee of £46.94 per lessee for arranging the
buildings insurance as permitted under clause 4(8) of the lease. The only complaint made by the Applicant was
that the correct premium was £1,514.57 and, when apportioned individually, the
correct liability was £45.54. This was
accepted by the Respondent and, therefore, a credit of £1.40 had to be applied
to the Applicant's service charge account.
Heat and
Light (2003/04-2005/06)
10. The total estimated amounts claimed by
the Respondent for each of these years were £275, £299 and £290
respectively. They related exclusively
to the electricity supply to the common parts because no heating was provided
to these areas. The Respondent's case was that the actual amounts incurred by
it were in fact greater than the amounts it sought to recover from the tenants
and were, therefore, reasonable.
11. The Applicant stated that the metering
for electricity supply was not put right until June 2007 and the cost was now
£250-275. It was submitted that the
historic costs were greater and could not be regarded as being reasonable,
especially given that they were estimated amounts, and should be disallowed
entirely.
12. The only bills disclosed by the
Respondent are to be found at Tab 12 of the bundle and they provide no
certainty about the actual expenditure incurred in each of these years. The figures that appear in the bills are
estimated amounts and represent an accrued total. No explanation was forthcoming from the Respondent
as to why the bills for the actual expenditure incurred could not be
provided. In addition, it was common
ground at the hearing that a number of other flats in the building had received
an electricity supply from the common system for which they had not been
charged. All of these matters provided
no certainty about the actual expenditure incurred by the Respondent or whether
the estimated amounts claimed were accurate.
The Tribunal did not accept the Applicant's submission that nothing
should be allowed for this expenditure because it was clear that she did
receive the benefit of light into the common parts. From the photographs available to the
Tribunal, the common parts appear to have very few lights and no electricity
sockets. Therefore, using its own expert
knowledge and experience, the Tribunal found that a nominal sum of £100 per
year (£20 per flat) for each of the years under consideration should be allowed
as reasonable.
Cleaning
(2003/04-2005/06)
13. The total estimated amounts claimed by
the Respondent for each of these years were £497, £505 and £490
respectively. The cleaning was
undertaken by
14. The Applicant contended that there was
little evidence of cleaning carried out to the common parts of the property and
submitted that these costs were not reasonable.
The photographs demonstrate that the area concerned is very small. Indeed, she asserted that she had often
carried out the cleaning of the common parts and it had taken no more than one
hour. The Applicant further contended
that she had obtained a verbal quote of £30-40 plus VAT per hour to carry out
this work. She was prepared to accept
that the cost should not exceed £50 plus VAT per hour.
15. The Tribunal accepted the Applicant's
submission that the cleaning cost for each of these years had not been
reasonably incurred because they were excessive having regard to the small area
of the common parts. In the tribunal's
view, the cleaning could adequately be carried out by one person in two hours
every quarterly visit. Therefore, the
cost incurred of £125 per hour was excessive.
The Tribunal allowed the sum of £20 (at £10 per hour) plus a further sum
of £10 for travelling and the cost of consumables as being reasonable. Accordingly, it allowed the total sum of £120
plus VAT for cleaning for each of the
service charge years.
Accountancy Fees (2003/04-2007/08)
16. The total estimated amounts claimed by
the Respondent for each of these years
were £588, £588, £735 and £588 respectively.
17. The Applicant simply submitted that these
costs were unreasonable because it was not known what work had been carried out
in the preparation of the service charge accounts. The Applicant contended that fees of between
£250-300 plus VAT per year was reasonable.
18. Neither of the representatives for the
Respondent was able to provide an explanation of the duties carried out by the
firm of accountants in the preparation of the service charge accounts for each
of these years. Similarly, they could
not provide any explanation as to why the fees in 2005/06 had increased
significantly. Nevertheless, they
submitted that the costs were reasonable.
19. The
relevant invoices for the accountancy fees incurred can be found at Tabs 11, 15
and 16 of the bundle. It was common
ground that the service charge accounts for each of these years had been
prepared in December 2007. The invoices
are those prepared by
Repairs
& Maintenance (2005/06)
20. By an invoice dated 30 November 2006, a
total sum of £854 was charged by
21. The Respondent contended that the gutters
would have been cleaned in the autumn.
In addition, there are two areas of hard standing and pea shingle, which
would need to be sprayed with weedkiller.
The work carried out would have taken, in total, probably 3-4 days at a
cost of £100-150 per day plus materials.
It was submitted, therefore, that the cost was reasonable.
22. This expenditure represented the annual
cost incurred to carry out repairs and maintenance to the property. However, the Respondent was unable to provide
an adequate explanation or adduce any evidence as to how this expenditure had
been incurred despite having been put to proof by the Applicant. In the absence of this evidence, the Tribunal
was bound to find that this expenditure had not been reasonably incurred and it
disallowed the entire amount.
Management
Fees (2006/07-2007/08)
23. In December 2008, the lessees acquired
the right to manage the property. The
management fees for 2006/07 and 2007/08 were £1,616 and £1,674.86 respectively
and relates solely to the tenure of Hurford Salvi Carr. The management fees were charged on the basis
of £285 plus VAT per flat. The differing
amounts simply reflect the change in VAT rates during this period.
24. The Applicant submitted that the
management agreement between Hurford Salvi Carr and the Respondent was a
long-term qualifying agreement for a term greater than 12 months. Therefore, the Respondent was obliged to
carry out statutory consultation in accordance with section 20 of the Act. Its failure to do so meant that that it is
only entitled to recover a sum no greater than £100 per lessee, being the
sanction imposed by section 20. In
particular, the Applicant place reliance on paragraph 7 of the agreement which
states that the agreement can only be terminated by either party giving to the
other three months notice in writing expiring at the end of a financial
year. The Applicant submitted that the
management agreement amounted to a rolling contract with no fixed term and was,
therefore, a long-term qualifying agreement.
35. Neither of the Respondent's
representatives was able to make any legal submissions on this point.
36. The Tribunal found that the management
agreement was a long-term qualifying agreement because a proper reading of this
document reveals that it contains no express provision that it is for a term of
12 months or less and automatically renews for the same term annually. The agreement is entirely silent on this point. The Tribunal concluded that the agreement
continued on an indefinite basis until such time it was terminated by either
party. Therefore, by virtue of paragraph
4 of the Service Charges (Consultation Requirements) (England) Regulations
2003, the Respondent was obliged to carry out statutory consultation in
accordance with section 20 of the Act.
It was common ground that he did not do so. The maximum amount the Respondent can recover
for the management fees is limited to the "statutory cap" of £100 per
lessee including VAT. The Applicant did
not content for a lower figure. Accordingly, the management fees allowed for
each of these years is £500 including VAT.
Of course, it is open to the Respondent to make an application under
section 20ZA of the Act to retrospectively dispense with the consultation
requirements.
Health and
Safety & Fire Risk Charge (2007/08)
37. The costs claimed for each of these items
of expenditure were £505.30 and £403 respectively and appeared to be the costs
of Hurford Salvi Carr to carry out this work.
The Applicant accepted that it was necessary to incur this
expenditure. However, she submitted that
the cost was excessive. This submission
was based on an enquiry she had made some weeks earlier when she had been
advised that a cost of £150 plus VAT was appropriate and that this was the
figure she proposed as being reasonable for each of these items.
38. At the hearing, the Respondent's
representatives said that they had not as yet received the invoices for this
expenditure and can provide no explanation about this matter. It was stated in the Respondent's statement
of case that the health and safety charge was greater than anticipated because
the property had not been checked for a number of years and, therefore, the
inspection had taken longer.
39. The Respondent had adduced no evidence as
to how these costs had been incurred.
For example, there was no evidence as to when and what work had been
carried out. The Tribunal was provided with
simply the bare figures and little else.
Therefore, in the absence of this evidence, it is concluded that the
cost for both items of expenditure was excessive and that he figure of £150
plus VAT for each item was reasonable.
Administration
Charges (2007/08)
40. These charges total £624.76 and represent
the costs of a debt recovery agency instructed by Hurford Salvi Carr to recover
rent and service charge arrears from the lessees. At the hearing, it was conceded by the
Respondent that an invoice for £196.64 had been duplicated and, therefore, the
net total of the administration charges claimed was £430.82.
41. The Applicant submitted that these
charges had not been reasonably incurred because when her payments on ground
rent and other credits had been applied to the service charge account, it was
not clear what her indebtedness had been.
This had also been the position even when the service charge accounts
had been finally prepared in 2007. The
Respondent simply submitted that the charges had been reasonably incurred.
42. The Tribunal found that the
administration charges had not been reasonably incurred because, in view of the
rather confused accounting practices adopted by
Section 20C
& Fees
43. The Applicant had also made an
application under s.20C of the Act seeking an order that the Respondent be disentitled from being able to recover
all or part of the costs it had incurred in these proceedings.
44. Section 20C of the Act provides the
Tribunal with a discretion to make an order preventing a landlord from being
able to recover costs it had incurred in proceedings such as these when it is
just and equitable to do so having regard to all the circumstances of the case.
45. In relation to this application, the
Tribunal relies on essentially the same reasons set out above regarding the
administration charges. For those
reasons, it seems that the Applicant was obliged to make this application. Furthermore, the Applicant has substantially
succeeded on the issues and, accordingly, the Tribunal makes an order
preventing the Respondent from recovering any of the costs it has incurred in
these proceedings through the service charge account.
46. Again, for the same reasons, the Tribunal
orders that the Respondent reimburse the Applicant the sum of £350, being the
total fees she has paid to the Tribunal to have this application issued and
heard.
Dated the 25
day of May 2010
CHAIRMAN ...............................................................
Mr
I Mohabir LLB (Hons)