Download Service Charge – case study

Service Charge ———— 1 March 2017
Service Charge – case study
Case Study
Archers Property Management Limited has recently been
appointed as managing agents for Broadway (Freehold)
Limited, the freehold owner of a residential scheme in South
London. The scheme contains 152 residential flats and three
commercial units spread over a number of buildings.
All of the flats were originally sold on long leases although a
small percentage of these are not owner occupied, and the
residents are sub-tenants. There is a recognised tenants'
association in place.
Shortly after Archers took over management of the scheme
they carried out a stock condition survey and realised that
some work would be needed to bring the scheme to an
acceptable standard of maintenance.
Case Study (1)
Repair work to the roof of each of the buildings on the
scheme. As no maintenance work has been carried out to
any of the roofs for a number of years, there is significant
disrepair due to the lack of on-going maintenance. As the
cost of the work is likely to be high, Archers anticipate
challenges from the leaseholders. The cost of the roof
work is likely to be over £2000 per leaseholder.
Case study – historic neglect
● Leaseholder’s arguments:• Repairs more expensive as a result of the historic
neglect by the landlord;
• Costs not reasonably incurred due to landlord’s
delays;
• Damages for breach of covenant / set off against
claim for service charge
● Continental Property Ventures Inc. v White [2007]
● Mansing Moorjani v Durban Estates [2015]
Case study – historic neglect
● Landlord’s arguments:-
• Section 19 (LTA 1985) does not prevent a landlord
recovering more expensive costs of repair as a
result of historic disrepair;
• Damages / set off claim is a possibility, but;
- Possible clause excluding the right of set off;
- Leaseholder has to show cost of repair would
have been avoided or reduced if remedied
earlier;
- Evidence of loss required (expert evidence)
● Daejan Properties Ltd v Griffin & another [2014]
Case study (2)
The replacement of the existing wooden windows. It is
proposed that these would be replaced with windows with
uPVC frames which may constitute an improvement to
those which are currently in place. Some of the most
recent leases provide that the landlord can recover the
cost of improvements through the service charges
whereas the earlier leases do not mention improvements.
The cost of the replacement windows is estimated to be
over £750 per leaseholder provided the work can be done
using the same scaffolding used for the roof repairs.
Case study - Improvements
● Leaseholder’s arguments
• Leases which allow improvements
- Alternative / less expensive remedies available?
- The financial means of the leaseholders
• Leases which do not mention improvements
- The work is not a repair (recoverable under the
lease) but is an improvement (not recoverable
under the lease)
- Goes beyond repair
• Not a landlord obligation to repair windows
• Waaler v London Borough of Hounslow [2017]
• Sheffield City Council v Oliver [2007]
Case Study - Improvements
● Landlord’s arguments
• Where there is an improvement clause
- Cost of improvements recoverable so long as
consideration has been given to the extent / financial
impact of the work
• Where there is no improvement clause
- A repair may also involve a degree of improvement
- Repair doesn’t cease to be a repair just because it
also effects an improvement
- Would work involved provide best value considering
life cycle costing
● Wates v Rowlands [1952]
● Craighead & others v Homes for Islington Limited & The
London Borough of Islington [2010]
Case study (3)
The previous agent entered into an agreement for the
provision of cleaning services to be provided on the
scheme. The agreement was for an initial term of 12
months but it does not state what happens after the initial
fixed term and there is no provision for rollover in the
agreement. The same cleaning contractor has continued
to provide the service after the expiry of the initial fixed
term of the agreement and have now been providing
cleaning services on the scheme for almost 3 years. The
cost of the service per leaseholder is currently £132 per
annum
Case study - QLTA
● Leaseholder’s arguments
• It is a QLTA
- Poynders Court Limited v GLS Property
Management Limited [2012]
- Leaseholders of Foundling Court [2016]
• S20 not carried out so capped at £100
• Financial prejudice as no market testing
• Should pay leaseholders costs on dispensation
Daejan v Benson
Case study - QLTA
● Landlord’s arguments
• At expiry of the fixed term, automatically rolled over
as periodic
• Terminable by either party thereafter
• Paddington Walk Management Limited v Governors
of Peabody Trust [2010]
● Possible dispensation through the FTT
• More likely since Daejan Investments Limited v
Benson and others [2013]
Case study
● Conclusion
• The outcome of cases often unpredictable;
• FTT decisions not binding - may be persuasive;
• Thorough preparation in the proceedings;
• Consider the points the other side are likely to raise
in the hearing;
• Reference to cases (from higher courts) if possible
which support your case.
Michael Donnellan
Partner
E: [email protected]
T: 0207 432 8578
Lynn James
Partner
E: [email protected]
T: 0161 838 2118