England and Wales Lands Tribunal

[2000] EWLands LRX_53_1999 (20 July 2000)

LRX/53/1999

LANDS TRIBUNAL ACT 1949

SERVICE CHARGE - repairs to tile cladding and flat roof - whether costs reasonably incurred - costs of hearing before LVT - whether reasonably incurred - tests of reasonableness - landlords' appeal dismissed - Landlord and Tenant Act 1985, ss 18-20c.

IN THE MATTER of an APPEAL from a DECISION of a

LEASEHOLD VALUATION TRIBUNAL

BETWEEN HYDE HOUSING ASSOCIATION LIMITED Appellants

and

GEORGE WILLIAMS Respondent

Re: Wynnstay, Oak Hall Road,

Burgess Hill,

West Sussex

Before: P H Clarke FRICS

Sitting at: 48/49 Chancery Lane, London WC2

on 10 and 11 May 2000

The following cases are referred to in this decision:

Plough Investments Ltd v Manchester City Council [1989] 1 EGLR 244

Yorkbrook Investments Ltd v Batten [1985] 2 EGLR 100

Wellcome Trust Ltd v Romines [1999] 3 EGLR 229

Ravenseft Properties Ltd v Davstone (Holdings) Ltd [1980] 1QB 12

Postel Properties Ltd v Boots the Chemist [1996] 2 EGLR 60

Stan Gallagher of Counsel, instructed by Marsons, solicitors of Bromley, for the appellants.

The respondent in person.


 


DECISION OF THE LANDS TRIBUNAL

1. This is an appeal by the landlords of a block of flats from the decision of a leasehold valuation tribunal that certain costs incurred for services, maintenance and management were not reasonably incurred (section 19(1)(a) and (2A)(a) of the Landlord and Tenant Act 1985) and that the landlords' costs of the proceedings were not relevant costs to be taken into account when determining any service charge (section 20C of the Landlord and Tenant Act 1985).
2. Stan Gallagher of counsel appeared for the appellant landlords and called John Michael Morris MCIOH MICIPD PG Dip MSc (PSL Mgt) MSc (Hsg Mgt), an assistant director of the appellant company, and Richard Pell ARICS, a senior associate of Kennedy and Partners, chartered surveyors of Greenwich.
3. George Williams, the respondent, appeared in person and called Rex Lacey FRICS IRRV, senior partner of Martin and Lacey, chartered surveyors of Haywards Heath, Crawley and Horsham.

FACTS

4. The parties have prepared a statement of agreed facts and from this statement and the evidence I find the following facts.
5. The property which is the subject of this appeal is a block of 50 flats known as Wynnstay, Oak Hall Road, Burgess Hill, West Sussex ("Wynnstay"). The block was built in 1976 and is partly constructed with a concrete frame and brick in-fill panels. The building varies in height from three to six storeys. It had tiled cladding on the high level facade. The roof was a flat roof of asphalt laid on a concrete deck.
6. The appellant landlords, Hyde Housing Association Limited ("Hyde"), are a registered social landlord and have been freehold owners of Wynnstay since March 1997. The respondent is the leasehold owner of flat 37 in Wynnstay and Chairman of Wynnstay Leaseholders Association.
7. At the relevant time in this appeal, 14 flats in Wynnstay, including the respondent's flat, were held on long leases granted under the right to buy provisions of the Housing Act 1985. The service charge provisions in these long leases are in substantially the same form and are as follows.
8. Clause 1(2) of the lease requires the tenant to pay "by way of further rent" the "service charge specified in clause 4(3) hereof", which requires the tenant:-

"To pay the Landlord without any deduction by way of further and additional rent a proportionate part of the expenses and outgoings incurred by the Landlord in complying with its covenants specified and in the property register and charges register of title number SX131865 and in clause 5 hereof and in particular in the repair maintenance renewal and insurance of the estate including the building and the provision of services therein and the other heads of expenditure as the same are set out in the Second Schedule hereto ..."

9. Clause 5 of the lease sets out the landlords' obligations; paragraph (1)(a) is relevant to this appeal:-

"The Landlord hereby covenants with Tenant (subject to the payment by the Tenant of the rent and for further rents hereby reserved and provided that the Tenant has complied with all the covenants and obligations on part of the Tenant herein to be performed and observed) as follows:-

(1) To maintain repair amend renew cleanse repaint and redecorate and otherwise keep in good and tenantable repair:-

(a) The structure of the building and in particular the roofs main timbers and foundations and walls thereof but excluding nevertheless therefrom:-

(i) all walls that are situate wholly within the flat

(ii) the fences or the internal faces of the boundary walls that enclose the flat

(iii) the window and other glass off and in the flat and

(iv) all portions corresponding to the foregoing in or appurtenant to other tenanted premises in the building"

10. In the Second Schedule paragraphs 1 and 2 are relevant to this appeal:-

"Subject to the provisions of the Landlord and Tenant Act 1985 Landlord's expenses and outgoings and other heads of expenditure in respect of the building which the Tenant is to pay a proportionate part by way of Service Charge as an additional rent

1 All costs and expenses whatsoever incurred by the Landlord in and about the discharge of the obligations on the part of the Landlord set out specifically in Clause 5 hereof.

2 The cost of periodically inspecting examining maintaining overhauling and where necessary replacing any and every part of the building and the estate and the appurtenances thereof"

11. In October 1994 Hyde instructed Kennedy and Partners ("Kennedy") to inspect and advise on structural defects at Wynnstay. They reported on 1 December 1994 with a recommendation that opening up works be carried out for further investigations. In March 1995 these works were carried out and a report dated 5 May 1995 (revised 6 June) was made by Kennedy. This included recommendations regarding the tile cladding and the roof. With regard to the tile cladding the report referred to the number of tiles which had fallen and nail sickness in the battens and suggested that these areas should be stripped and either re-clad with tile hanging or re-covered with a sheet product or a proprietary profiled sheet material (paragraph 7). With regard to the roof the report stated that, although few areas of water penetration were noted within the building, the asphalt roof was crazing, brittle and at the end of its economic life. It was recommended that the existing coverings be stripped out and the roof re-covered with a high performance elastomeric felt laid on insulation. A lightning conductor should be provided (paragraph 8).
12. On 18 October 1995 Kennedy prepared a specification for the renewal of roof coverings, cladding, windows and structural repairs at Wynnstay. These works were put out to fixed price competitive tender. Five tenders were received. The lowest was from J J Jagger & Co Ltd in the sum of £534,522.77, inclusive of VAT but exclusive of contract supervision fees. The highest tender was £671,841.50. On or about 15 December 1995 Hyde wrote to each of the long leasehold tenants at Wynnstay under section 20 of the Landlord and Tenant Act 1985 ("the 1985 Act") informing them of the proposed works, the tenders received, their estimated share of the cost and their right to make observations. On 26 January 1996 a contract was awarded to J J Jagger & Co Ltd. The works commenced on 5 February 1996 and were completed within budget and on schedule. A certificate of practical completion was issued on 23 August 1996 and on 23 April 1997 Kennedy certified that the defects, shrinkage and other faults had been made good.
13. The disputed items of expenditure in this appeal in respect of the above works are:

(i) the replacement of the tile cladding (total cost £50,595.31);

(ii) the renewal of the flat roof coverings and the provision of roof insulation and a lightning conductor (total cost £76,305);

(iii) the element of scaffolding and preliminary costs attributable to (i) and (ii) above (total cost £31,175).

The total cost of the disputed works is £158,075.31 plus a contract supervision fee of 10%.

14. Two applications were made to a leasehold valuation tribunal for the Southern and South Eastern Rent Assessment Panel. Hyde made application for determination of the reasonableness of a service charge where costs had already been incurred (section 19(2A)(a) of the 1985 Act). Mr Williams made application on behalf of Wynnstay Leaseholders Association for an order for the limitation of service charge arising from the landlords' costs of the proceedings (section 20C of the 1985 Act). Following a hearing on 9 December 1998 the tribunal issued a decision on 18 January 1999. The relevant parts of that decision for the purpose of this appeal are as follows:-

(1) A total re-covering of the flat roof was unnecessary and therefore unreasonable (paragraph 48).

(2) With regard to tile hanging, a reasonable repair job could have been carried out at a much reduced cost. (paragraph 49).

(3) Works which were either excessive or not properly claimable totalled £174,721.47 but allowances should be made against this sum for the costs of reasonable repairs: £1,000 for the tile hanging, £1,500 for roof repairs, plus 10% supervision fee and VAT for both items (paragraphs 52, 53 and 59(i)).

(4) An additional fee of 15% charged by Hyde for administration and fees was not justifiable but a 10% supervision fee should be allowed (paragraphs 53 and 54 and 59(i)).

(5) Hyde's costs in respect of the hearing and preparatory work should not reasonably form part of the service charge. Hyde are not entitled to any part of their costs of the proceedings under section 20C of the 1985 Act (paragraphs 55, 57 and 59(ii).)

(6) Interest on outstanding payments that would have been due from the tenants should be an allowable item of service charge (paragraph 56).

15. On 8 February 1999 Hyde made application to the leasehold valuation tribunal for leave to appeal to this Tribunal. This was refused on 22 March 1999. On 15 April 1999 Hyde made application to this Tribunal for leave to appeal and, following a hearing before N J Rose FRICS, leave to appeal was given on 27 September 1999, subject to conditions that no appeal shall lie against the part of the decision of the leasehold valuation tribunal relating to the windows to the common areas and that Mr Williams shall not be responsible for Hyde's costs of the appeal in any event. Mr Williams responded to the appeal but did not lodge or seek leave to lodge a cross appeal.

STATUTORY PROVISIONS

16. It will be convenient to set out now the relevant statutory provisions. Sections 18 to 30 of the Landlord and Tenant Act 1985 are concerned with service charges. Sections 18 to 20C are relevant to this appeal.
17. Section 18 sets out the meaning of "service charge" and "relevant costs":-

"(1) In the following provisions of this Act 'service charge' means an amount payable by a tenant of a dwelling as part of or in addition to the rent -

(a) which is payable, directly or indirectly, for services, repairs, maintenance or insurance or the landlord's costs of management, and

(b) the whole or part of which varies or may vary according to the relevant costs.

(2) The relevant costs are the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a superior landlord, in connection with the matters for which the service charge is payable.

(3) For this purpose -

(a) 'costs' includes overheads, and

(b) costs are relevant costs in relation to a service charge whether they are incurred, or to be incurred, in the period for which the service charge is payable or in an earlier or later period."

18. Sections 19 to 20C contain provisions limiting the amount of service charge payable by a tenant. This appeal is concerned with section 19 (reasonableness) and 20C (costs of court proceedings).
19. Section 19(1) provides for the limitation of "relevant costs" in a service charge by reference to two tests: whether the costs are "reasonably incurred" and whether the services or works are "of a reasonable standard." This appeal is solely concerned with the former. The material part of section 19(1) is as follows:-

"(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, ...

(b) ...

and the amount payable shall be limited accordingly."

20. Section 19(2A) gives the landlord or tenant the right to apply to a leasehold valuation tribunal for a determination as to reasonableness:-

"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) ...

(c) ..."

21. Section 20C is concerned with limitation of service charge by reference to the costs of tribunal proceedings:-

"(1) A tenant may make an application for an order that all or any of the costs incurred, or to be incurred, by the landlord in connection with proceedings before a court or leasehold valuation tribunal, or the Lands Tribunal, ... , are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the tenant or any other person or persons specified in the application.

(2) The application shall be made -

(a) ...

(b) in the case of proceedings before a leasehold valuation tribunal, to the tribunal before which the proceedings are taking place or, if the application is made after the proceedings are concluded, to any leasehold valuation tribunal;

(c) in the case of proceedings before the Lands Tribunal, to the tribunal;

(d) ...

(3) The court or tribunal to which the application is made may make such order on the application as it considers just and equitable in the circumstances."

ISSUES

22. Hyde appeal to this Tribunal seeking two orders. The first is to set aside the decision of the leasehold valuation tribunal, save for their determination as to the reasonableness of the costs relating to the replacement of windows and the smoke extraction devices, and for a determination that the following costs were reasonably incurred under section 19(1)(a) and (2A)(a) of the 1985 Act:-

(i) the replacement of tile cladding, £50,595.31;

(ii) the renewal of flat roof coverings and the provisions of roof insulation (£72,195) and a lightning conductor (£4,110), £76,305;

(iii) the element of scaffolding and preliminary costs attributable to these items, £31,135;

(iv) a contract supervision fee of 10% of the contract price.

The second application by Hyde is for an order under section 20C of the 1985 Act that costs of the hearing before the leasehold valuation tribunal in the sum of £4,039 were reasonably incurred for the purposes of section 19(2A)(a) of the 1985 Act.

23. Mr Williams asks for the appeal by Hyde to be dismissed and for confirmation of the decision of the leasehold valuation tribunal except paragraph 56, which determined that interest on outstanding payments that would have been due from the tenants should be an allowable item of service charge. Mr Williams accepts that the disputed works were carried out to a reasonable standard (section 19(2A)(b)) and that the costs were reasonable (section 19(2A)(c)). His contention is that it was not reasonable for Hyde to undertake such extensive and expensive works. The costs of the disputed works were not reasonably incurred (section 19(1)(a) and (2A)(a)).
24. In the light of the parties' contentions and the relevant statutory provisions the issues in this appeal can be stated in the form of three questions:-

(1) Were the costs incurred by Hyde in the renewal of the flat roof covering and provision of a new lightning conductor, replacement of the tile cladding and associated scaffolding and preliminary costs, costs reasonably incurred under section 19(1)(a) and (2A)(a) of the 1985 Act?

(2) Were the costs incurred by Hyde in connection with the proceedings before the leasehold valuation tribunal to be regarded as relevant costs to be taken into account in determining any service charge under sections 19(1)(a) and (2A)(a) and 20C of the 1985 Act?

(3) In the absence of a cross-appeal by Mr Williams, should I consider making an order to set aside paragraph 56 of the decision of the leasehold valuation tribunal relating to interest on outstanding services charges?

25. My formulation of question (1) above differs slightly from the issues agreed by the parties regarding the roof and tile cladding. This is as follows:-

"17 Specifically, the issues as to the roof are:

a whether the housing association made a reasonable decision in deciding to renewal (sic) the roof rather than to undertake an overhaul of it;

b if it was reasonable to renewed (sic) the roof, whether the roofing system chosen was a reasonable choice for the housing association to have made.

c whether the housing association made a reasonable decision in deciding to install a lighting (sic) conductor.

18. The specific issue as to the tile cladding is whether the housing association made a reasonable decision in deciding to undertake the wholesale removal of the high level tiles and to replacement (sic) them with the sheet type material."

I do not dissent from this formulation and will consider the more specific issues raise by the parties within my general question.

DECISION

26. The works in dispute have been carried out and an inspection will not be of assistance in reaching my decision.
27. The issues in this appeal are essentially questions of fact - whether the costs of the repairs to the roof and tile cladding were reasonably incurred, whether the works were reasonable - but Mr Gallagher made submissions as to the correct approach in law to the question of reasonableness. I now consider the tests which I should apply, which emerged from the authorities cited by Mr Gallagher.
28. Clause 5(1)(a) of the long leases requires Hyde to "maintain repair amend renew ... and otherwise keep in good tenantable repair" the structure of Wynnstay including the roof and walls. It is not in issue that the works carried out by Hyde to the roof and tile hanging, with the possible exception of the new lightning conductor, were works of repair within Hyde's repairing obligations. Clause 1(2) requires the tenant to pay a service charge which includes the cost of repairs incurred by Hyde (Second Schedule paragraphs 1 and 2). The tenant's obligation to reimburse the costs of repair is, however, subject to section 19(1)(a) of the 1985 Act which provides that those costs must have been "reasonably incurred". A service charge may thus be limited to such costs and a landlord or tenant may apply to a leasehold valuation tribunal (and on appeal with leave to this Tribunal) for a determination whether costs were reasonably incurred (section 19(2A)(a) of the 1985 Act). No guidance is given in the 1985 Act as to the meaning of "reasonably incurred". Some assistance can be found in the authorities. The issues in this appeal are essentially about different methods of repair and reference can usefully be made to cases concerned with the extent of repairing obligations.
29. In Plough Investments Limited v Manchester City Council the issues concerned the nature and extent of repairs to an office building, the cost of which was recoverable by the landlords from the tenants. Scott J said (page 247M - 248B):-

"The landlord's fifth schedule repairing obligation is, although nominally an obligation, in a sense also a right. If it were simply an obligation, then, presumably, the three tenants of the building could choose to release the landlord, in whole or in part, from that obligation. But the provision is not, in my view, simply, or even mainly, for the benefit of the tenants. It is also a provision for the benefit of the landlord. It enables the landlord to keep its building in repair at the tenants' expense. If the repairing obligation had been imposed on the tenant, the tenant would have been entitled to decide on the manner in which it would be discharged. Provided remedial works were sufficient to discharge the obligation, the landlord could not require a different type of repair to be effected. Under these leases, however, the relevant decisions regarding repairs to the exterior are to be taken by the landlord. If reasonable remedial works are proposed by the landlord in order to remedy a state of disrepair for the purposes of its fifth schedule obligation, the tenants are not, in my judgment, entitled to insist that cheaper remedial works be undertaken. Miss Williamson [counsel for the landlord] accepted that the landlord's decisions had to be reasonable ones. The tenants, after all, have to pay for the fifth schedule repairs. But I accept Miss Williamson's point that the tenants are not entitled to require the landlord to adopt simply a minimum standard of repair. Provided proposed works of repair are such as an owner who had to bear the costs himself might reasonably decide upon and provided the works constitute 'repairs' within the meaning of that word in the fifth schedule covenant, the tenant is not, in my judgment, entitled to insist upon more limited works or cheaper works being preferred. I agree with Miss Williamson that the landlord cannot be limited to a minimum standard of repair only."

Three points emerge from this part of the judgment. First, as a general rule, where there is more than one way of executing repairs, the choice of the method of repair rests with the party under the obligation to repair. Second, provided the works of repair are reasonable, a tenant under an obligation to reimburse the cost to the landlord cannot insist upon cheaper or more limited remedial works or a minimum standard of repair. Third, a test as to whether works carried out by a landlord and reimbursed by a tenant are reasonable is whether the landlord would have chosen that method of repair if he had to bear the cost himself.

30. When determining whether a repair is reasonable, as to cost or standard, there is no presumption either way. It is for the court or tribunal to decide on the whole of the evidence. In Yorkbrook Investments Limited v Batten one of the issues before the Court of Appeal was the recovery of a service charge (including garden maintenance). This was limited by section 91A of the Housing Finance Act 1972 to chargeable items "to a reasonable standard", where the amount defrayed by the landlord is "reasonable." Wood J, giving the judgment of the court, said (page 102L):-

"During argument on the issue of garden maintenance, it was indicated that registrars of county courts and those practising in this field were finding difficulty in dealing with the burden of proof when considering applications for declarations under the Housing Acts. Having examined those statutory provisions, we can find no reason for suggesting that there is any presumption for or against a finding of reasonableness of standard or of costs. The court will reach its conclusion on the whole of the evidence. If the normal rules of pleadings are met, there should be no difficulty. The landlord in making his claims for maintenance contributions will no doubt succeed, unless a defence is served saying that the standard or the costs are unreasonable. The tenant in such a pleading will need to specify the item complained of and the general nature - but not the evidence - of his case. No doubt discovery will need to be ordered at an early stage, but there should be no problem in each side knowing the case it has to meet, provided that the court maintains a firm hold over its procedures. If the tenant gives evidence establishing a prima facie case, then it will be for the landlord to meet those allegations and ultimately the court will reach its decisions."

Wood J is there referring to the burden of proof in proceedings at first instance. The proceedings on appeal to this Tribunal are in the form of a re-hearing with the burden of proof on the appellant (in this case Hyde) to show that the decision of the leasehold valuation tribunal is wrong. That decision stands unless it is shown to be wrong by the evidence at the re-hearing before this Tribunal (Wellcome Trust Ltd v Romines at page 233B). Mr Gallagher accepts this burden of proof.

31. On the extent of repairs, the works chosen should comply with statutory requirements or regulations and be carried out in reliance on reasonable and competent professional advice (Ravenseft Properties Ltd v Davstone (Holdings) Ltd and Postel Properties Ltd v Boots the Chemist).
32. The position outlined above, as applied to this appeal, is as follows:-

(1) The choice of method of repair to the roof and tile cladding rested with Hyde and, provided the works were reasonable, Mr Williams cannot insist on cheaper works or only a minimum standard of repair.

(2) When deciding whether works are reasonable there is no presumption either way. It is for this Tribunal to decide the question of reasonableness on the whole of the evidence. However, the burden of proof is on Hyde to show, on the evidence at the re-hearing before this Tribunal, that the decision of the leasehold valuation tribunal on this question is wrong.

(3) Tests to be applied to ascertain whether the works carried out by Hyde were reasonable, that is to say whether the costs thereof were "reasonably incurred", include: whether Hyde would have carried out the same works if the cost was wholly borne by them; whether the works were required to comply with statutory requirements or regulations; whether the works were carried out in reliance on reasonable and competent professional advice.

33. During the hearing the question arose whether the test of reasonableness should be applied to each item of repair, and the cost thereof, or whether it should be considered in the context of the service charge as a whole. Mr Williams said that the tenants have accepted the need for other repairs and have adopted a pragmatic approach. It is unreasonable for Hyde to add to already high service charges caused by the agreed or undisputed works other unreasonable and unnecessary repairs. In my judgment this might be a relevant consideration (I make no decision on the matter) but I did not receive evidence as to annual service charges and repair costs (although requested) and only very limited submissions on this issue. I am therefore reluctant to make a decision on this point. I find that I can reach my decision solely by reference to each item of repair and that, if I had accepted Mr Williams's argument that the costs were unreasonable in the context of service charges as a whole, this would have reinforced that decision. The issue can therefore be left open for decision at another time, if necessary, after full argument and evidence. I turn now to the evidence. First, I consider the general evidence given by Mr Morris, on behalf of Hyde, and then look at each item of repair in the light of the guidance as to reasonableness summarised above.

MR MORRIS'S EVIDENCE (GENERAL)

34. Mr Morris gave evidence regarding the policy of Hyde towards repairs and maintenance. He said that, in order to provide funding for necessary and high priority refurbishment works, Hyde have in the past allocated an annual capital and revenue budgetary provision to fund essential works across the whole of the Hyde stock of housing. Each application is scrutinised using the criterion of structural necessity. Work would be strictly prioritised having regard to scarce funding. The repairs carried out at Wynnstay were not driven by the availability of funds. Funds would not have been released unless there was a need for the repairs. It is necessary to bid for funds each year.
35. In the context of known structural defects at Wynnstay, Kennedy were instructed to evaluate the current position and make recommendations. Defects were highlighted and opening up works carried out. Kennedy reported defects in the tile cladding and the flat roof. Following receipt of Kennedy's report, approval was obtained to secure contingent priority maintenance funding. The main reasons for Hyde committing themselves to the works were: Kennedy's diagnosis of the need to renew the flat roof at the end of its economic life; the danger to pedestrians due to the defective tile cladding; and the diseconomies of continuing with spot repairs. Hyde acted reasonably having regard to the need to address longer term maintenance obligations, their statutory duty and cost benefits. The works were reasonable and necessary to protect the long term interests of all parties. It is not reasonable that tenant funds, held by an organisation registered under charitable rules, should be required to fund leaseholder liabilities.
36. Essentially this dispute is concerned with a judgment regarding economic life cycles. The short term option of deferring repairs until complete or serious roof failure risked detriment to the structure and occupiers and would have resulted in wasted resources committed to short term repairs. Hyde do not dispute that this was an option but it was not in the best interests of Hyde and the tenants.
37. Hyde have shown a high standard of customer care and communication in dealing with the tenants. They have acted in good faith on professional advice. Agreement in this dispute has not been possible. Hyde have a duty to ensure that public sums are recovered to meet their charitable objectives. Hyde have to meet the repair costs in respect of the short leasehold flats.
38. I turn now to the evidence relating to each item of repair I look first at the tile cladding.

TILE CLADDING

Appellants' case

39. Mr Morris said that Kennedy referred in their report to "nail sickness" and other defects causing tiles to fall into unrestricted areas with the possibility that pedestrians might be struck. In cross-examination he was asked about delay in carrying out the works, the lack of temporary protective works and the lack of communication with the tenants warning them of the dangers. Mr Morris agreed that, with hindsight, more should have been done but denied that there was any ulterior motive in carrying out the replacement of the tiling. This work was executed on the recommendation of Kennedy. Mr Morris said that he relied solely on Kennedy's report regarding falling tiles; he has no contemporary written evidence of these occurrences.
40. Mr Pell said that Kennedy initially prepared a report dated 1 December 1994 which considered the works likely to be required at Wynnstay with recommendations and estimated costs. There are no references to tile cladding in this report.
41. On 5 May 1995 (revised 6 June) Kennedy prepared a report on defects noted during the opening up works. Paragraph 7 on page 7 states:

"A number of the hanging tiles to the high level facade details have fallen from their background and, additionally, the battens themselves would appear to be suffering from nail sickness since a significance number have dropped leading to vertical displacement of entire courses of tiles.

We would suggest that these areas are stripped and either re-clad with tile hanging or recovered with a sheet product such as Capeboard to replicate a concrete finish or a proprietary profiled sheet metal such as Met Tile giving the general appearance of tiling. ... we would feel optimistic that a sheeting material could possibly be adequately used in this location and anticipate that the costs for renewing the tile hanging and replacing the tile hanging with a sheet type material would be comparable."

Earlier in the report concern was expressed that tiles could be seen as dropping on to the ground below with the possibility that a pedestrian could be struck.

42. On 25 November 1998 Kennedy prepared a report on the issues raised by the leaseholders' surveyor. On tile cladding (page 3) this notes that, although these areas could readily have been locally repaired at minimal cost, it was agreed that, due to the height and exposed position of the building, high winds were regularly causing damage. Fallen tiles were noted on the grass and roof. Replacement of the tiling by metal cladding was primarily due to safety concerns. The metal cladding will be cheaper and more resilient to wind.
43. On 22 December 1998 Mr Pell prepared a report for the leasehold valuation tribunal hearing, which also formed part of his evidence in this appeal. The estimated cost of the new vertical metal cladding was £29.97 per square metre compared to £21.39 for the re-use of the existing tiling and battens and £38.12 for new tile cladding. The replacement of vertical tile cladding with larger monolithic metal sheeting is the most advisable treatment. Future maintenance costs would be significantly reduced. The tile hanging was the original tiling when the building was erected in 1976.

Respondent's case

44. Mr Lacey said that his inspections showed that the tile cladding was generally in satisfactory condition. Minor repairs only were necessary. These could have been carried out during normal maintenance. The replacement of the whole of the tile cladding was not a legitimate exercise. Photographs were put in evidence to support these conclusions. He did not notice any dangerous tiling on his inspections.

Decision

45. The question for my determination under this heading is: were the costs incurred by Hyde in the replacement of the tile cladding reasonably incurred under section 19(1)(a) and (2A)(a) of the 1985 Act? The leasehold valuation tribunal decided that these costs were not reasonably incurred. The burden of proof is on Hyde to persuade me that this decision is wrong.
46. I am satisfied that Hyde carried out the works in reliance on reasonable and competent professional advice. I received no evidence as to whether Hyde would have chosen this method of repair if they had to bear the whole cost, but I note Mr Gallagher's submission that Hyde have to bear 72% of the costs in respect of the flats which are not let on long leases. It is not contended that these works were required to comply with statutory requirements or regulations but Mr Morris and Mr Pell emphasised the dangers from falling tiles. In my view this concern for safety became more apparent after the works had been carried out. Mr Morris was unable to produce any contemporary evidence of safety concerns, no temporary repairs were carried out, restrictions on access to the areas under the tile cladding were not imposed, no warnings were given to the tenants of this danger and there was no particular urgency regarding the implementation of these repairs.
47. On the evidence before me I am not persuaded that the leasehold valuation tribunal were wrong to decide that the costs of the replacement of the tile cladding were not reasonably incurred. For the reasons set out in the preceding paragraph, I do not accept that considerations of safety rendered necessary the replacement of the whole of the tile cladding. I think that any danger has been exaggerated. I agree with Mr Lacey that minor repairs were all that were necessary. In their report of 25 November 1998 Kennedy acknowledge that the areas of defective tiling "could readily have been locally repaired at minimal costs." The complete replacement of the tile cladding was not reasonable and therefore the costs were not reasonably incurred. Hyde have failed to discharge the burden of proof and the appeal on this issue fails.

FLAT ROOF

Appellants' case

48. On 1 December 1994 Kennedy reported on defects found at Wynnstay. Their report noted that the asphalt roof was leaking in some places and that the majority of upstands were failing, possibly due to differential movement. It was suggested that, since the asphalt is in the most part relatively sound, the roofs should be the subject of high performance elastomeric felt.
49. On 5 May 1995 (revised 6 June) Kennedy prepared a report on the defects found during opening up works. Paragraph 8 on page 2 states:-

"The general condition of the asphalt coverings to the roofs was considered and it was noted that the roofs had been patched repaired on a number of occasions and that damp staining to the soffits below was apparent in a couple of areas."

Later in the report Kennedy noted that "only a few area of water penetration were noted from within the building". In many locations the asphalt was brittle and crazing and at the end of its economic life. It was recommended that it should be stripped up and the roof covered with a high performance elastomeric felt laid on insulation. A lightning conductor to the recently revised regulations should be provided, having regard to the exposed nature of the building. (paragraph 8 on page 7).

50. On 25 November 1998 Kennedy prepared a report on the issues raised by the leaseholders' surveyor. With regard to the roof (page 4) this stated that the economic life is no longer sustainable by patch repairs. There is continuing splitting, slumping at upstands, crazing and water penetration. The above recommendation of stripping the asphalt was replaced by patched repairs and overlay with elastomeric felt.
51. On 25 December 1998 Mr Pell prepared a report for the leasehold valuation tribunal hearing, which also formed part of his evidence in this appeal. Comparative costs were prepared: stripping up and renewing all asphalt, £36.54 per square metre; stripping up and renewing 25% of the roof, £11.94 per square metre; overlaying with Marley Gold Seal, £28.64 per square metre. Attention was drawn to increased future repair costs if only 25% of the roof is renewed.
52. The flat roof is original, dating back to 1976. Mr Pell said that the main area of the roof has an economic life of 30 years but the problem is centred on the differential movement of the roof beams which has caused cracking and splitting at the upstands. A new roof would be maintenance free for 20 years with a total life of 30 to 35 years with maintenance. The building did not have a lightning conductor. This is advisable but Mr Pell was unable to say whether it is compulsory.

Respondent's case

53. Mr Lacey agreed that the asphalt required further overhaul and repair but he did not agree that it is brittle and at the end of its economic life. Further surface repair and patching, together with the possibility of treating or coating with proprietary materials, would enhance and extend the life of the asphalt for many years. Mr Lacey agreed that stripping the asphalt and re-covering with elastomeric felt would be an improvement and would be preferable to the existing arrangement. This felt would more easily withstand differential movement. However, it would be sensible to restrict repair works to the overhaul of the present roof cover in the short to mid-term. There is no necessity for immediate replacement of the roof. Mr Lacey put the economic life of the original asphalt roof at 50 to 60 years.

Decision

54. The question for my determination under this heading is: were the costs incurred by Hyde in the renewal of the flat roof covering and the provision of a new lightning conductor costs reasonably incurred under section 19(1)(a) and (2A)(a) of the 1985 Act? The leasehold valuation tribunal decided that these costs were not reasonably incurred. The burden of proof is on Hyde to persuade me that this decision is wrong.
55. I am satisfied that Hyde carried out the works in reliance on reasonable and competent professional advice. I heard no evidence as to whether Hyde would have chosen this method of repair if they had been responsible for the whole of the cost. I note that Hyde had to bear 72% of the costs for the flats which are not let on long tenancies. It is not contended that the roof repairs were required to comply with statutory requirements or regulations, although it was suggested that the provision of a new lightning conductor was highly desirable and may have been required by statute or regulations, but no authority was given.
56. On the evidence before me I am not persuaded that the leasehold valuation tribunal were wrong to decide that the costs of the renewal of the flat roof covering and the provision of a lightning conductor were not reasonably incurred. I prefer the evidence of Mr Lacey that the roof covering had not reached the end of its economic life and that patch repairs would have been satisfactory for a few more years. The evidence shows that the disrepair was mainly to be found on the upstands and perimeter of the roof. There is little evidence of water penetration into the building. The complete re-covering of the flat roof and provision of a new lightning conductor were unreasonable and therefore the costs were not reasonably incurred. Hyde have failed to discharge the burden of proof and the appeal on this issue fails.

SCAFFOLDING AND PRELIMINARY COSTS

57. The leasehold valuation tribunal determined that an "element of scaffold and preliminary costs attributable to" the tile cladding, roof coverings, replacement of windows and smoke extraction (both not in issue in this appeal) was either excessive or not properly claimable (paragraph 52). This item is dependent on my decision on the tile cladding and roof coverings. In both cases I have found that I should not disturb the decision of the leasehold valuation tribunal and it follows therefore that I should not alter the decision of that tribunal disallowing part of the scaffolding and preliminary costs. The appeal on this issue fails.

APPELLANTS' COSTS UNDER SECTION 20C OF THE 1985 ACT

58. The leasehold valuation tribunal noted that Hyde have undertaken a considerable amount of work in presenting their case but much of it "related to items which the Tribunal have concluded should not reasonably form part of the service charge" (paragraph 55). Accordingly, the tribunal did not "consider that [Hyde] are entitled to any of their costs of proceedings under Section 20C of the Landlord and Tenant Act 1985" (paragraph 57). The tribunal determined (paragraph 59(ii)) that:-

"... for the purposes of Section 20C of the Landlord and Tenant Act 1985 [Hyde's] costs of proceedings should be limited to the extent before specified and that any additional charges are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the leaseholders."

59. I have found that I should not disturb the decision of the leasehold valuation tribunal on the tile cladding, flat roof and scaffolding and preliminary costs and it follows that I should not disturb their decision regarding the recovery by Hyde of their costs in the leasehold valuation tribunal under section 20C of the 1985 Act. Hyde, having failed in this appeal, it must follow that they cannot recover as relevant costs in a service charge any of their costs in the proceedings before this Tribunal. The appeal on this issue fails.

INTEREST

60. At the start of the hearing I refused leave for Mr Williams to appeal out of time from the decision of the leasehold valuation tribunal (paragraph 56) that interest on outstanding payments that would have been due from the tenants should be an allowable item of service charge. The reasons for this decision are: that Mr Williams did not seek leave from the leasehold valuation tribunal to lodge a cross-appeal on this issue; it does not form part of Hyde's statement of case or appeal (although it is referred to in Mr Williams's reply); it was not referred to by Mr Williams in his written response to Hyde's application to this Tribunal for leave to appeal. I am unable to say that the decision of the leasehold valuation tribunal on this issue may have been wrong. I have no evidence at all on this matter. Mr Gallagher submitted that I have no jurisdiction to give leave to appeal out of time in the absence of a prior application to the leasehold valuation tribunal for leave to appeal. This is an arguable point of law but Mr Gallagher did not elaborate on it in any detail and Mr Williams did not make submissions on it. In the absence of full submissions I make no decision on this point and rely on my discretion to refuse leave to appeal out of time on the assumption that I have jurisdiction, even though no application for leave to appeal was made by Mr Williams to the leasehold valuation tribunal.

CONCLUSION

61. For the reasons set out above I am not satisfied that the decision of the leasehold valuation tribunal issued on 18 January 1999 is wrong. I dismiss the appeal. In accordance with the order of this Tribunal dated 27 September 1999 Mr Williams cannot be responsible for Hyde's costs of this appeal in any event. He can seek his own costs. The above decision concludes my determination of the substantive issues in this appeal. It will take effect as a decision when the question of Mr Williams's costs is decided and at that point, but not before, the provisions relating to the right of appeal in section 3(4) of the Lands Tribunal Act 1949 and order 61 rule 1(1) of the Civil Procedure Rules will come into operation. The parties are invited to make submissions as to Mr Williams's costs of this appeal and a letter accompanies this decision setting out the procedure for submissions in writing.

DATED: 20 July 2000

(Signed: P H Clarke)

ADDENDUM

62. I have received written submissions on costs from both parties. In accordance with the order of this Tribunal dated 27 September 1999 Mr Williams cannot be responsible for Hyde's costs of this appeal in any event. He seeks his own costs in the total sum of £6,153.23. Hyde submit that there should be no order as to costs on the basis that they were endeavouring to further the objective of the organisation as a registered charity, a registered social landlord and an organisation registered as an Industrial and Provident Friendly Society. They also object to the amount claimed as excessive and as relating in part to matters outside the appeal to this Tribunal.
63. I have dismissed Hyde's appeal and I can see no reason why costs should not follow the event. There is, however, substance in their objection to the amount of costs claimed. This should be the subject of assessment by the Registrar.
64. Accordingly, I order Hyde to pay Mr Williams's costs of this appeal, such costs, if not agreed, to be the subject of a detailed assessment on the standard basis by the Registrar of the Lands Tribunal in accordance with Rules 44.4 and 44.7 of the Civil Procedure Rules. The procedure laid down in Rule 52 of the Lands Tribunal Rules 1996 shall apply to such detailed assessment.

DATED:

(Signed: P H Clarke)