UT Neutral citation number: [2010] UKUT 402 (LC)

LT Case Number: LRX/112/2009

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

LANDLORD AND TENANT – service charges – appeal by way of rehearing following review of LVT decision – concierge and on-costs 2005/6 – appeal dismissed – miscellaneous items 2005/6 – appeal allowed – figure determined by LVT increased from £13,052.41 to £15,884.36.

IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE LEASEHOLD

VALUATION TRIBUNAL FOR THE LONDON RENT ASSESSMENT PANEL

BETWEEN PEVEREL OM LIMITED Appellant

and

(1) ANDREW STEPHEN WERNICK

(2) JENNY ISABELLA WERNICK Respondents

Re: The Heights

Gerry Raffles Square

London

E15 1BQ

Before: N J Rose FRICS

APPEAL DETERMINED ON WRITTEN REPRESENTATIONS

DECISION

Introduction

1.           This is an appeal by Peverel OM Limited (the appellant) against the decision of the Leasehold Valuation Tribunal for the London Rent Assessment Panel (the LVT), determining the amount of service charges payable for the years ending 31 August 2006 and 31 August 2007 under section 27A of the Landlord and Tenant Act 1985 (the Act).  The charges relate to The Heights, Gerry Raffles Square, London, E15 1BQ (the appeal property), a block of 139 residential flats, all of which are held on long leases, together with two restaurants on the ground floor.  The premises were converted and extended by Barratt Homes Limited who, on completion of the development, sold leases of the individual flats.  Under these leases the appellant was appointed the manager for the whole of the premises.  The respondents, Mr Andrew Wernick and Mrs Jenny Wernick, jointly own three flats in the block, Nos. 98, 124 and 139.  Each flat is sub-let under an assured shorthold tenancy.

2.           On 12 August 2010, following an oral hearing of the appeal by way of review, I dismissed the appeal on two issues, relating to window cleaning and gardening costs and to redecoration costs.  I allowed the appeal on the remaining two issues and directed that the consequential rehearing of those issues be conducted by written representations unless either party requested a further oral hearing.  The appellant has made written representations, to which the respondents have replied.  In the absence of a request for a further hearing I have considered the written submissions and this is my decision on the remaining issues.

Issue 1 – Concierge and on-costs 2005/6

3.           The Appellant charged the lessees £43,035.75 for this item and the LVT decided that a reasonable figure was £30,904.16, that is a reduction of £12,131.59.  The Appellant submits that all the amounts charged related to expenditure reasonably incurred. 

4.           Mr Wernick points out that the amount charged was substantially in excess of the figure originally estimated by the Appellant (£29,500).  He says that petty cash vouchers for various items, totalling £85.69, were either not supported by invoices, or the invoices provided were illegible.  In addition he says that a Woolworth top-up receipt for £10.00 contained no mobile telephone number and should therefore not be included and that the expenditure of £93.85 on Christmas vouchers should not be charged to the service charge account.

5.           The Appellant argues that adequate supporting documentation has been produced for these items.  I consider that the expenditure on staff Christmas vouchers was reasonable.  Otherwise I accept the submissions made by Mr Wernick.  I find that £95.69 of the total claimed for petty cash was not reasonably incurred. 

6.           Mr Wernick also questions the total of approximately £290.00 charged for the purchase of thirteen cartridges.  He says that the use of more than one cartridge a month for a concierge’s office seems excessive.  In the same period only a small quantity of paper was purchased.  He suggests that three cartridges would be consistent with such paper consumption and that the use of Leighton Maintenance to supply cartridges was unjustified.

7.           In response the Appellant points out that there is one printer and one fax machine used by the concierge for printing letters, notices and circulars for 139 flats as well as correspondence with third parties and contractors when necessary.  Mr Wernick replies that most communications would be from the estate manager, who is not located at the development, rather than from the concierge.  He says that he has been told informally that the concierge at the relevant time was a student, who did a large amount of printing in connection with his own studies, presumably using his own paper.  He points out that the cost of only six cartridges was included in the accounts for 2007/08.  I agree that the number of cartridges used seems excessive in the light of all the evidence.  I find that it would be reasonable to include the cost of six cartridges at £20 each.  I determine that £170 of the amount charged for this item (£290-£120) was not reasonably incurred.

8.           The total charged to the tenants included £14,312.72 in respect of the cost of employing agency staff.  Out of this sum, a total of £6,051.93 was charged by the Appellant itself through six invoices, issued between 31 October 2005 and 31 August 2006.  Mr Wernick points out that, in contrast to the invoices submitted in July 2006 by Spring Personnel, the Appellant’s invoices did not detail the names of staff employed, hours or dates worked, rates of pay, or the role or duties performed by the staff members.  Moreover, the Appellant did not win the contract for the supply of agency staff through a proper selection process, and had not demonstrated how it had put in place safeguards to deal with its conflict of interest and ensure costs were reasonable.

9.           The Appellant replies that the invoices related to the use of agency staff, whom it employed to cover sickness and holidays of the permanent staff including the concierge and cleaners.  Whilst the Appellant had sickness cover in place, this was limited to a maximum of £330.00 per week for a maximum of 26 weeks, with the first five days deducted from each claim.

10.        I agree with Mr Wernick that the information contained in the Appellant’s own invoices is wholly inadequate to enable one to judge whether the amounts charged are reasonable.  I find none of the amount claimed of £6,051.93 was reasonably incurred.

11.        The Appellant submits that it is entitled to charge the sum of £5,893.68 for various agency staffing costs, in respect of which it submitted five invoices between 31 January and 31 March 2006.

12.        Mr Wernick says that it is difficult to believe that the total of £5,551.81 charged in 2 of the invoices was reasonably spent on concierge agency staff in just one month.  In support of this submission he produced a detailed criticism of the figure by reference to salaries paid in other months and the hourly rate charged by another agency used by the Appellant.  I do not need to consider those criticisms in detail.  The short answer to the Appellant’s claim is that, in the absence of supporting documentation, invoices submitted by the Appellant to itself which are stated to relate simply to “agency staff recharge Jan 06” or “agency staff Jan hrs paid Feb 06” are wholly inadequate to establish that the amounts claimed were reasonably incurred.  A similar objection by Mr Wernick is justified in respect of the Appellant’s invoices dated 31 March 2006 (“Board development signs”), 31 March 2006 (“agency staff income Feb hours paid March 06”) and 28 February 2006 (“site staff training Feb 06”).  I determine that none of the amount claimed of £5,893.68 was reasonably incurred.

13.        The Appellant also claims £28.33, which it says is the premium paid for employer’s liability insurance.  In the Scott Schedule prepared for the LVT hearing Mr Wernick objected to this item on the grounds that no invoice or any other supporting documentation had been provided.  The Appellant’s response was as follows:

“Accruals and prepayments are the methods of ensuring costs and income relate to the new year, but the prepayments do.”

14.        In its submission prepared for this appeal, the Appellant’s case on this item was expressed as follows:

“The Respondent also disputed the employer’s liability cover.  The Appellant submits that this is a requirement and submits that this cost in the sum of £28.33 is reasonable.”

15.        I agree with Mr Wernick that, in the absence of any supporting documentary evidence, the Appellant has not shown that this item of claim was reasonably incurred and I so find.

16.        The LVT disallowed a total of £12,131.59 of the total claimed for concierge and on-costs.  I have found that a higher figure (£95.69 + £170.00 + £6,051.93 + £5,893.68 + £28.33 = £12,239.63) was not reasonably incurred.  The appeal against the LVT’s decision on this head of claim therefore fails.

Miscellaneous items 2005/6

17.        In my decision dated 12 August 2010 I found that, in addition to general repairs, CCTV maintenance and pest control, paragraph 60 of the LVT’s decision related to the maintenance of landscaped areas and plant and machinery.  My decision to allow the appeal on miscellaneous items for 2005/6, therefore, included the two latter items as well as those specifically mentioned in paragraph 60.  Mr Wernick has sought to argue that they must be excluded from the current rehearing.  I reject that submission for the reason put forward by Mr Carr at the review hearing, set out in paragraph 13 of my decision and accepted in paragraph 17.  In addition to those items, I allowed the appeal on general repairs, to which I now turn. 

General repairs

18.        The amount claimed for general repairs totalled £10,159.37, of which the LVT disallowed £2,290.47.  This head of claim relates to some 30 separate invoices.  The Appellant’s justification for these items and Mr Wernick’s criticisms of them were set out in detail in the Scott Schedule produced at the LVT.  The parties have referred to those arguments in their submissions on this appeal, and they have both made further representations on several of the amounts claimed.  I have carefully considered all the representations made.  I find that, with two exceptions, the Appellant has shown that the amounts claimed were reasonably incurred.  The exceptions are items 1.12.2 and 1.12.3 on the Scott Schedule, for which no invoices have been provided.  The total claimed for these items was £333.70.  I determine that the reasonable costs of general repairs amounted to £9,825.67.

Landscaping

19.        The items claimed under this heading in the Scott Schedule were as follows:

20.        I have considered the parties’ submissions on these items put forward in the Scott Schedule and subsequently for this appeal.  The first item was conceded by the Appellant.  I am satisfied that the remaining items, totalling £714.23, were reasonably incurred and are properly payable.

Plant and Machinery

21.        The following items were claimed:

Pumps, heating systems and electronic gates £138.58

Water leak to flat 94 £411.25

22.        I am satisfied on the evidence that the first item claimed was reasonably incurred.  The Appellant accepts that the figure of £411.25 should not have been included in the service charge, but asserts that it was credited back into the accounts in 2007.  Mr Wernick contends that no such credit has been made and submits documentary evidence in support.  I accept Mr Wernick’s submission.  The total payable for plant and machinery maintenance is therefore £138.58.  The appeal on the miscellaneous items issue is allowed.  I determine that the LVT’s figure of £13,052.41 should be increased to £15,884.36, calculated as follows:

23.        The appeal on concierge and on-costs is dismissed.  The appeal on miscellaneous items is allowed.  In their response to the Appellant’s submissions the Respondents request an award of costs in the sum of £1,000.  They also apply for an Order under section 20C of the Act.  If the Appellant resists either or both of these applications it must file a copy of its representations with the Tribunal within 14 days of the date of the letter accompanying this decision and send a copy to the Respondents.  Any counter-representations by the Respondents must be filed within a further 7 days and copied to the Appellant.

Dated 15 November 2010

N J Rose FRICS