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United Kingdom Upper Tribunal (Lands Chamber)
You are here: BAILII >> Databases >> United Kingdom Upper Tribunal (Lands Chamber) >> Mihovilovic & Anor v Leicester City Council [2010] UKUT 22 (LC) (28 January 2010)
URL: http://www.bailii.org/uk/cases/UKUT/LC/2010/LRX_135_2008.html
Cite as: [2010] UKUT 22 (LC)
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UPPER TRIBUNAL (LANDS CHAMBER) |
UT Neutral citation number: [2010] UKUT 22 (LC)
LT Case Number: LRX/135/2008
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LANDLORD AND TENANT – service charges – landlord self-insuring – whether cost could be included in service charge – held it could not – qualifying works – disaggregation – date of agreement – held LVT erred procedurally in considering these – appeal allowed – section 20C order made – case remitted – Landlord and Tenant Act 1985 ss 20, 27A and 20C – Service Charges (Consultation Requirements) (England) Regulations 2003 reg 7(5)
IN THE MATTER OF AN APPEAL FROM A DECISION OF THE LEASEHOLD
VALUATION TRIBUNAL FOR THE MIDLAND RENT ASSESSMENT PANEL
BETWEEN LINA MIHOVILOVIC
and
STOJANEA MIHOVILOVIC Appellants
and
LEICESTER CITY COUNCIL Respondents
Re: 225 Kashmir Road,
Leicester LE2 1NE
Before: The President
Sitting at 43-45 Bedford Square, London WC1B 3AS
On 14 January 2010
Mr Brian Hitchcock, solicitor, of Howells, solicitors of Leicester, for the appellants
Justin Bates instructed by Mrs M J Patel, Principal Legal Officer, Leicester City Council, for the respondent
© CROWN COPYRIGHT 2010
The following cases are referred to in this decision:
Leicester City Council v Master LRX/175/2007, BAILII: [2008] EWLands LRX_175_2007
Sheffield City Council v Oliver LRX/146/2007, BAILII: [2008] EWLands LRX_146_2007;
Akrumah v Hackney London Borough Council [2005] 1 WLR 985
The following further cases were referred to in argument:
Martin v Marylands Estates Ltd [1999] 2 EGLR 53
London Borough of Camden v Leaseholders of Flats at 30-40 Grafton Way LRX/185/2006, BAILII: [2008] EWLands LRX_185_2006
Daejan Investments Ltd v Benson LRX/148/2008, [2009] UKUT 233 (LC)
R v London Ealing Borough Council ex p Lewis (1992) 24 HLR 484
Shelley v London County Council [1948] 1 KB 274
London Borough of Brent v Hamilton LRX/51/2005, BAILII: [2006] EWLands LRX_51_2005
Norwich City Council v Marshall LRX/114/2007, BAILII: [2008] EWLands LRX_114_2007
Wembley National Stadium Ltd v Wembley London Ltd [2008] 1 P & CR 3
Arrowdell Ltd v Coniston Court (North) Hove Ltd LRA/72/2005, BAILII: [2006] EWLands LRA_72_2005
DECISION
1. In this appeal certain elements of a decision of the Leasehold Valuation Tribunal for the Midland Rent Assessment Panel under sections 27A, 20C and 20ZA of the Landlord and Tenant Act 1985 are called into question. The premises that are the subject of the appeal are a two-bedroom maisonette on the first and second floors of a block of flats, the freehold of which is vested in Leicester City Council, the respondents. The appellants are tenants under a lease dated 25 June 2001 for a term of 125 years at a nominal ground rent. The lease was granted pursuant to the right to buy provisions of the Housing Act 1985. I was told that over 600 leases in similar form had been granted.
2. The LVT had before it applications by the appellants under section 27A for a determination of liability to pay service charges for the years 2005/06 and 2006/07 and for an order under section 20C that the respondent’s costs in connection with the proceedings should not be part of any service charge; and an application by the respondent under section 20ZA for dispensation from the consultation requirements contained in section 20. There were in addition similar applications under sections 27A and 20C by the tenants of eight other flats. The LVT identified four issues for determination.
3. The first issue was whether the council were entitled under the terms of the lease to levy service charges in respect of work yet to be performed and to maintain a reserve fund for this purpose. The LVT determined that the council were so entitled, but they held that the amounts demanded were more than was reasonable and they accordingly determined amounts payable that were less than the amounts demanded. They refused the appellants permission to appeal on this issue, and on 2 January 2009 I refused their further application for permission on the ground that the point was now the subject of a decision of this Tribunal in Leicester City Council v Master (LRX/175/2007, 12 December 2008).
4. The second issue before the LVT concerned the reasonableness of (and the consequential liability for) the service charges relating to four matters – cleaning, door entry systems, waylighting and insurance – and it made its determinations in respect of each of these. It is only the determination in respect of insurance that is in issue in the present appeal. In the relevant years the council did not insure the premises or the building against fire and other causes of damage and destruction but chose instead to “self insure”, as it was put, and to include in the service charge an amount in respect of this self-insurance. The appellants’ contention was that the council were not entitled under the lease to include such an amount in the service charge, but the LVT rejected this contention. The appellants appeal on this matter with permission granted by the LVT.
5. The third and fourth issues concerned charges made for the costs of replacing doors and windows in the appellants’ flat and in communal parts of the building. The appellants contended that these works fell within the requirements of section 20(1) of the Landlord and Tenant Act 1985 and that there had not been the requisite consultation, so that their liability was limited to the prescribed £250. It appears to have been agreed that no consultation conforming with the requirements had been carried out. The LVT said that the contract under which the works were carried out was entered into before the date of the lease but held that section 20(1) applied because the relevant date for this purpose was the date when the works had been carried out, and this was after the date of the lease. The LVT treated as separate works for this purpose the replacement respectively of the individual doors, the individual windows, the communal doors and the communal windows. The consequence of this was that the works for the communal windows and the communal doors were exempt from the consultation requirements as the amount charged was less than the prescribed amount but that the consultation requirements applied to the individual doors and windows. It determined that dispensation under section 20ZA should be granted in respect of the windows but should not be granted in respect of the doors. It determined that the amount due for the individual doors was limited to £250, and it went on to determine the reasonableness of the amounts charged for the other works and the consequential liability of the appellants.
6. On the third and fourth issues the appellants appeal, with permission granted by me, in relation to the conclusion that the works for the communal doors and windows were outside section 20(1). Their contention is that the LVT erred in disaggregating the four elements of the works, which should instead properly have been treated as one set of qualifying works. The council contend that section 20(1) had no application because the contract for the works was entered into before the date of the lease and that the LVT erred in determining that the material date for this purpose was the date when the works were carried out; but that, if section 20(1) does apply and the works are to be treated as one, dispensation under section 20ZA should be given.
7. I will take first the insurance issue. The material provisions of the lease are as follows. Clause 3(2) of contains this tenant’s covenant:
“To pay on demand to the Lessor at such times and in such manner as the Lessor shall direct a fair proportion (to be determined from time to time by the Lessor’s Director of Housing) of the reasonable costs or estimated costs (including overheads) of any services incurred or to be incurred by the Lessor in observing and performing the provisions of sub-clauses (1) (2) (3) and (4) of Clause 4 hereof...so far as such costs are chargeable to the Lessee by the Lessor under the provisions of Part III of Schedule 6 of the Act...”
8. The Landlord’s covenants in clause 4 include these:
“(3) To ensure so far as practicable that any services which are provided from time to time by the Lessor and to which the Lessee is entitled (whether by himself or in common with others) are maintained at a reasonable level and to keep in repair any installation connected with those services
(4) To rebuild or reinstate as soon as reasonably practicable the Premises and the Building in case of destruction or damage by fire tempest flood or any other cause against the risk of which it is the normal practice to insure”.
9. Clause 1 defines “any services” in clause 3(2) and clause 4(3) to mean:
“...those services or costs specified in the Fourth Schedule hereto as may from time to time be varied by the Lessor under its powers contained in sub-clauses (g) and (h) of Clause 6 hereof so far as the same are applicable to this lease and the Premises in addition to those costs or estimated costs incurred or to be incurred by the Lessor in observing and performing the provisions of sub-clauses (1) (2) and (4) of Clause 4 hereof”
The list of services set out in the Fourth Schedule includes this:
“(D) The costs and expenses of insuring the Premises and the Building against the risks specified or referred to in sub-clause (4) of Clause 4 hereof”
10. The “provisions of Part III of Schedule 6 of the Act” to which reference is made in clause 3(2) are to the provisions that are applied by section 139 of the Act (the Housing Act 1985). The section provides:
“(1) A conveyance of the freehold executed in pursuance of the right to buy shall conform with Parts I and II of Schedule 6; a grant of a lease so executed shall conform with Parts I and III of that Schedule; and Part IV of that Schedule has effect in relation to certain charges.”
11. Paragraphs 14 and 15 in Part III of Schedule 6 have the sidenote “Covenants by the landlord”, paragraph 16 has the sidenote “Covenant by tenant”, and paragraphs 16A to 16 E, which were inserted by the Housing Act 1986, have the sidenote “Service charges and other contributions payable by the tenant”. I will refer to these provisions later. For the moment it is sufficient to note that paragraph 14(3) provides:
“There is an implied covenant that the landlord shall rebuild or reinstate the dwelling-house and the building in which it is situated in the case of destruction or damage by fire, tempest, flood or any other cause against the risk of which it is the normal practice to insure.”
And paragraph 16A(3) provides:
“Where the landlord does not insure against the obligations imposed by the covenant implied by virtue of paragraph 14(3), or, as the case may be, the superior landlord or other person does not insure against his obligations to the like effect, the lease may require the tenant to pay a reasonable sum in place of the contribution he could be required to make if there were no insurance.”
12. As I have said, during the years in question the council did not insure against the clause 4(4) risks but instead included in the service charge an amount in respect of their costs of bearing the risk themselves. It is the appellants’ contention that, although the lease permits the recovery of the costs of insurance, it does not permit the recovery of an amount that reflected the council’s costs of bearing the risks themselves. The LVT did not accept this contention. It determined that it was “immaterial whether the insurance is provided from commercial sources or is provided by the Council itself, i.e. self insurance.”
13. For the appellants Mr Brian Hitchcock submits that insurance involves the payment by one person to another of a premium for indemnity against insured risks. Self-insurance, he says, is not insurance, and he points to the provisions of paragraphs 14(3) and 16A(3) of Schedule 6 to the Act as showing this. Moreover, he says, while paragraph 16A(3) provides that the lease may require the tenant to pay a reasonable sum in place of the contribution he could be required to make if there were insurance, the provision is in terms permissive. If, as here, the lease does not so require, the tenant has no liability to pay such reasonable sum.
14. For the council Mr Justin Bates advances two arguments. Firstly, he says, the word “may” in paragraph 16A(3) does not confer a discretion on the council to include the covenant referred to because under section 139 there is an obligation to include it. He relies on the decision of this Tribunal in Sheffield City Council v Oliver LRX/146/2007 as showing that, even though not included in the lease, the covenant applies by force of statute. The word “may” has been used, he says, because there are two circumstances in which paragraph 16A(3) may be excluded: with the consent of the county court prior to the grant of the conveyance under paragraph 14(4); and under paragraphs 14(3A) and 15(3) where the council are only a leaseholder and the head lease prevents them from carrying out the obligations that would be imposed by Schedule 6.
15. Mr Bates’s second contention is that, even if a covenant is not to be implied under paragraph 16A(3), nevertheless on a proper construction of the lease the council are entitled to make a charge for self-insurance. As a local housing authority, he says, they have wide powers to manage their housing stock as they think fit (and he refers in this respect to Akrumah v Hackney London Borough Council [2005] 1 WLR 985), and it would not be consistent with the existence of these wide powers if individual leaseholders were able to demand that insurance must be provided in a particular manner or with a particular provider. Relying on the decision of this Tribunal (Judge Huskinson) in Leicester City Council v Master, which concerned a similar right to buy lease, he says that clause 3(2) should be given a generous and wide interpretation. The provisions of the lease should be construed having regard to the council’s wide powers of housing management and the fact that this is a right to buy lease. There is no reason, he says, why administrative and logistical costs of a self-insurance would not be a service “incurred or to be incurred by the Lessor in observing and performing” the provisions of clause 4(4). Accordingly the LVT was right to conclude that it was immaterial whether provision was made for insurance via a private company or via a self-insurance scheme.
16. I accept the case advanced by Mr Hitchcock, and I reject both of Mr Bates’s contentions. The first contention that there is an implied covenant that takes effect by force of section 139 of and Schedule 6 to the Act creating a liability to pay the council’s costs of self-insurance is, in my judgment, one that is simply not open as a matter of statutory construction. Paragraph 16A(3) is expressly permissive in its terms. It enables provision to be made in the lease requiring the tenant to pay a reasonable sum where the landlord chooses to self-insure, but it does not require such a provision to be made or imply a covenant as to such payment.
17. The permissive words that appear in paragraph 16A are in contrast to the mandatory provisions of the preceding paragraphs, 14, 15 and 16. I have quoted paragraph 14(3) which says that there is an implied covenant that the landlord shall rebuild or reinstate in the event of destruction by fire, etc. Thus, whatever the provisions of the lease may be, there is a covenant on the landlord’s part to this effect that is implied by force of the Act. The words “There are implied covenants” or “There is implied a covenant” also appear in paragraph 14(2), 15(2), 15(4) and 16, and it was in relation to the covenant implied in paragraph 14(2)(a) that I said in Sheffield City Council v Oliver that the covenant applied by force of the statute whatever covenants might be included in the lease. Here the lease does include a covenant that is almost the same, but not quite the same, as that implied in paragraph 14(3) The covenant in clause 4(4) differs in that it includes the words “as soon as reasonably practicable”. If those words in any way diminish the requirement of the words expressed in the paragraph 14(3) implied covenant (although I do not suggest that they do), they would be of no effect: the statutory covenant would be implied and it could not be diminished in effect by the terms of the lease.
18. Paragraphs 16A to 16E, as I have said, were inserted by the Housing Act 1986. If the draftsman had intended to provide that covenants were to be implied he would clearly have followed the formulation of the preceding paragraphs, with any exceptions that might be necessary being specified. Instead, by using the permissive “may”, he created a contrast with what had gone before, and it is in my view inconceivable that this would have been done unless the intention had been to give the landlord a discretion whether or not to impose a requirement to pay a sum in respect of self-insurance. The fact that section 139(1) provides that a right to buy lease “shall conform with” Part III of Schedule 6 does not assist the council’s contention. If paragraph 16A(3) gives the landlord a discretion whether or not to impose a requirement to pay a sum in respect of self-insurance and he does not do so, the lease does not fail to conform with Part III of Schedule 6 on this account.
19. Mr Bates’s alternative submission is equally unsustainable, in my judgment. I have no doubt that the council have power if they wish to bear the risks of their obligations to rebuild and reinstate under a covenant such as that in clause 4(4); and indeed paragraph 16A(3) recognises this. The lease makes specific provision under clause 3(2) and paragraph (D) of the Fourth Schedule requiring the tenant to pay the council’s costs of insuring against the clause 4(4) risks. That provision was necessary because the clause 4(4) obligation is not to insure against the risks but to rebuild or reinstate in the event of certain occurrences. It is implicit, however, in the power that is given to the landlord to charge for the costs of insurance that the tenant is not liable to pay the costs of rebuilding or reinstatement should that be required. But if the council do not insure but decide to bear the risks themselves, any payment sought in respect of the costs of such so-called self-insurance would not be a payment for costs of the services provided or to be provided under clause 4(4). The services are rebuilding and reinstatement, and there is no suggestion that if rebuilding or reinstatement is not required any amount paid in respect of the council’s self-insurance would be refunded.
20. It may well be that the LVT considered that the appellants’ case on self-insurance payments was unmeritorious. But it is in my view inescapable that if the council have failed to include a paragraph 16A(3) requirement in the lease and they decide not to insure, they cannot charge a tenant the an amount in respect of their own risk-bearing. The appellants’ appeal on this point succeeds.
21. The third matter that arises in the appeal concerns the issue of whether section 20(1) applies to the works for the replacement of doors and windows. The LVT reached three key conclusions on this matter: that the works should be treated for the purposes of the statutory provisions and the Regulations made under them as four separate qualifying works; that the contract under which the works were done was awarded before the date of the lease; and that the relevant date for the purposes of the application of the provisions was the date when the works were carried out, and this was after the date of the lease.
22. Mr Hitchcock submits on the first conclusion (on disaggregation) that it was wrong on the facts as a matter of law; or alternatively that reaching it without inviting the applicants to address the matter was an error of procedure that has prejudiced them. On the date of the contract he says that this was not a conclusion that it was open to the LVT to reach on the material before it. On the relevant date it is the contention of the council that the LVT was in error and that the relevant date is the date of the contract. Mr Bates accepts this; and it is this error that makes the first conclusion and second conclusion (on the date of the works contract) of crucial importance.
23. The LVT identified the amounts claimed by the council in respect or the works in paragraph 22 of its decision. It said:
“During the year 2006/7 the Council removed from the Repairs Account the sum of £3,896.57. This work is stated to be in connection with the replacement of the windows and doors, both those individual to the First Applicants’ Property and communal replacements for the Block. In fact, from a perusal of the Council’s breakdown provided to the First Applicants the figure of £3,896.57 is made up as follows:
|
Individual Windows |
£2516.80 plus 10% |
£2,768.48 |
|
|
Individual Doors |
£ 647.99 plus 10% |
£ 712.79 |
|
|
Communal Windows |
£ 200.40 plus 10% |
£ 220.44 |
|
|
Communal Doors |
£ 70.64 plus 10% |
£ 77.71 |
|
|
Communal roof |
£ 0.70 plus 10% |
£ .77 |
|
|
Communal Waylights |
£ 7.81 plus 10% |
£ 8.59 |
|
|
Individual heating |
£ 98.00 plus 10% |
£ 107.80 |
|
|
TOTAL |
|
£3,896.58 |
(1p discrepancy) |
There are no representations from either party with regard to the last three items. Accordingly the Tribunal make a determination in respect of the first four items only, which amount in total to £3,779.38.”
24. On disaggregation the LVT said this at paragraph 24:
“From the list above it is clear that there are four separate items of charge relating to the windows and doors. Neither party has addressed directly the issue of whether the four items should be treated as one ‘qualifying work’ for the purposes of the Regulations. As the Council’s breakdown referred to in paragraph 22 refers to ‘Windows Programme 2006/2007’ and separately to ‘Doors Programme 2006/2007’ the Tribunal hold that each of the four items are separate ‘qualifying works’ for the purpose of the Consultation Regulations. The charges for the Individual Windows and the Individual Doors are each in excess of the financial requirements contained in the Regulations (£250 per leaseholder), and the Tribunal determine that prima facie the Consultation requirements apply to both of these items. The Communal Windows and the Communal Doors are both exempt from the regulations as the charges in respect of each of them are below the financial limits.”
25. Mr Hitchcock submits that the LVT erred in disaggregating the four elements of the works. All the work was done under one contract: it was all of a similar nature; and it was all done in the course of a few days in October 2006. In these circumstances, he says, it is only appropriate to treat it as a single qualifying work for the purposes of section 20. In addition Mr Hitchcock submits that, in any event, the decision of the LVT was procedurally flawed in that it reached its conclusion on this matter without any reference to the parties. I will take the latter contention first.
26. Mr Bates’s response to this contention is that it was for the appellants to satisfy the LVT that the council had been under a duty to consult and, if their contention was that the works were a single qualifying work, it was for them to state and make good that contention. They had simply failed to take the point. I was at one stage attracted by this response, but a consideration of the documents in the case, to which Mr Hitchcock draws attention, shows that the approach of the appellants throughout had been to treat the works as a single qualifying work and that the council had not disagreed with this approach.
27. The section 27A application to the LVT asserted that the council had failed to carry out the consultation procedure in respect of “PVC doors and windows” and a price (£3,700) that related to these. Pursuant to directions made by the LVT chairman on 17 March 2008 the appellants solicitors prepared a Scott schedule of the items to be considered in the section 27A application. In Part 2 there is a single item entry “Repairs” and a single amount “£3,896.57”. Although the first column contains numbers 9 to 13 these do not relate to separate elements of the repairs or the amount. The “Lessee’s Comment” said this:
“It appears from the service and repair charge accounts sent to me on 10.09.07 that £1,200 was spent on the replacement of the doors and windows to the common parts and £3,481.27 on the doors and windows to my own flat.
Since there are 6 flats in the building, the total costs of the work would appear to me to be £22,087.62 ((6 x £3,481.27) + £1,200.00).
If so, the expenditure must fall within section 20 of the Landlord and Tenant Act 1985 as major expenditure upon which there should have been prior consultation.
It cannot be only my share of the costs of the work on the common parts that is taken into account in considering whether the works were qualifying works for the purposes of the section.
It must be my share of the total costs.
Nor can I see any basis on which the City Council might ask the Tribunal to retrospectively exempt the City Council from the consultation requirements.”
The calculation there set out appears to be erroneous in multiplying by 6 the amount spent on the doors and windows to the appellants’ flat, but the contention being advanced is clear: the works to the individual and communal doors and windows fall to be treated as one for the purposes of section 20.
28. The “Lessor’s Comment” said;
“The manufacture and installation was undertaken by the lessor’s DSO Window Unit. This contact (sic) was awarded to the DSO Window Unit following a competitive tender prior to the granting of the lease.
The estimated cost of replacing windows and external doors was detailed on the Secure Tenant’s Right to Buy Landlords’ Offer Notice (Section 125 Housing Act 1985) dated 15th January 2001.”
The comment then went on to deal with adjustments made to the costs and the apportionment of contributions.
29. It is in my judgment clear from these entries in the Scott schedule that the lessee’s contention was that the works should be treated as one, rather than that the communal doors and windows should be treated separately from the individual doors and windows. It is also clear that the council were not disagreeing with this. Indeed they referred to the “manufacture and installation” without any distinction between doors and windows and the individual and the communal, and they referred also to the DSO Window Unit contract as a single contract. The purpose of the Scott schedule was to identify the differences between the parties and their contentions in relation to these. The respective comments established that the applicant said that the communal and individual works should be treated as one for the purposes of section 20 and that the council did not disagree with this.
30. In their application for dispensation under section 20ZA of the Landlord and Tenant Act 1985 the council identified the qualifying works as “Installation of UPVC windows and external doors under the Leicester City Council’s programme of improvement to Council owned properties manufactured/ installed by Leicester City Council DSO Section.” Thus no distinction was drawn between doors and windows or the communal and the individual. And at no point thereafter did the council seek to contend that the works should be disaggregated. Their skeleton argument did not address the matter, nor, it appears, was anything said at the hearing about it – unsurprisingly in view of what had gone before.
31. Mr Bates says that the papers show that the council had accounted for the various works items individually, that the section 125 notice dealt with the items separately and that, following the completion of the works, their quality was assessed separately. The LVT based its conclusion that the works should be treated a four separate works on the council’s breakdown that it set out in paragraph 22 of its decision. That seems to me to be far from conclusive that the council were treating the items as separate works. It was a breakdown of the total that they were seeking to charge. Clearly a single works agreement may well descend into detail in its pricing. Similarly section 125A provides for works to be “itemised” in the section 125 notice, with the likely of “each item” being given, and the appellants’ 125 notice provided such estimates under the heading “Details of works”. A single qualifying work may well embrace a number of items and its components may be set out as details. Finally the degree of detail that might be considered appropriate in order to make a proper assessment of works that have been completed gives no indication at all as to whether they constitute one or more qualifying works.
32. In these circumstances in my judgment it was not open to the LVT as a matter of procedural fairness to reach a conclusion on disaggregation that conflicted with what on the face of it was the approach of both parties without warning the appellants that it might do so and giving each of them an opportunity to address the matter. That was a procedural error that has substantially prejudiced the appellants. The appeal must succeed on this ground.
33. I have considered also whether, in these circumstances, it was even open to the LVT to make its determination on disaggregation. The LVT in these proceedings was determining an inter partes dispute. Where parties have expressly agreed a matter the LVT has no jurisdiction to make a determination contrary to such agreement. Here, however, although it seems clear that both parties were approaching the issues on the basis that there was a single qualifying work, there was no agreement between them to this effect. Consequently, I think, the LVT was not precluded from considering the matter; but before doing so it was undoubtedly necessary that it should give the parties an opportunity to advance submissions upon it.
34. I turn then to the LVT’s conclusion on the date of the works contract. It was the council’s contention that the consultation requirements of section 20 did not apply to any of the works by reason of the provisions of regulation 7(5) of the Service Charges (Consultation Requirements) (England) Regulations 2003. Regulation 7(5) provides:
“In relation to a RTB tenant and particular qualifying works, nothing in paragraph (1), (2) or (4) requires a landlord to comply with any of the consultation requirements applicable to that agreement that arise before the thirty-first day of the RTB tenancy.”
35. Mr Hitchcock points out that the drafting of this paragraph is imperfect because it does not state what “that agreement” means. But the parties and the LVT appear to have treated it, in my view correctly, as referring to the agreement under which the works were carried out. The thirty-first day of the appellants’ RTB tenancy was 26 July 2001, so that if the agreement under which the works were done was entered into before that date the consultation requirements would not have applied to them. At paragraph 27 of its decision the LVT reached this conclusion:
“It was established after the hearing that the contract in favour of the Direct Contract department of the Council was awarded before the date of the lease.”
Having reached this conclusion, the LVT did not say in terms that in consequence the consultation requirements did not apply to the works. As it made clear in paragraph 31 it regarded the matter as immaterial:
“The Tribunal…also determine that the fact that the contract granted to the Council’s Direct Contract section was made before the date of the Lease is irrelevant. It is the date the windows were installed which is the relevant date.”
36. As I have said, the parties agree that this last conclusion is wrong in law. It is Mr Bates’s contention, however, based on the LVT’s conclusion at paragraph 27, that the date of the agreement under which the works were carried out was before the the thirty-first day of the RTB tenancy and therefore the council were under no requirement to consult.
37. The background to the conclusion in paragraph 27 is this. It appears that after the hearing the LVT requested further information from the council. One of the items on which information was requested was the date of the “DSO contract”. In a letter to the LVT dated 9 June 2009 the council’s legal officer said:
“The DSO contract was awarded on the 1st October 1998. As mentioned at the hearing on the 3rd June 2008, this contract expires on the 30th June 2008 and notices to comply with s. 20 of the Landlord and Tenant Act 1985 (as amended) have been sent to all lessees in respect of a proposed new contract.”
38. On 13 June 2009 Mr Hitchcock wrote to the LVT with his comments on the council’s letter. He made clear his contention that the date when the contract was entered into was a matter of significance. If the contract was entered into before the coming into force of the Service Charges (Consultation Requirements) (England) Regulations 2003, he said, the consultation requirements would be those in Schedule 3 of the Regulations; if after, the consultation requirements would be those in Part 2 of Schedule 4. He went on:
“If it is found that there were consultation requirements, it may be relevant to the Tribunal’s decision on the City Council’s application for an order dispensing with them what the consultation requirements in fact were.
This being so, and while I do not for one moment accuse the City Council of mis-stating the position, I would again respectfully ask the Tribunal to request a copy of the contract.
What the City Council say is that ‘The contract was awarded on 1st October 1998’.
It may be that that contract committed the City Council’s DSO to replace the doors and windows on the relative building at a stated cost and at a stated time in the future.
If so, it could properly be said that the contract for the replacement of the doors and windows in my clients’ building was entered into before the one of them acquired her lease.
It may equally be that the contract was a framework contract providing for the City Council’s DSO to carry out door and window replacement works from time to time as required by the City Council without specifying the particular buildings on which the works were to be done but leaving that to be determined at a later stage.
If so, it would in my submission not be till the contract was awarded or a purchase order raised for the works on the building containing my clients’ flat that it could properly be said that there was a contract for the qualifying works in issue.
I hope I make myself clear but I should be happy to provide further explanation, if required.”
39. In its decision the LVT did not address the question that Mr Hitchcock had raised in his letter, possibly because, as it said in paragraph 31 of its decision, it considered the date of the contract to be irrelevant. I am not sure that its conclusion in paragraph 27 was intended to be to the effect that the DSO contract constituted, for the purposes of regulation 7, the agreement under which the works were carried out. But in any event, by failing to consider the matters that Mr Hitchcock had raised in his letter, the LVT made a procedural error that has substantially prejudiced the appellants, and the appeal must be allowed on this ground also.
40. The appeal is allowed. The council were not entitled under the terms of the lease to include in the service charge an amount in respect of their costs of bearing the insurance risks themselves; and the LVT was in error in failing to invite submissions on the disaggregation question and in failing properly to address the question of the date of the works agreement. The parties were agreed that if I concluded as I have done on the procedural errors that the case should be remitted to the LVT. Depending on its conclusion on the date of the works agreement, it will be for it to re-consider, therefore, whether the works constituted a single qualifying work or two works or four works and, if it reaches a different conclusion on this from that in its original decision, to consider afresh the question of dispensation under section 20ZA.
41. There is also before me an application by the appellants under section 20C for an order that the costs incurred by the respondent in connection with the proceedings in this Tribunal are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by them or any other of the council’s leaseholders. In view of my decision that the appeal should be allowed it is in my view appropriate to make such an order, and I do so.
Dated 28 January 2010
George Bartlett QC, President