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United Kingdom Upper Tribunal (Lands Chamber)
You are here: BAILII >> Databases >> United Kingdom Upper Tribunal (Lands Chamber) >> Wilson v Lesley Place (Maidstone) Ltd RTM Company Ltd [2010] UKUT 139 (LC) (13 May 2010)
URL: http://www.bailii.org/uk/cases/UKUT/LC/2010/LRX_140_2008.html
Cite as: [2010] UKUT 139 (LC)
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UPPER TRIBUNAL (LANDS CHAMBER) |
UT Neutral citation number: [2010] UKUT 139 (LC)
LT Case Number: LRX/140/2008
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LANDLORD AND TENANT – service charges – liability – acquisition by RTM company – service charges including contributions to reserves – whether tenant entitled to set off against service charges payable to RTM company amounts paid to landlord after the date of acquisition in respect of service charges for previous years – held she was not – appeal dismissed – Commonhold and Leasehold Reform Act 2002 s 94
IN THE MATTER OF AN APPEAL AGAINST A DECISION OF LEASEHOLD VALUATION TRIBUNAL FOR THE SOUTHERN RENT ASSESSMENT PANEL
BETWEEN JUDITH ELIZABETH WILSON Appellant
and
LESLEY PLACE (MAIDSTONE) LTD
RTM COMPANY LIMITED Respondent
Re: Flats 4, 7, 11 &12 Claire House,
Flats 3, 4, 8 & 11 Ruth House,
Flats 4, 7, 8 & 12 Carrie House,
Maidstone, Kent ME16 0UD
Before: The President
Sitting at 43-45 Bedford Square, London LWC1B 3AS
on 5 May 2010
Nicholas Grundy instructed by Holden & Co, solicitors of Hastings, East Sussex, for the appellant
Adam Chambers instructed by Susan Heads & Company, solicitors of Chislehurst, Kent, for the respondent
No cases referred to.
DECISION
Introduction
1. This is an appeal, conducted by way of review with permission having been given by this Tribunal, against the decision of a leasehold valuation tribunal that the appellant was not entitled to set off against unpaid service charges such part of an amount previously paid by her as she claimed represented reserves for future service charge costs. The facts, other than those relating to the nature and content of the previous payment, are not in dispute.
2. G & O Rents Ltd is the owner of a residential development of 56 flats at Maidstone, Kent. The flats are let on leases which are in similar terms and provide that in addition to the rent each tenant must pay a maintenance charge of 1.78% of the estimated expenditure to be incurred by the landlord each year. There is provision that as part of the maintenance charge the landlord may take into account expenses that it considers may be incurred up to seven years ahead in order to avoid excessive fluctuations in the charge from year to year. The amount taken into account for future expenditure is known as the reserves.
3. Until 31 December 2004 the managing agent of the property was Urbanpoint Property Management Limited. On 1 January 2005 Lesley Place (Maidstone) RTM Company Limited acquired the right to manage the property. At that time the appellant was the tenant of 12 out of the 56 flats, and she acquired the lease of a further flat in March 2007.
4. On 5 August 2004 the landlord applied to the LVT under section 27A of the Landlord and Tenant Act 1985 for a determination of the liability of a number of tenants to pay service charges in respect of flats on the estate. The appellant was one of the tenants and the 12 flats of which she was the tenant were among the flats to which the application related. At a pre-trial review on 16 February 2005 the appellant’s husband, Mr Fergus Wilson, and the representative of Urbanpoint informed the tribunal that agreement had been reached on the sum of £650 as the service charges to be paid for each of the six years 1999 to 2004 in respect of each flat. Urbanpoint withdrew the application in respect of the appellant’s flats and other flats for which similar agreements had been made.
5. In its decision on 8 July 2005, which related to the flats to which the application remained outstanding, the LVT determined the service charges payable for each of the five years 1999 to 2003. The total amounts for the years 2001, 2002 and 2003 each included an amount, £14,000, for “General Reserve”. The total amount for the five years when divided by 56 and by 5, came to £653.78.
6. On 8 September 2005 Urbanpoint wrote to Mr Wilson (in reply to a letter from him to G & O Rents Ltd, which was not produced). In it Urbanpoint said:
“The LVT have dealt with accounts for the period 01/01/99 to 31/12/03. The opening balances are due from your client as clearly identified in our correspondence of 16/05/02, subsequent account statements and reminders.
We have credited an amount of £239.76 to each one of the eleven Flats. This is made up of actual expenditure for the period 01/01/99 to 31/12/04 less the amount agreed of £650.00 pa for this period. The actual expenditure as per the service charge statements supplied to your client for each Flat for the six year period is £4,139.76 less the agreed amount of (£650.00 x 6) £3,900.00 = £239.76. We have applied this credit to all 11 Flats even the ones purchased after 01/01/99…”
7. On 4 February 2007 Mr Wilson wrote to Glenisters, the landlord’s solicitors:
“Further to our discussion. Please find enclosed cheque for £45,000 in Full and Final Settlement of all monies owed to date to G & O Rents and Urbanpoint.”
And Glenisters emailed in reply that they confirmed
“that the cheque in the sum of £45,000 has been accepted in full and final settlement of disputed service charges previously claimed by our client.”
8. Under section 94(1) of the Commonhold and Leasehold Reform Act 2002, where the right to manage premises is to be acquired by an RTM company, the landlord or a manager appointed under Part 2 of the 1987 Act to act in relation to the premises “must make to the company a payment equal to the amount of any uncommitted service charges held by him on the acquisition date”. In October 2007 Urbanpoint paid the RTM company the sum of £38,009.05. It provided a “Final Statement” showing how this amount was made up.
9. On 23 November 2007 the RTM company issued proceedings against the appellant in Maidstone County Court for outstanding arrears of service charges amounting to £19,644.88 (for the calendar years 2005 to 2007 in respect of the original 12 flats and for 2006 and 2007 for the additional flat). In her defence the appellant asserted that she was entitled to rely as set-off against the sums claimed by the RTM company the payment to Urbanpoint in February 2007 of the sum of £45,000. The particulars of the claim had showed in respect of each of the 12 flats as “Funds received from Urbanpoint” the sum of £0.01. The claim was transferred to the LVT.
10. At a pre-trial review on 18 April 2008 the LVT ordered the appellant to disclose “all documentation in her or her husband’s possession relating to the agreement and transfer of the uncommitted reserves from G & O Rents and/or Urbanpoint” and “all documentation relating to the negotiations and agreement with G & O rents and/or Urbanpoint concerning service charges to 31 December 2004, in particular (but not limited to) her payments in respect of reserves and excesses of income over expenditure”. It also ordered the RTM company to disclose “such documentation as will explain what became of the sum of £38,009.05 transferred from Urbanpoint to [the RTM Company] in or about October 2007, giving a precise breakdown as to how this sum was allocated as between the various lessees.”
11. An exhibit to one of the RTM company’s witness statements filed in the county court proceedings was Urbanpoint’s Final Statement, which set out for each of the 56 flats details leading to the total of £38,009.05. Identical figures for each flat appeared under “S/Charge Surplus Held” (£734.86), “General Reserve” (£566.87)” and “Total Reserve” (£1,301.73, the sum of the two previous figures). Under “Credit as agreed pre-LVT” there appeared a figure for each of the appellant’s 12 flats and the other flats in respect of which agreement had been reached in the LVT proceedings that had been begun on 5 August 2004. The amount was different in the case of each of the 12 flats and did not affect what appeared in the final column, “Balance Held”. A column headed “Balance as per Tenant Statement” showed against each of the appellant’s flats an amount, £1,301.72, which was £0.01 less than the “Total Reserve” figure. The “Balance Held” column showed £0.01 for each of the appellant’s flats.
12. In its decision the LVT said this about the documentation produced an relied on by the appellant:
“10. The [appellant’s] Solicitors provided us with correspondence about car parking permits and blocked soil pipes which was completely irrelevant to these proceedings and provided copy correspondence concerned with negotiations about the settlement reached between the [appellant] and G & O Rents Ltd. That correspondence was incomplete. There were letters which referred to other correspondence which was not included in the documents produced. We were told by Mr Speller that the [appellant’s] case relied on just two documents: a letter from Urbanpoint dated 8th September 2005 and a letter from Mr Wilson to Glenisters, the Solicitors representing G & O Rents Ltd., dated 4th February 2007. Those two documents and other correspondence produced which referred to the settlement, including an e-mail from Glenisters acknowledging receipt of the cheque for £45,000, did not set out clearly the terms of that settlement but we came to the conclusion that as there was no application before us to determine the accrued uncommitted service charges to be paid by G & O Rents Ltd or Urbanpoint in accordance with Section 94 of the Commonhold and Leasehold Reform Act 2002 that settlement was of no concern to us.”
13. The relevant findings of the LVT were these:
“12. The figures produced by Urbanpoint for the purpose of handing over management to the Applicant show that Urbanpoint did not pay to the Applicant any money which could be set off against the service charges due for the years 2005, 2006 and 2007 from the Respondent.
13. Indeed that appears not to be disputed by the parties. After that money had been handed over the Applicant still demanded from the Respondent money for service charges for those years and the Respondent, whichever of the two ways her case was put, did not contend that she had paid to the Applicant any money for service charges for those years.
14. If, as he stated in evidence at the hearing, Mr Wilson on behalf of the Respondent paid to G & O Rents Ltd service charges for a period when service charges should have been paid only to the Applicant then those service charges remain due to the Applicant and the Applicant is entitled to demand those service charges from the Respondent.
15. If G & O Rents Ltd have not dealt with the settlement as agreed with the Respondent then it is for the Respondent to pursue that company to resolve the matter.
16. On the evidence presented to us we find as a fact that the Respondent has not paid to the Applicant service charges due 1st January 2005, 1st January 2006 and 1st January 2007 and that the Applicant is entitled to them.”
14. For the appellant Mr Nicholas Grundy said that the schedule showed that every tenant had been billed on the same basis, including amounts for the general reserve, and the service charge determined by the LVT decision of 8 July 2005 included amounts for the general reserve. Since the agreement with Urbanpoint was in full and final settlement of all outstanding amounts it must have included amounts for the reserve fund. Alternatively, he said, the RTM company could not establish on the balance of probability that the sums claimed were due. The burden of showing what the reserve fund held was on the RTM company and not the appellant. Any money in the reserve fund was held by the RTM company on trust. Under section 94 Urbanpoint was required to account to the RTM company for the uncommitted service charges held by it, and that duty must have extended to monies received by it after the acquisition date.
15. Mr Grundy pointed out that the amount agreed with Urbanpoint, £650, correlated closely with the amount determined by the LVT in July 2005, which worked out at £653.78 per flat. He also relied on two letters that were not before the LVT. The first was a letter of 14 June 2007 to Mr Wilson from the appellant’s then solicitors, Chaine Hunter, in which the writer said that he had “only this week been informed that you had settled the amount of £650 per annum per flat with Urbanpoint and that this included the reserve fund, which they had claimed for each year from 2001 and 2004.”
16. Mr Grundy referred in addition to a letter dated 7 January 2009 to Mr Wilson from Urbanpoint enclosing a schedule showing the balance of funds transferred on 2 October 2007. The figures, which were essentially those in the schedule produced earlier, showed the “net Reserve Balance” for each flat as £1301.73. The letter said:
“To clarify matters we instructed Mr David Whitney of Glenisters at the time to reach settlement with you in respect of unpaid balances on your wife’s flat accounts. During the negotiations held it was made clear that in the figures sought in respect of each flat there were no monies due and owing to the RTM Company by way of reserves or otherwise. The figure sought on the basis of £650.00 per service charge year for each flat was in respect of monies which had been spent and no contribution to reserve funds. The settlement was reached with you in respect of £45,000.00 in full and final settlement of amounts owing to the freeholder via ourselves as Managing Agents and there was no contribution to reserves.”
17. For the RTM company Mr Adam Chambers submitted that a party relying on a set-off bore the burden of proof. Under section 93 of the 2002 Act the RTM company were able to seek from Urbanpoint any information in its possession and control that was reasonably required in connection with the right to manage. It made that request, and it got the answer, showing who had paid what. Section 94 was only concerned with amounts held by the landlord or its agent on the acquisition date, and the amount paid to Urbanpoint by the appellant was paid after the acquisition date. But in any event, Mr Chambers said, the figures did not support the appellant. Urbanpoint’s Final Statement showed for each flat as “Total Billed” £5,441.47. Averaged over six years, this showed £906.91 average per annum. Thus the £650 agreed was clearly a compromise.
18. In my judgment the appeal must fail, essentially for the reasons given by the LVT in its decision. What the LVT had to determine was the appellant’s service charge liability to the RTM company for the years 2005, 2006 and 2007. If the payment made by the appellant to Urbanpoint in February 2007 included an amount in respect of reserves for the years up to and including 2004, that amount was and is held by Urbanpoint on trust for the appellant. The RTM company does not hold the money, nor is it entitled to receive it from Urbanpoint under section 94, which relates only to money held on the acquisition date. Since the RTM company does not hold the money and is not entitled to it, it is not under any liability to the appellant in respect of such money, and so no right of set-off can arise.
19. It is unnecessary, therefore, to determine whether the evidence shows that the £45,000 paid to Urbanpoint included an amount in respect of reserves, but in view of the contentions advanced by each party I would just say two things. Firstly there is a complete absence of any contemporaneous documentation relating to the agreement and such documentary evidence as there is seems to be inconclusive. Urbanpoint’s Final Statement of October 2007 shows that they were then treating the appellant’s payment as being net of reserves, and the letter of 7 January 2009 says that the figure sought of £650.00 per flat included no contribution to reserves. Chaine Hunter’s letter of 14 June 2007, which said the writer had “this week been informed” that the £650 per annum included the reserve, seems to me to imply that the information came from Mr Wilson and not from Urbanpoint. The most that can be said is that each party appears to have had a different view.
20. Secondly, it appears to be impossible to reconcile, or to relate in any meaningful way, the £650 per flat that was agreed, the LVT decision on the years 1999 to 2003 and the Urbanpoint Final Statement. It appears that the £45,000 may have reflected the £650 as a rounding-down of £650 x 6 [years] x 12 [flats] = £46,800. But even this is speculative. It is not possible, therefore, to determine whether the £45,000 did or did not include anything for reserves. And it is certainly the case that the appellant has failed to show that it did.
21. The appeal must accordingly be dismissed.
Dated 13 May 2010
George Bartlett QC, President