United Kingdom Upper Tribunal (Lands Chamber)

UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2012] UKUT 170 (LC)

UTLC Case Number: LRX/97/2011

 

 

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

 

LANDLORD AND TENANT – construction of lease – covenant to repair – obligation to pay service charge –  appeal conceded – costs

 

 

IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE

LEASEHOLD VALUATION TRIBUNAL FOR THE LONDON

RENT ASSESSMENT PANEL

 

BETWEEN:

SCARLE PROPERTY CO LIMITED Appellant

and

177 VICTORIA ROAD (ALDERSHOT) MANAGEMENT LIMITED  Respondent

 

Re:   177 Victoria Road

Aldershot

Hampshire

GU11 1JU

 

 

 

Before: Her Honour Judge Walden-Smith

 

Sitting at: 43-45 Bedford Square, London WC1B 3AS

on

22 May 2012

 

Mr Montague Palfrey instructed by Shentons Solicitors on behalf of the appellant

Ms Nicola Muir instructed by Setfords Solicitors on behalf of the respondent

 

DECISION

Introduction

1.     This is an appeal by way of review from the decision of the Leasehold Valuation Tribunal (“LVT”) for the Southern Rent Assessment Panel dated 25 May 2011.

2.     An application for permission to appeal was made to the LVT on 15 June 2011 and refused by the LVT on 14 July 2011.

3.     The President granted permission to appeal with the following observation:

There is a realistic prospect of a successful appeal that the LVT construed the leases incorrectly.

The appeal will be dealt with by way of review.

The Parties

4.     The appellant is the freehold owner of 173/181 Victoria Road, Aldershot, Hampshire (“the building”).  The respondent is a private limited company with a share capital of 160 £1 shares: 120 of which are owned by the residential long leaseholders and the remaining 40 shares by the appellant.

The Building

5.     The building comprises of 4 commercial units (lock-up shops) on the ground floor with 12 flats above (4 on each of 3 floors) each of which are let on long leases.  I have been informed at the oral hearing that one of the lock-up shops has been divided into two so that there are now 13 flats.  This in itself causes issues with regard to the matter for determination.

6.     The 12 original flats have long leases that provides for the respondent to enter the building for the purpose of performing various obligations including the repair, maintenance and insurance of the building and for the residential lessees to pay the respondent the interim service charge and service charges at the times and in the manner provided in the Third Schedule to the Leases.

The Leases

7.     Paragraph 1(2) of the Third Schedule defines the “Net Expenditure” as being “the Total Expenditure less any sums paid to the Company the Lessors pursuant to Clause 6(B)(2)”.  Paragraph 1(3) of the Third Schedule defines “the service charge” as being “such percentage of the Net Expenditure as is specified in paragraph 9 of the Particulars”.  Paragraph 9 of the Particulars of Lease specifies the lessees share of the Net Expenditure as being 6.25% in respect of Flats 4,6,8 and 10 and 8.33% in respect of the remaining 8 flats (the 13^th flat not being included in this).  A total of 91.64%.

8.     The appellant contends in its appeal that the conclusion of the LVT that the Appellant is obliged “to indemnify the applicant [respondent] for the difference between the total service charge contribution of 91.64% collected from the residential lessees and the total service charge expenditure pursuant to the Third Schedule.  This provides the net expenditure expressly referred to in paragraph 1(2) in the Schedule.  It follows that the respondent’s [appellant] maximum service charge liability in any given year cannot exceed 8.36%” is a fundamentally flawed conclusion and cannot be upheld (see paragraphs 21 of the LVT’s decision).

9.     The appellant relied, among other things, to the express wording of the Residential Leases and the distinction between the definition of “Total Expenditure” (in paragraph 1(1) of the Third Schedule) and “Net Expenditure” (in paragraph 1(2) of the Third Schedule) being the “Total Expenditure less any sums paid to the Company by the Lessors pursuant to Clause 6(B)(2).”

10.  There is no purpose, indeed it would be counter-productive, for me to reach any findings with respect to the proper construction of leases in light of the respondent conceding the appeal.

The Appeal

11.  The respondent conceded the appeal at the commencement of the hearing.  The respondent did so in light of the significant change in the practical situation, namely the creation of an additional flat from one of the commercial premises.  The respondent also acknowledged that the LVT’s reasoning set out in paragraph 21 of the decision does not withstand scrutiny.

12.  In the circumstances, I ordered that the appeal be allowed.  As this is an appeal by way of review and not re-hearing and as further issues have arisen, including the possibility of the necessity for a claim for rectification, it is necessary for the matter to be remitted back to the LVT.  Both parties agree that the matter should be remitted to a differently constituted LVT.

The Costs

13.       The appellant seeks its costs of the hearing pursuant to the provisions of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010.  Rule 10 provides that the Tribunal may make an order for costs on an application or on its own initiative (rule 10(1)); that the Tribunal may order a party to pay to another party costs of an amount equal to the whole or part of any fee paid (which has not been remitted) in the proceedings by that other party that is not otherwise included in an award of costs (rule 10(6)) and

(1) In an appeal against the decision of a leasehold valuation tribunal, the Tribunal may not make an order for costs except –

(2)       under section 29(4) of the 2007 Act (wasted costs);

(3)       under paragraph (6); or

(4)       if the Tribunal considers that the party ordered to pay costs has acted unreasonably in bringing, defending or conducting the proceedings.

The amount that may be awarded under (7)(c), disregarding any amount that may be awarded under paragraph (6), must not exceed £500.

14.            The respondent has not acted unreasonably in defending the proceedings as it was seeking to uphold the decision of the LVT and had grounds for so doing.  However, it had made a decision that, in light of the change in circumstances and the difficulty in upholding the reasoning in paragraph 21 of the LVT’s decision, it was appropriate to concede the appeal. The respondent did not communicate that decision to the Tribunal until the hearing and while, as I understand the situation, some intimation had been made the day before the hearing that the appeal might be conceded, this was not made clear to the appellant until immediately before the hearing.

15.            While Ms Muir, on behalf of the respondent, contended that no additional costs would have been incurred as the brief would have been delivered prior to the skeleton arguments being lodged last week, I do not accept that there could not have been a saving on that fee had the decision not to proceed with opposition to the appeal been made prior to the actual hearing.  Certainly, the necessity and cost of the solicitor attending would have been avoided.

16.            In the circumstances, I do consider that it was unreasonable for the respondent not to have communicated its decision not to proceed with the appeal at an earlier stage and the costs unnecessarily incurred by that failure are likely to be at least £500.  In the circumstances, I do award costs to the appellant pursuant to the provisions of rule 10(4), limited to £500.

Conclusion

17. For the reasons set out above, the appeal is allowed and the matter remitted to a differently constituted LVT.  The respondent is to pay the appellant’s costs limited to £500.

 

 

 

 

Dated  24 May 2012

 

 

 

 

 

 

 

Her Honour Judge Karen Walden-Smith