Assethold Limited v Nelio Patricio Teixeira Franco
[2022] UKUT 285 (LC)
Assethold Limited v The Lessees of Flats 1-14 Corben Mews
21 March 2023
[2023] UKUT 71 (LC)
Upper Tribunal
The landlord tried to charge for things it shouldn't have and didn't follow the rules. The judge said the landlord can only charge for things actually spent and had to pay the tenants' legal fees because they were so badly behaved.
Key Facts
- •Assethold Limited (freeholder) appealed an FTT decision on service charge reasonableness and payability.
- •Lessees of Flats 1-14 cross-appealed.
- •Leases stipulated service charge proportions (6.25% for Estate, 16.66% for Building) and a £500 annual maintenance charge with provision for increases based on previous year's excess contribution.
- •Assethold, through its agent, demanded service charges including estimated future costs, contrary to the lease.
- •FTT found Assethold's demands for estimated service charges invalid and that the waking watch costs were unreasonable except for the first month.
- •Assethold failed to comply with FTT directions, leading to the inability to adduce evidence.
Legal Principles
Landlords cannot demand service charges in advance based on estimates unless explicitly permitted in the lease.
Lease agreement, Clause 5(3) and (4)
Lessees must provide evidence that a service charge cost is excessive to challenge its reasonableness.
Ridehalgh v Horsefield [1994] Ch 205
Costs orders against a party in FTT proceedings for determining service charge reasonableness are only made in clearest cases of unreasonable conduct.
Ridehalgh v Horsefield [1994] Ch 205, Willow Court Management Co Ltd v Alexander [2016] UKUT 0290
Section 20C of the Landlord and Tenant Act 1985 allows for orders that landlord's costs in tribunal proceedings are not recoverable through service charges if deemed just and equitable.
Landlord and Tenant Act 1985, Section 20C
Outcomes
Appeal on estimated service charges dismissed.
The issue was already determined in previous proceedings, and recovering actual costs doesn't depend on the validity of past estimated demands.
FTT's finding on insurance valuation cost set aside; cost deemed reasonable and payable.
FTT overlooked relevant lease clause (6(6)) supporting the charge.
FTT's decision on fire safety works cost set aside; cost reduced to £800 including VAT.
FTT's explanation for cost reduction was insufficient, and evidence showed incomplete work.
FTT's decision on duplicated insurance charge set aside; charge deemed not payable.
Assethold failed to provide evidence to justify the charge, despite having ample opportunity.
Appeal on Section 20 consultation charge dismissed as Assethold conceded non-payability.
Agreed by parties.
FTT's Rule 13 costs order upheld.
Assethold's unreasonable conduct caused significant delays and prejudice to the lessees, justifying the costs order.
FTT's Section 20C decision set aside; order made preventing Assethold from recovering costs through service charges.
FTT's explanation was inadequate, but Assethold's conduct in pursuing estimated charges and failing to disclose justified the order.