Service Charges: Whether charges were recoverable where the FTT had acted beyond its jurisdiction (Triplerose Ltd v Bowles and others – 2022)

In an application where the First-tier Tribunal (FTT) was asked to determine the reasonableness and payability of service charges, did it act beyond its jurisdiction in finding that some sums due were less than the amounts challenged?

The background

In Triplerose Ltd v Bowles and others [2022], the subject property comprised two residential blocks, each of 24 flats, of which the appellant company was the freeholder.

The freeholder converted a communal garden into a car park which could be used by the public with payment made to the freeholder. The leases for the flats provided for payment of service charges, which included CCTV that covered the car park.

Leaseholders applied to the FTT for determination as to the reasonableness of service charges over a 5-year period, challenging a number of items for each year and, in particular, the CCTV charges which leaseholders claimed was not used to the full. Cleaning charges were also challenged on the basis of the quality of cleaning services provided.

The FTT found some charges to be reasonable and others were reduced and others found not to be payable. Cleaning charges were reduced by 50%, as were CCTV charges. Management fees were also reduced.

The appellant freeholder appealed to the Upper Tribunal (UT) in respect of the cleaning, management fees and CCTV charges, and was directed by the FTT to prepare a Scott Schedule, itemising amounts challenged and the relevant comments by both parties relating to each.

The Scott Schedule was prepared using a downloaded template, which stated “the balance is admitted”. The leaseholders argued that the template was used without any advice, and was intended to give an indication of the sums they felt were reasonable. The Schedule was not intended by leaseholders to act as a cap or limit on the sum.

The decision

The UT considered whether the leaseholders had, by supplying the Scott Schedule with the “balance accepted” wording, accepted reasonableness and payability of some sums, finding that they had.

S.27A of the Landlord and Tenant Act 1985 states that the FTT has jurisdiction to determine reasonableness and payability of service charges, but that no application can be made for determination relating to matters agreed or admitted by the tenant. In this case, the landlord claimed that the leaseholders had admitted the balance of cleaning charges in the Scott Schedule.

The UT found that leaseholders had been aware of the ‘balance accepted’ statement on the Schedule and that the FTT did not have jurisdiction to make a determination as to reasonableness of charges beyond the one third not admitted in the Schedule by the leaseholders. The UT set aside the FTT’s judgment that 50% of the cleaning charges were payable, instead finding that two-thirds of the cleaning charges were payable.

The UT found that the FTT had gone beyond its jurisdiction in reducing the management fees sum payable by more than the amount challenged by the leaseholders without explanation, and its decision was set aside by the UT. The reduction made by the UT was the amount challenged by leaseholders.

In respect of CCTV, the appellant argued that evidence had been presented as to usage of the CCTV and that the FTT had not explained why it had rejected this evidence to allow only 50% of the charges incurred in respect of the CCTV system. The UT found that the FTT had not ignored the evidence, but that there had been a lack of evidence that the CCTV system worked and was used frequently, justifying a reduction of 50%. The UT agreed with this and dismissed the appeal on this point.

Advice and action for landlords

Although in some respects a technical case turning on FTT jurisdiction, there are points to be aware of for landlords and tenants in this decision. Both parties should be aware of the content of documents completed, in particular any potential admission or acceptance of sums even in unassuming column headings, as was the case in this decision.

Where a landlord defends a sum charged, such as the CCTV charges here, appropriate evidence must be presented to justify charges, such as indicating regular use and functionality of a system.

This decision otherwise is a useful indication that the FTT does not enjoy jurisdiction to reduce service charge sums beyond amounts challenged by the leaseholders.