Cases - South Tyneside Council v Nicholas Alfred Francis Ciarlo and Alan Hudson

Record details

Name

South Tyneside Council v Nicholas Alfred Francis Ciarlo and Alan Hudson

Date

[2012]

Citation

UKUT 247 (LC)

Keywords

Landlord and tenant – service charges – management charges – apportionment of management fees - arms length management company – recovery of a uniform management charge per leasehold property

Summary

The Appellant landlord (S) owned large housing stock comprising of tenants holding under short tenancies and lessees under long leases. S transferred management of its housing stock to an arm’s-length management organisation (ALMO). The Respondent (C), a long leaseholder, challenged the increases in management charges recoverable through the service charge provisions contained in his lease. The management charges were calculated on the basis of an apportionment of the ALMO’s global costs incurred in managing the leasehold properties, divided equally amongst the lessees. The management charges included costs of governance, IT support and human resources.

The LVT held that S’s method of calculation was erroneous under the terms of the lease as it included costs that were irrecoverable. The LVT held that a more appropriate method of calculating the management costs was to calculate a management fee for each flat, by reference to the nature of the building in which the flat was situated and then apportioning the due proportion (as defined in the lease) to each lessee. S appealed.

The first issue was whether the amount sought to be recovered by S from C by way of the management charge, was payable under the contractual terms of the lease. If so, was it reasonable for that amount to be recovered in whole or part?

The management that S was entitled to provide and charge for involved not merely the services repairs and other such items referred elsewhere in the lease, but extended to the general management of the relevant building as part of S’s residential portfolio. Under the terms of the lease S was entitled to appoint an ALMO to manage its housing stock. Under the terms of the lease, S was entitled to charge C his due proportion of the reasonably estimated amount required to cover the cost and expenses incurred in paying the ALMO for managing the building in which C’s property was situated.

Under the terms of the lease S was not obligated to agree terms and conditions of remuneration with the ALMO that involved charging a separate and specific amount for the management of each building. The LVT had erred in assessing a reasonable fee, based on an uplift of previous years’ management fees. S was entitled to agree with the ALMO to extract its cost of managing the leasehold properties out of the global costs of managing the entire housing stock. On the basis of the evidence the management costs were not unreasonably high or unreasonably incurred. The appeal was allowed.