Cases - Avon Ground Rents Ltd v (1) Rosemary Cowley & others (2) Metropolitan Housing Trust Ltd (3) Advance Housing and Support Ltd (4) May Hempstead Partnership
Record details
- Name
- Avon Ground Rents Ltd v (1) Rosemary Cowley & others (2) Metropolitan Housing Trust Ltd (3) Advance Housing and Support Ltd (4) May Hempstead Partnership
- Date
- [2018]
- Citation
- UKUT 92 (LC)
- Legislation
- Keywords
- Service charges – reasonableness of advance payments - Landlord and Tenant Act 1985, s.19(2)
- Summary
-
The appellant was the freehold reversioner of a mixed-use building and the respondents were long lessees. Water was found penetrating through the surface of the central courtyard of the building into 2 commercial units.
The service charge provisions in the leases required each leaseholder to contribute towards expenditure by the landlord for the repair, management and maintenance of building and the provision of services.
The appellant began statutory consultation with the leaseholders with the intention that the costs of the remedial works would be recouped through the service charge. Liability for repairing the defect fell on the appellant. The building was covered by NHBC warranties and a claim was also made on the warranties. Liability was accepted by NHBC and the appellant intended to give credit for any sums received under the warranties.
The respondents applied to the First-tier Tribunal (FTT) for a determination of the service charge payable in advance of the remedial works being carried out. The FTT found that it was not reasonable, for the purposes of s.19(2) of the Landlord and Tenant Act 1985 (the Act), for the lessees to be required to pay a contribution that equated to the full costs of the remedial works. The majority of the costs of the remedial work was to be covered by the payment made by the NHBC under the warranties.
The appellant was required to give credit to the leaseholders for sums received by the NHBC. In Oliver v Sheffield City Council [2017] 1 WLR 4473, the court held that all forms of double recovery had to be prevented in circumstances where a landlord was entitled to recoup its expenditure both through a service charge and from a third party.
The respondents’ leases did not require credit to be given by the landlord in advance of NHBC payment. Contractually, if expenditure on the remedial work was likely to be incurred in the account year the appellant was entitled to include it in the estimate and recover it from the leaseholders under the service charge regardless of whether the appellant also expected to receive the same sum from NHBC at some point during the same year.
Section 19(2) of the Act was applicable to the sums in issue. Whether an amount was reasonable as a payment in advance was not to be determined by the application of rigid rules, it had to be assessed in light of the facts of each case. The likelihood of a particular event occurring during the period covered by an advance payment could be considered in determining the reasonableness of the amount payable. Further, certainty that works would be carried out, and therefore the certainty of the anticipated costs, were matters that could be taken into account in considering the reasonableness of the advance payment, Knapper v Francis [2017] UKUT 3 (LC) and Parker v Parham (2003) Lands Tribunal LRX/35/2002 followed.
The fact that a landlord’s expenditure may be covered by a warranty or insurance policy did not mean that a landlord may never include that expenditure as part of an advance payment. The receipt from a third party was not required to be certain before it could be considered in determining the reasonableness of an advance payment.
On the facts, the FTT was entitled to conclude that a contribution equal to the full costs of the remedial works was not a reasonable advance payment, in circumstances where a payment of a near equivalent amount was anticipated from the NHBC and there was no evidence that payment was going to be delayed.
Appeal dismissed.