Tuesday, 21 February 2017

Major Service Charge Win by Lessee


You can usually challenge the reasonableness of a residential service charge under a lease, to the property tribunal. But what's the score when the service charge relates to improvements as opposed to repairs which the lease has given the landlord a discretion to carry out? Can you attack the landlord's decision to carry out these improvements at your expense? Things are better than many thought.

In a case which started in a tribunal but has just been decided by the Court of Appeal * the part of the service charge under attack was for the replacement of windows and cladding to 10 blocks of facts at the IvyBridge Estate in Isleworth where the landlord is the London Borough of Hounslow. The Estate comprises council flats and houses and some properties which have been bought under long leases  by former council tenants under the right to buy scheme. One lady got a demand for a cool £55,000 as the required charge from her for the new windows and cladding and some other work. The windows had not been in disrepair but suffered from an inherent design fault which was a potential safety issue. The fault related to a hinge failure. Replacement hinges were available at a cost of £140 a pair but the problem would have eventually recurred with new hinges. So after the necessary consultation with lessees, the council decided to replace the windows and deal with the inevitable resulting replacement of cladding as well. The aluminium windows which were used will have a life span of twice that of the UPVC ones which might have been used at a lower cost. 

Our aggrieved lady (with other lessees) attacked the council's decision. The Court of Appeal ruled that improvements such as these - and they were to be classified as such - had to be approached differently to repairs which the council was obliged to carry out. With improvements, a landlord had to take particular account of the extent of the interests of the lessees who would be charged up, their views on what was proposed and the financial impact of proceeding. It was not simply sufficient to rely on the right to recover the cost of repairs under the lease as a justification in itself for embarking on a scheme of very expensive work. 

The landlord was not bound by the views of lessees but where it was exercising a discretionary power at the lessees' expense, it made sense that the lessees' views should be more influential than when repairs were concerned. The landlord need not embark on an investigation into the finances of particular lessees. However, in broad terms,the landlord was likely to know what kind of of people were lessees in a particular block or estate. Lessees in a luxury block in Knightsbridge might find it easier to cope with a bill for £50,000 odd than lessees of a former council flat in Isleworth.

The council had not acted as it should have done. The result is that only part of the service charge will be recoverable from our lady and the tribunal will now decide how much.

* The case is London Borough of Hounslow v Waaler [2017]EWCA Civ 45