![CA-2024-001597 - [2025] EWCA Civ 1308](https://backend.juristeca.com/files/emisores/logo_Sjvxvlx.png){kind=logo}
Application to the FTT
Application to the FTT
The Leaseholders applied to the FTT in December 2022. Their application challenged the inclusion in the service charges for 2013 onwards of the entirety of the costs attributable to the gym. They sought a determination that in the light of the grant of the Gym Lease it was not fair and reasonable for the freeholder to recover 100% of the gym costs from the residential leaseholders, suggesting that they should only pay a proportion of the costs from 2013 to 2020, and none of the costs from 2020.
As the Judge points out in her decision in the UT this was not an application brought under s. 19 L&TA 1985. The Leaseholders were not saying that the costs were not reasonably incurred or that work was not of a proper standard. The challenge was to the way that Abacus had made decisions under the terms of the Flat Leases which required it to decide which costs should be charged to the residential leaseholders. The jurisdiction of the FTT that was invoked was that in s. 27A L&TA 1985 which (as set out below) provides that an application may be made to the FTT for a determination whether a service charge is payable, and if so, the amount that is payable. This therefore enables the FTT to decide whether a service charge is properly claimed under the terms of the lease.
The Leaseholders’ statement of case in the FTT set out a number of contentions under various different heads, concerned with (1) the common costs, (2) direct gym costs, (3) the proposed major works and (4) legal costs of the dispute with Mr White respectively. In summary what was said was as follows:
So far as common costs were concerned, an appropriate share should have been apportioned to the Gym Lease, as the gym benefited from them, and the share apportioned to the residential leaseholders reduced accordingly. The appropriate share was calculated (on the basis of the surface area of the gym) at 1.16% for costs which were shared between the residential leaseholders and the commercial tenants (such as buildings insurance or communal electricity) and 1.22% for costs shared between the residential leaseholders alone (such as water supply).
So far as direct gym costs were concerned (such as maintenance of the gym or gym equipment) the landlord should have apportioned to the residential leaseholders no more than a proportion of the costs incurred on the gym reflecting the fact that these costs benefited Mr White as tenant under the Gym Lease. That was put at no more than 40% for the period from 2013 to 2020; and from 2020 onwards it was said that no costs were recoverable.
So far as the proposed major works were concerned, it was again said that none of the costs were recoverable.
None of the costs of the dispute with Mr White should have been recoverable either.
It was acknowledged that since Mr White was not liable under the terms of the Gym Lease to contribute anything by way of service charge, any costs that were not recovered from the residential leaseholders would be borne by Abacus itself.
The application was heard by the FTT (Judge Silverman and Mr S Johnson) in June 2023 and their decision was released on 7 July 2023. They dismissed the application, finding the service charges demanded by Abacus in respect of gym maintenance and litigation costs for the years 2013-2023 inclusive to be payable and reasonable in amount.
In relation to the period from 2013 to 2020 the FTT held that the lengthy pattern of undisputed payments inclined them to conclude that there was an irresistible implication or inference that the charges had been agreed or admitted, with the result that they lacked jurisdiction.
In relation to the period from 2020 onwards (and the earlier period if they were wrong that they lacked jurisdiction) they considered whether the freeholder could be said to have acted reasonably in exercising its discretion to allocate 100% of the service charges attributable to the gym to the residential leaseholders. They concluded that it had.
The FTT also rejected a number of other contentions such as that the gym could no longer be considered as “Common Parts” and that the litigation costs were not recoverable.