[2023] UKUT 152 (LC)

That brings us to the final issue in the appeal, and the heart of Ms Yambasu’s quarrel with the respondent about the heating system, which is that it is just too antiquated and expensive for costs incurred in maintaining it to have been reasonably incurred.

It is impossible not to have sympathy with Ms Yambasu. She has experienced repeated failures of the heating system over many years. She has already paid substantial sums, following the 2017 proceedings, to have the system upgraded, and is now faced with a further demand, this time for a four-figure sum, for yet more work on an obsolete system, when she could get a combination boiler fitted for a fraction of the cost and be rid of the problem.

The FTT’s decision again deals with the issue rather briefly. It accepted the respondent’s witness’ evidence which it summarised as follows in its paragraph 26:

The FTT went on to say:

“29.

The Defendant’s final point is that the service provided by the heating system is “below average standard” and that she has been left without heating for “days and sometimes weeks in the middle of the winter from year to year”. She says she has had to spend “lots of money” on electricity using portable heaters to heat her home and to boil hot water. She states that during Christmas 2019 there was no heating and hot water.

30.

The difficulty with this argument is that this case is concerned with charges for works designed to improve the functioning and reliability of the district heating system. Mr. Marenghi’s evidence is clear that the works have been a success in that they have improved the systems reliability and “bursts have been reduced to a minimum”. Water losses have reduced considerably. Given the unviability, as set out above, of scrapping the system in its entirety, it is difficult to see what else the Claimant can do other than carryout works to try and improve the functioning of the system. The Defendant herself appears to accept that the situation has improved from the historic position in that any outages are now for a shorter duration.

31.

In the tribunal’s view the service charges are reasonable and have improved the functioning and reliability of the district heating system …”

Section 19 of the Landlord and Tenant Act 1985 provides that where a service charge is incurred before the relevant cost is incurred (such as this one), no greater amount than is reasonable is payable. The principal authority on the meaning of “reasonable” in this context is Waaler v Hounslow London Borough Council [2017] EWCA Civ, where the Court of Appeal – in a decision about costs actually incurred rather than estimated charges - held that the outcome achieved by the landlord must be a reasonable one, but need not be the cheapest; nor need it be the best possible solution, nor the one preferred by the tribunal.

The FTT’s reasoning at its paragraphs 26 to 31, if read without knowledge of the background, are not compelling; one might get the impression that the landlord was locked into a system that it had to continue to maintain, no matter how uneconomic it had become. The idea that the landlord could not change the system without varying the leases is unconvincing; the lease requires the respondent to provide heating and hot water (which requirement could be waived), and does not require it to continue to maintain this particular system.

However, what is apparent from perusal of the appeal bundles produced by both parties, albeit not spelt out in full in the FTT’s decision (no doubt because the background is so well-known to both parties) is that the respondent’s decision to carry out the major works in question in this appeal followed a programme of work begun in 2013, after a feasibility study carried out by consulting engineers. That study recognised that the system had reached the end of its useful life, but that the respondent wanted to carry out a phased programme of upgrading rather than starting again from scratch, because of budget constraints. The work done between 2013 and 2015 consisted of the installation of two new boilers and associated pipework and electrical services. The further work that is the subject of the charge in issue in this appeal builds on that work.

It is therefore abundantly clear that for the respondent now to abandon the old system would mean that it would have wasted the work done between 2013 and 2015. In the light of that background, which was well-known to the parties, it is possible both to understand Ms Yambasu’s continuing frustration but also to understand that this further cost, building on the earlier work of renewal, was reasonably incurred by the respondent. As to whether it was reasonable in terms the actual amount, there was no evidence before the FTT that the estimate was unreasonably expensive. Indeed there was no evidence at all that about the level of the charge; Ms Yambasu’s argument was that she should not have to pay at all.

Ms Yambasu’s preferred solution was for the respondent to allow her to disconnect from the system. The lease gives the respondent an unqualified right to refuse her permission to do that (see paragraph 5 above) and it has done so. Does the availability of that alternative mean that the service charge was not reasonable? Clearly not; the respondent’s reasons for rejecting the request to disconnect, summarised at paragraph 41 above, were sound: that the disconnection of one residents places a greater burden on the others, and that there would in fact be more work needed to make disconnection possible, which of course residents would have to pay for.