[2024] UKUT 400 (LC)

The respondents challenged the charges for the electricity supplied to the common parts. It seems that the situation changed dramatically after the first three years of the lease, as the FTT explained:

“7.1

For a number of reasons, this was the main bone of contention between the parties, at least so far as the applicants were concerned. During the first three years of account no charges in respect of communal electricity usage were levied at all. In 2019/20 £9,141 was charged, in 2020/21 £10,442 was charged, in 2021/22 £29,200 was charged, in 2022/23 the provisional charge was £6,500 and in 2023/4 the provision was for £20,000.”

Those figures are for the whole block. The respondents pay 1.37% of the whole, so £126.04 in 2019/20 and so on. But for the first three years of the term of the lease they had not had to pay anything for the electricity supply to the common parts, and they inferred that that was because the electricity was generated by the solar panels. When payment started to be demanded they inferred that the appellants had diverted the supply for their own use. They took the view that that was not legitimate in view of the obligation in the planning permission (see paragraph 3 above). They also expressed concern that all the electricity bills from the supplier over the five years challenged had been estimated charges which had never been reconciled with actual usage. So while there was no dispute about their contractual obligation to pay the charges, their challenge was brought on the basis of section 19 of the 1985 Act; their case was that the costs paid by the appellants to the external electricity supplier were not reasonably incurred and that the estimated charges were not reasonable.

The FTT received witness statements from Mr Joe Gurvits, a senior manager for the appellants who had not been directly involved with this building. His witness statement is in the appeal bundle but it appears that more was said at the hearing. The FTT said this about the evidence it heard about the electricity charges:

“7.2

The reasons for the absence of charging in the first three years are not clear. Mr Gurvits said in his evidence that there were problems with the metering but there was no documentary evidence to support that claim. The Applicants explained the absence of charges on the basis that the electricity was being supplied during that period by the solar panels installed on the roofs of the Building and that it was as a result of works done by Avon to divert that supply that the bills began to be levied.”

The FTT recorded Mr Gurvits’ evidence, given at the hearing, that

“7.3

… i) Avon had not known anything about the solar panels on the roof of the Building when it purchased the Property at auction; ii) to the best of his knowledge the solar panels within the landlord’s demise were not operational; and iii) he had referred the Applicants’ queries in respect of the solar panels to Avon and that it was investigating them. …

… the only result of Mr Gurvits’ inability to provide us with any useful/reliable information is that there is no satisfactory evidence before us in relation to the position on Avon’s part.”

The FTT went on to say that it therefore had to rely on the evidence of Mr and Mrs Pilgrim and on its own observation of the fuseboard in the control room on the ground floor, where they saw that the solar panels were generating electricity for the flats (as Mr and Mrs Pilgrim said) but that the circuit for the common parts was switched off. The FTT concluded:

“7.4

It is therefore our conclusion that unless and until Avon is able to establish that: the 50 or so solar panels which were installed on the roofs of the Building as a condition of the planning consent and which are required by that consent to be maintained in good working order so that 10% of the Building’s total electricity needs are met from them are not operational; that they cannot economically be made operational, having regard to the feed in tariff revenue which they would generate; and/or that the feed in tariff which they do generate is not sufficient to discharge the communal electricity costs, it will not be reasonable for the respondent to demand payment of any communal electricity charges from the leaseholders. That is to say, that these charges were not reasonably incurred. Consideration also needs to be given to how the condition of the planning consent that 10% of the energy being consumed by the whole development (i.e. not just to the common parts) should be supplied from the panels ought to be met – whether that be within the terms of the leases or, failing that, by means of enforcement action by the Local Planning Authority.”

7.5

We leave on one side, as being outside the scope of our jurisdiction on this application, the question whether Avon may be liable to account to the leaseholders in respect of the benefit of any feed in tariff which it may have received from the solar panels.

7.6

Further or alternatively, it was clear to us from our perusal of the electricity bills supplied by Avon that a large number of bills were estimated, that those estimates appeared to be at substantial variance to the measured usage and that there were a large number of credit notes in the bundle, apparently on that account. It therefore seems to be very likely that there have been significant problems with the estimated bills being rendered and that the charging needs to be properly investigated before any further demands are made. That may well entail withholding payment of sums demanded on the basis that no proper statement of account has been delivered by the electricity provider.”

Later at its paragraph 15 the FTT summarised its various decisions and said:

“15.1.

That it is not reasonable for the Landlord to incur any communal electricity costs without first ascertaining the functionality of the solar panels from which the property benefits. In addition, the estimated bills which have been rendered need to be properly investigated and challenged as necessary. Again, until that process is complete no such costs would be either reasonably incurred or reasonable in amount.”

The consequence of that determination for the years in dispute is that nothing is payable in respect of the costs incurred in 2019/20, 2020/21 and 2021/22. The FTT did not explicitly say whether the estimated charges for 2022/23 and 2023/24 were reasonable, since it expressed itself only in terms of whether costs were reasonably incurred. Mr Granby suggested that it could be inferred that the FTT regarded the estimated charges as unreasonable, and I agree.