[2024] UKUT 400 (LC)

Two different sets of management charges were in issue before the FTT. The conclusion on one of them is not appealed but it has a bearing on the other which is.

As I said above the building is managed by Y & Y Limited. The respondents challenged the annual fee, which was reflected in the service charge, on the basis of poor management, and the FTT determined at paragraph 12.5 of its decision that the charge was to be reduced by 50%; in other words, 50% of the annual fee charged by Y & Y was a cost reasonably incurred by the appellants and only to that extent was the service charge payable. Neither party appeals that conclusion.

The FTT had sight of the contract setting out Y & Y’s terms and charges. It contains an Appendix listing matters not covered by the annual charge and for which an additional charge would be made, and the list includes monitoring building works, “dealing with s20 consultations, including serving the required notices”. The additional charge for such work is set at 15% + VAT, meaning 15% of the contract price.

The management charge that is in issue in the appeal is a charge made in accordance with that item in the Appendix, for the management of a consultation (as required by section 20 of the Landlord and Tenant Act 1985) in relation to the installation of a key fob entry system for the building. Both the contract price of £10,800 and the management fee of 15% of that sum were challenged by the respondents.

The FTT found that the contract price was reasonably incurred. As to Y & Y’s management charge it said:

“It is manifestly inappropriate that Y & Y should be paid a management charge of 15% of the contract price of £10,800. Quite apart from any question as to the competence with which Y & Y has managed the s.20 process, Y & Y is already being paid a management fee at the top end of the normal range for its work in relation to the Building. That work includes or ought to include, the management of projects which are integral to that management function, such as the security of the entrance doors. It is not therefore reasonable for Landlord to incur any additional costs paying it to manage a project which it ought to have been managing anyway.”

That is the decision the appellants appeal.