[2024] UKUT 41 (LC)

Miss Welstead was unhappy with the proposed increases and on 21 March 2022 she referred it to the FTT.

The form Miss Welstead used to refer the notice of increase to the FTT was not included in the appeal papers. Assuming she used the FTT’s standard form, she will have been asked only to provide details of her flat and her tenancy and a copy of the notice of increase; she will not have been required to explain why she was referring the notice to the FTT nor even to say that she was dissatisfied with the increase proposed by Catalyst.

The FTT issued directions which invited both parties to complete a pro forma Reply Form giving details of the property and any further comments they wished the tribunal to take into consideration. The landlord was to go first, followed by the tenant, with the landlord then being allowed a brief response. In rent cases these forms are the only statements of case which either party is asked to supply.

Although in this case the FTT gave its standard directions, they were not followed by Catalyst. By an oversight it missed the date for submitting its reply form and Miss Welstead submitted hers first, even though she had not seen what Catalyst wanted to say to explain its proposed rent increase.

In her reply form Miss Welstead gave various details of her flat including information about problems experienced with the lift and the main entrance door, as well as the standard of decoration and wear and tear in the common parts. In a separate box for any other comments she gave a brief account of the increases in the service charge since 2013. After covering early years, she continued:

“As of April 2022, rent is £133.25 (weekly) service charge is £45.06 (weekly) and heating and hot water is now £13.47 (weekly). In the space of a year, the service charge has been increased by 23.6% (£10.61) a week, with heating and hot water being increased by 36.3% (£4.89) a week.

Whilst it is appreciated that the cost of living (inc. heating) has affected everyone during the pandemic, it is unclear how and why service charges should be so significantly increased at this time. The increase in service charge alone represents an additional £551.72 per year (£2,343.12 total service charge per year) and has been issued at a time when the cost of living is at an all time high.

It is also important to note that, as above, Apsley House has seen no improvements (at all) in the time I have lived here, the standard of service we receive is well below that seen in the private buildings that form part of Dickens Yard, and unfortunately, it is unclear as to the justification of such a significant increase to rising costs (to the public) at this time.

How is it expected that tenants such as myself will be able to afford these significant additional costs?

I would ask for justification of the significant increase in service charges at a time that most people can ill afford to incur more costs in living.”

When Catalyst did submit its own reply form it responded briefly to the points made by Miss Welstead concerning disrepair and the unreliability of the lift, saying that the walls would be cleaned and the lift investigated. It made no reference at all to the service charge, despite having had notice of Miss Welstead’s concerns from her form of reply.

The FTT directed an oral hearing of the reference, for which Catalyst instructed counsel. It also arranged for two members of its staff to attend, a property manager and the legal executive who had prepared the reply form. Miss Welstead also attended.

As the FTT explained in its decision, counsel instructed on behalf of Catalyst sought to persuade it that it had no jurisdiction to consider that part of the rent which comprised the fixed service charge. It disagreed (and it was conceded during the appeal that the FTT had been right about that, and that it did have jurisdiction to consider the whole of the rent).

Submissions were made on Catalyst’s behalf about market rents in the area, including in Dickens Yard itself. Mr McFarlane, the property manager, explained that there had been issues with the lifts since 2013. Mr Shulver, the in-house paralegal, acknowledged that there had been some “mislabelling” of items on the service charge account but said he was not aware how the rent had been set. Mr McFarlane also confirmed that he was not aware how the rent was set because “it was dealt with by a different department”.

In its decision the FTT recorded its observations on its inspection of Apsley House and the remainder of Dickens Yard. It compared Apsley House unfavourably with the privately owned blocks in the development and addressed the submissions made by counsel about the relative value of flats in the different parts of the development. It then addressed the service charge issue. As it is said by Peabody that the FTT gave inadequate reasons for its decision, I will set out this part of its reasoning in full, as follows:

“28.

The service charge account for 2022-23 listed the items charged to the account. The itemised services are not well explained and not easy to relate to the services described in the tenancy agreement. The management charge appeared to be excessive at £30.88 per week, totalling £1605.76 per year. Even assuming that the charge includes the out of hours service which is provided, the charge is much higher than would be paid in the market for management services. Using its own expertise as the landlord was not able to provide any background to the makeup of the service charge account the Tribunal determines that the service charge, inclusive of the management fee should be reduced to £39 per week based on a reduction in the management charge but accepting all the other charges on the service charge account provided. The Tribunal wishes to emphasise that, in accordance with the terms of the tenancy agreement, this is a fixed, not a variable service charge and that it is an integral part of the market rent and not separate from it. Given Counsel’s attempt to persuade the tribunal that the service charge element of the rent lay outside its jurisdiction under section 14, and the misleading explanation in the landlord’s correspondence with the tenant of the reason for excluding this element of the rent from the cap it has applied to the remainder of the rent increase, it appears that the distinction between fixed and variable service charges has not been properly understood.

29.

Doing the best it can on the limited evidence available the tribunal determines a weekly rent of £300 inclusive of service charges of £39 per week to reflect the location and size of the flat in a social housing block fronting the main road and having no outdoor space.”