[2024] UKUT 158 (LC)

Nutley Court is a block of four flats and two maisonettes, all held on long leases. The appellant is the freeholder, and its six shareholders are the six leaseholders, including the respondents. They are the leaseholders of flats 1 and 2, respectively. The respondents were directors of the appellant from October 2016 to October 2022. The block was managed by Parkfords until April 2022 and thereafter by Ambercrown Management Limited (“AML”), a company incorporated in order to take over the management of the property after Parkfords’ resignation.

The leases of the flats are in unsurprising form and make provision for the payment of service charges by the leaseholder to the landlord.

The FTT has jurisdiction under section 27A of the Landlord and Tenant Act 1985 to decide whether service charges are payable by leaseholders. Charges may not be payable because, for example, they are not recoverable under the terms of the lease, or the costs they represent were not reasonably incurred by the landlord and so fall foul of section 19 of the 1985 Act, or because of failure to comply with the consultation requirements imposed by section 20 of the Landlord and Tenant Act 1985.

Section 20 of the 1985 Act and the Service Charge (Consultation Requirements) (England) Regulations 2003 together prescribe a consultation procedure that landlords must follow if service charges for particular works are going to cost more than £250 for each tenant. The procedure comprises a number of stages: first, a notice of intention to carry out works must be served; then a notice stating the estimates that have been received; and finally, unless the contract is entered into with a person nominated by a tenant, or with the person who submitted the lowest tender, a notice of reasons for entering into the contract has to be served.

Failure to follow that procedure means that the landlord can recover only £250 from each tenant in respect of the works about which it should have consulted.

In February 2023 the appellant and the respondents both applied to the FTT for a determination about service charges for the years 2016, 2022 and 2023. In accordance with its usual practice the FTT directed the preparation of a Scott Schedule setting out the charges in dispute; the items in dispute were so numerous that the FTT agreed with the parties’ representatives at the hearing on 29 August 2023 that it would hear them and make decisions in respect of selected items only. What was to happen about the items in respect of which the FTT made no decision was not stated. One of the items that was decided was liability for charges of £12,500 in total in respect of work done on the roof.