![[2024] UKUT 205 (LC)](https://backend.juristeca.com/files/emisores/logo_lnJS4Uj.png){kind=logo}
Background
Background
The respondent holds a long lease of 29 Thanet Lodge, one of 43 flats in a five-storey block. The appellant RTM company was incorporated by the leaseholders in order to exercise the right to manage the block conferred by the Commonhold and Leasehold Reform Act 2002. The respondent is not a member of the appellant.
In October 2022 the respondent applied to the FTT for a determination under section 27A of the Landlord and Tenant Act 1985 as to whether certain service charges were payable. Some of the items charged were challenged by the respondent on the basis that costs were not reasonably incurred, in light of section 19 of the 1985 Act which provides that service charges are payable only insofar as the costs they represent were reasonably incurred. In respect of other charges the respondent argued that the terms of his lease did not permit the appellant to recover them.
The FTT’s determination covered five different types or groups of charges. The appellant sought to appeal the decision in respect of just one group, and has permission from this Tribunal to do so. The charges in question are for legal fees incurred by the appellant. The FTT decided that the terms of the lease did not permit the appellant to recover them by way of service charges. There was no challenge on the basis that the costs were not reasonably incurred, and therefore the FTT’s decision and this appeal are solely about the construction of the lease.
The costs claimed by the appellant were incurred in the period March 2020 and October 2019 and are as follows:
Solicitors’ costs for advice about the membership and constitution of the RTM company, and about a proposed EGM.
Solicitors’ costs in relation to a dispute with another leaseholder and the consequences of the settlement of a dispute about service charges.
Legal costs incurred in relation to a compensation claim brought by the respondent.
Legal costs (solicitors and barrister) for advice in connection with a mediation of the respondent’s compensation claim.
The appellant’s share of the mediation fee.
The amounts claimed range from £960 to £1838; if I have understood correctly those figures represent the total cost, which was then apportioned between the leaseholders.
The respondent’s lease, dated 15 June 1995, requires him to pay the Service Charge as provided in the Fifth Schedule; that schedule requires him to pay a specified percentage of the “Total Expenditure”, defined as follows:
“Total Expenditure” means the total expenditure incurred by the Lessors in any Accounting Period in carrying out their obligations under Clause 5(4) of this Lease and any other costs and expenses reasonably and properly incurred in connection with the Building including without prejudice to the generality of the foregoing (a) the cost of employing Managing Agents (b) the cost of any Accountant or surveyor employed to determine the Total Expenditure and the amount payable by the Tenant hereunder and (c) an annual sum equivalent to the fair rent of any accommodation owned by the Lessors and provided by them rent free to any of the persons referred to in Clause 5(4)(f) of this Lease and (d) interest charged upon Bank accounts maintained for the purposes of the Management of the Building”
Clause 5(4) of the lease, to which that definition refers, imposes obligations on the landlord (into whose shoes the appellant, as an RTM company, stands for these purposes) in sub-clauses (a) to (n) including the maintenance and repair of the structure of the building and of its common parts, and:
“(4)(g)(i) To employ at the Lessors’ discretion a firm of Managing Agents and Chartered Accountants to manage the Building and discharge all proper fees salaries charges and expenses payable to such agents or such other person who may be managing the Building including the cost of computing and collecting the rents and service charges in respect of the Building or any parts thereof
To employ all such surveyors builders architects engineers tradesmen accountants or other professional persons as may be necessary or desirable for the proper maintenance safety and administration of the Building
…”
The appellant argued in the FTT, and on appeal, that the use of legal professionals and the incurring of legal fees falls within the expenditure described at clause 5(4)(g), and in any event with the definition of Total Expenditure and the words “any other costs and expenses reasonably and properly incurred in connection with the Building.”