[2025] UKUT 115 (LC)

As I have noted, the FTT did not decide the Contractual Liability Issue. The FTT did however set out its analysis of the Contractual Liability Issue, which it is helpful to have in mind in considering the appeal. In the remainder of this decision, references to Paragraphs, without more and unless otherwise indicated, are references to the paragraphs of the Interim Decision.

The FTT started with an analysis of the service charge provisions in the Headleases, which I have summarised earlier in this decision. The FTT then went on to consider the provisions of the Occupational Underleases. After considering the provisions of clause 3.3 of the Occupational Underleases, and the definition of “outgoings” therein, the FTT set out the following preliminary views, at Paragraphs 40-42:

“40.

The preliminary view of the Tribunal is that the service charges due to the “Management Company” under the headlease, are not “outgoings” as defined by the lease. The definition rather seems to refer to any sums assessed against the flat, the Building or part of the Building in the nature of taxes and rates. This is the analysis suggested by the Second Respondent in their Statement of Case (see [11] at p.561).

41.

In so far as the First Respondent relies on Clause 3.3.3, payment would only become “due” when lawfully demanded by the Superior Landlord in in accordance with the terms of the Superior Lease.

42.

The Tribunal notes that Clause 1.2.32 defines “Superior Landlord” as “the landlord under the Superior Lease”. In an earlier Statement of Case, dated 13 September 2023 ([[8] at p.243), the First Respondent suggest that the sums rather become payable pursuant to Clause 3.3.2. The Tribunal has heard no argument on this important point.”

The FTT then referred to the demands which were produced by the Appellant on the first day of the hearing. The FTT analysed those demands and, at Paragraph 44, set out its “preliminary” views on what sums had actually become due to the Superior Landlord under the Headleases, for the purposes of clause 3.3.3 of the Occupational Leases, in respect of the service charge years from 2019 to 2023.

The FTT recorded the position of Ms Traynor in the following terms, at Paragraph 45:

“45.

Ms Traynor felt unable to assist the Tribunal with the interpretation of the lease as she stated that she only had a watching brief. Ms Musarurwa (at p.982) describes how the First Respondent operates the lease:

The FTT then expressed the following preliminary views, at Paragraphs 46 and 47:

“46.

The preliminary view of the Tribunal is that the First Respondent has not demanded “the sums due” under Clause 3.3.3 in accordance with the terms of the lease. No liability arises on the Leaseholder to pay any sum until it becomes due the Superior Landlord under the Superior Lease. It will only become payable when the Management Company has approved a budget for the relevant service charge year and a demand has been made for an interim service charge.

47.

It is, of course, open to a landlord to accept monthly payments in respect of any sums that have become due. No tenant would object to this. However, the underlease does not permit the First Respondent to estimate what sum may become payable, to assist the budgeting by its tenants. This can only be done with the agreement of the tenants. The problem in the current case seems to have been that there has been no transparency as to how “the sums due” under the Superior Lease have been charged.”

The FTT then moved to what it described as its ruling on the preliminary issue. It is not clear to me whether this meant the Contractual Liability Issue or the question of whether the Contractual Liability Issue could be considered at all. The FTT recorded Ms Traynor’s arguments in the following terms, at Paragraph 49:

“49.

Ms Traynor argued, with great vehemence, that it was not open to the Tribunal to raise the issue of the payability of the service charges pursuant to the terms of the First Applicant’s underlease. She provided a Skeleton Argument in support of her submissions. She contended that the Applicants had been given every opportunity to set out the nature and scope of the issues in dispute. The Directions given on 25 September 2023, had required the Applicants to file a Statement of Case which should specify any legal submissions in support of the challenge to the service charges claimed, including argument, if liability to pay was at issue. The Applicants, advised by Solicitors, had filed a Statement of Case. Their Statement of Case was restricted to the reasonableness of the service charges which had been demanded. No issue was raised on the issue of liability to pay. The Respondents had prepared their Statements of Case on their understanding that liability to pay was not at issue.”

The FTT then considered the various authorities relied upon by Ms Traynor. The FTT recorded the position of Ms Whitehouse, for the Applicants, in the following terms at Paragraph 54:

“54.

In response, Ms Whitehouse stated that the Applicants wanted the Tribunal to consider the issue of reasonableness to pay. She had only been instructed some two weeks previously and had not drafted the Statement of Case. She was handicapped by the manner in which the case had been prepared by the previous solicitor. The Tribunal was not impressed by Ms Traynor’s response to these submissions, namely that their remedy lay in a negligence claim against their former solicitor.”

The FTT expressed its conclusions on the question of whether it should admit the Contractual Liability Issue in the following terms, at Paragraphs 58-60 (I have already quoted Paragraph 60, but I repeat it for ease of reference):

“58.

Both this area of the law and the terms of these leases are unduly complex. This case raises a number of new and important points of principle. The Applicants have had difficulty is securing legal representation. The Tribunal is satisfied that there has been a lack of transparency for which the First Respondent is responsible. We are dealing with a Registered Social Landlord which is providing social housing. The Applicants have been unsure how the sums demanded from them have been computed. The demands provide no adequate explanation. A demand for a monthly estimated service charge bears no resemblance to the First Applicant’s liability under Clause 3 of her underlease. The Tribunal asked Ms Traynor to explain how the sums demanded reflected the tenant’s liability to pay pursuant to the terms of her underlease. Her response that she was not in a position to do so because she merely had a watching brief, was not one that reassured the Tribunal.

59.

The Tribunal is required to consider whether the service charges levied by the Second Respondent for 2019 are reasonable. We asked Ms Traynor whether the Lead Applicant was obliged to pay any “sums due to the Superior Landlord under the Superior Lease” in respect of this service charge year. She was unable to answer. Our preliminary view is that neither the Lead Applicant nor any of the other Applicants were obliged to pay any service charge in respect of this service charge year. This Tribunal does not determine academic questions.

60.

It is a matter of regret that the Tribunal has been unable to determine this issue of liability to pay at this two day hearing. Ms Traynor rather directed her attention to drafting a Skeleton Argument seeking to argue why we should not do so. If we are to deal with this matter fairly, we were satisfied that we had no option but to adjourn the case and give further Directions. This issue does not involve the Second Respondent and no further submissions are required from them. This Tribunal is accustomed to dealing with litigants in person. Neither the Applicants nor the First Respondent should feel the need to be legally represented.”

In summary, and as I read the Interim Decision, the point on contractual liability raised by the FTT, which I am referring to as the Contractual Liability Issue, related to the ability of the Appellant to pass on the Service Charges to the Applicants, by way of demands for the Payments. The essential reasoning of the FTT which, it appears, was intended to be expressed on a preliminary basis, was as follows: