[2025] UKUT 19 (LC)

106 Tollington Way is a building divided into five residential flats. The respondent owns the freehold and its sister company Eagerstates Limited is the managing agent. The flats are held on 125-year leases granted in 2001, and the appellants hold the lease of flat 3. The leases reserve a ground rent of £200 and contain provisions in unsurprising terms for the leaseholders to pay a service charge to reimburse the landlord for its costs of repairing and maintaining the building and the common parts, but not the individual flats because they are the responsibility of the lessees.

On 6 November 2023 six individuals including the appellants, between them holding the leases of four of the five flats, made an application to the FTT for it to determine whether service charges for the 2022/2023 and estimated service charges for 2023/24 were payable; later the charges for 2021/22 were added. The FTT has jurisdiction under section 27A of the Landlord and Tenant Act 1985 to decide whether service charges are payable; section 19 of that Act provides that service charges representing costs incurred by the landlord are payable only insofar as those costs were reasonably incurred, and that estimated charges are payable only insofar as they are reasonable.

When the FTT’s jurisdiction under section 27A is invoked by leaseholders, they must raise a prima facie case that indicates that a cost was not reasonably incurred, or that an estimated charge was not reasonable. Once they have done so the evidential burden shifts to the landlord to show that the expenditure, or the charge (as the case might be), was reasonable.

The leaseholders said in their application that service charges had risen dramatically in the last few years and that the landlord had failed to provide copies of invoices so that they were unable to understand the charges; accordingly they required disclosure of various documents by the landlord and disputed all the charges items charged for the years in question.

On 13 December 2023 the FTT gave directions in standard form, which were revised and re-issued on 14 December so as to reflect the items the leaseholders wanted to be disclosed. A hearing was listed for May 2024. Following a series of failures on the part of the respondent to comply with the FTT’s directions the hearing had to be re-listed to July 2024. Sufficient progress was made for a Scott Schedule to be complied, setting out the items in dispute, the leaseholders’ reasons for challenging them, and the respondent’s comments, but the respondent did not file a statement of case nor any witness evidence.

On 26 June 2024 the FTT made an order preventing the respondent from adducing or relying upon a statement of case, a witness statement or any document in addition to those it had already filed. However, the respondent was not prevented in any other way from taking part in the proceedings, and it was represented by counsel at the hearing on 11 July 2024. At that hearing the FTT had to consider: