[2025] UKUT 56 (LC)

Agreements which include an obligation to pay a specified service charge, subject to variation, for services listed in a schedule but where the schedule itself is blank and where no separate printed schedule or screenshot has been attached (such as the tenancy of 17 Mayflower House) are covered by the reasoning in the Cardiff case. Into the same category fall agreements such as those for 27 and 28 Endeavour House where a screenshot has been attached showing the wrong page and providing no details of the services to be provided in return for payment. In my judgment in all such cases the tenant is bound to continue to pay for the services which were being provided when the tenancy was granted, and which were taken into account in determining the amount of the original weekly contribution. The tenant is not liable to pay for services which were not being provided or which were not taken into account in the original calculation.

There are several agreements, including those in respect of 35, 37, 52 and 53 Endeavour House and 20 and 21 Mayflower House, where the tenant has agreed to pay for services stated to be set out in Appendix Four, but where that appendix comprises a blank sheet with the words “Schedule of services provided (to be entered or attached below)”. No services were entered in the Schedule but a printed schedule or screenshot may have been attached. If so, no copy has been retained by NHG. There are other agreements, including for 1 Mayflower House, where NHG has not retained a complete copy of the agreement, but only the particulars page. There are two flats where not even that material is in NHG’s possession. In total there are said to be 14 flats, almost half the total number involved in these proceedings, where no complete copy of the tenancy agreement is held by NHG. In these cases it is not yet possible to know what the tenant’s liability is.

It seems likely that in every case the tenant was given a complete version of the agreement when they signed it. The tenant may well have retained a copy of their own agreement, as it is an important document. In some cases the complete copy of the agreement is likely to include the printed list and in others it is likely to include the screenshot. Because I have come to different conclusions about the effect of these schedules, without knowing which was used in a particular case it is not possible to say what that tenant’s liability is. What determination should the FTT make in such cases?

Each of the tenants has made an application under section 27A, Landlord and Tenant Act 1987 for the FTT to determine their liability to pay service charges. Each tenant is obliged to cooperate with the FTT to enable it to complete its task. That cooperation includes producing a copy of the tenancy agreement which they signed, if they have one and are asked to do so. No request for disclosure of the tenants’ copies of the agreements was made by NHG and no disclosure by the tenants was ordered by the FTT. Whatever the outcome of this appeal, all tenants for whom NHG does not yet hold a complete copy of their tenancy agreement should be asked to provide a copy so that there can be greater certainty on both sides over the extent of their liability.

Where the tenant is able to provide a copy of their tenancy agreement, it is likely that in most cases they will be found to include either the printed schedule or the screenshot. It has not been suggested that other forms of the schedule of services were in use. If the agreement includes the printed schedule, the tenant will not be liable to contribute towards the cost of services provided by the freeholder, but if it includes either the screenshot or a blank schedule, evidence would be admissible to show what the charge originally agreed had covered.

If neither NHG nor the tenant of a particular flat is able to produce a copy of the relevant tenancy agreement which includes the schedule of services, and if there is no evidence on which it could be determined on a balance of probability what form that schedule had originally taken, the FTT would be unable to make a determination. That does not mean that it would make a decision that no charges were payable for services provided by the freeholder during the years in question; it would be unable to make a decision because it would not know what, if any, terms had been agreed about those services.

I have so far concluded that the FTT was correct that those tenants whose agreements included the printed schedule are not liable to contribute towards the costs of services provided by the freeholder, but that it was wrong, as a matter of interpretation of the agreements, to find that those costs were not payable by those tenants whose agreements included the screenshot, or those in category 3 whose agreements were blank or incomplete. But the FTT made a second important determination.

Having decided that none of the tenants was obliged to contribute towards the cost of the freeholder’s services, the FTT went on:

“Furthermore it is simply impossible to say whether the charges are reasonably incurred or reasonable in amount as we have no information as to what services the charge relates to for any of the years in question, nor any information as to what has been charged for any given service in any given year. While there is a burden on the applicants to raise at least a primae facie case, we consider that the size of the charges levied, and the significant annual variation in the annual cost, is sufficient to pass the burden back to the respondent to supply some evidence to show that the s.106 charges consisted of costs that were reasonably incurred and reasonable in amount, particularly as all of the relevant information is within their control. They have not met this burden.”

NHG had been unable, for any of the years in dispute, to provide a costed breakdown of the services provided by the freeholder which it had paid for and for which it was seeking reimbursement from the tenants. All it identified was the gross sum it had paid for a particular year. That was a surprising omission, since it was NHG’s evidence that it scrutinised the invoices received from Rendall & Rittner and regularly queried any discrepancies and checked that the costs being passed on to tenants were reasonable.

In the paragraph quoted above the FTT determined that it was impossible for it to say whether the charges had been reasonably incurred or were reasonable in amount as it did not know how much had been charged for which services. It was suggested by Ms Conlan that this determination was of no effect, as the FTT had already decided that the tenants were not liable to contribute to the cost of the freeholder’s services. But it appears clear to me that the FTT was providing an additional reason why the tenants were not liable to pay the disputed charges. NHG had been unable to explain what the charges were for, so it was impossible for the FTT to ascertain whether they have been reasonably incurred or were reasonable in amount. The FTT was entitled to take the view that the tenants had raised enough of a case to put the burden on NHG of establishing those matters. It is striking, for example, that while the PSCTP charge represented about 15% of the original service charge (£2.57 out of £17.64 in the example I was shown) it had risen to 72% of the estimated charge for 2020-21 (£34.33 of a total weekly charge of £47.36). There may be a perfectly good explanation for that apparent disparity, but it was not provided by NHG and the FTT was entitled to conclude that the charges had not been justified and were therefore not payable. There is no cross appeal against that determination and it is binding on NHG as far as the years 2016 to 2023 are concerned.