UPPER TRIBUNAL (LANDS CHAMBER)

	
UT Neutral citation number: [2011] UKUT 256 (LC)
LT Case Number: LRX/104/2010

	TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

LANDLORD AND TENANT – service charges – construction of lease – whether sums claimed due.

	IN THE MATTER OF AN APPEAL FROM A DECISION
OF THE LEASEHOLD VALUATION TRIBUNAL
FOR THE LONDON RESIDENTIAL PROPERTY TRIBUNAL

BETWEEN	SINCLAIR GARDENS INVESTMENTS (KENSINGTON) LTD	Appellant

	and

	PHILIP ALBANESE	Respondent

	Re:	Flat 5,
		Stewart House,
		Leroy Street
		London
		SE1 4SW

	Before: His Honour Judge Nicholas Huskinson
(Decision made upon written representations)

Decision 

1.		The Appellant appeals, with permission, from the decision of the Leasehold Valuation Tribunal for the London Residential Property Tribunal (“the LVT”) dated 26 April 2010 whereby the LVT decided that the amount of certain insurance premiums paid by the Appellant in respect of Stewart House were reasonable but decided that, having regard to the machinery provisions in the relevant lease, nothing was due from the Respondent to the Appellant in respect of such insurance premiums because the machinery provisions for making such a demand have not yet been worked through.

2.		I have decided this case upon written representations. The Appellant has asked that the matter be decided on written representations and the Respondent, having at first indicated an intention to oppose the appeal, has withdrawn his case. The appeal has therefore proceeded unopposed. The fact that the appeal has proceeded unopposed does not, of course mean, that the appeal falls automatically to be allowed. It remains for the Appellant to persuade the Tribunal upon the written representations that the LVT was wrong.

3.		The matter came before the LVT in the manner described in paragraph 1 of the LVT’s decision:

“This is an application seeking a determination of the reasonableness of service charge costs in respect of insurance premiums in the sum of £455.27, and administration costs in the sum of £106.92 totalling £562.19. A claim for these sums was issued in the Chichester County Court and transferred to the Lambeth County Court, who in turn by an order dated 6/11/09 by District Judge Zimmels transferred this matter to the Leasehold Valuation Tribunal.”

4.		The LVT set out its decision in paragraphs 6 and 7:

“6. The Tribunal finds that the insurance premiums are reasonable in the sum demanded by the Applicant. The Tribunal accepts Mr Kelly’s evidence and is satisfied that the Applicant has gone through a proper process of obtaining a competitive quote for insurance, and that a copy of the relevant certificate and policy has been provided to the Respondent on request. The Tribunal is satisfied that the Applicant is entitled to make a demand for excess service charges for the previous year, where such service charges have been underestimated. However, in this case the sum demanded concerns a premium covering the period November 2008 to November 2009, which sum was demanded in January 2009. The Tribunal finds that this sum is reasonable, for the reasons stated above, but finds the lease makes no provision for the demand or payment of any service charges, whether excess or estimated until 31 March of any service charge year, or within 2 months of that date; Part IV of The Schedule to the lease.

7.  Therefore, the Tribunal finds that the sum claimed for insurance although reasonable, is not payable until demanded in accordance with the terms of the lease. It follows that any action taken to enforce payment of a sum wrongly demanded has incurred unreasonable administration costs, and the Tribunal determines that these are not payable in any event. The Tribunal now remits this matter back to the Lambeth County Court for any further determination on orders.”

5.		Accordingly the LVT decided that the insurance premiums were reasonable in the sum demanded by the Appellant. As regards the administration costs the only reason given for concluding that these were unreasonable was because the LVT had concluded that the money claimed in respect of the insurance premium (which was a reasonable sum) was not yet payable and that therefore the administration costs had been incurred in seeking to pursue a sum which was not yet due. I find that it follows from the LVT’s decision that if, contrary to the LVT’s decision, the money demanded in respect of the insurance premiums was properly demanded by the Appellant and was payable, then the administration costs would also have been reasonable and properly payable.

6.		It will be seen that the LVT concluded that the money payable in respect of the insurance premiums was not yet payable because the machinery provisions for recovery of service charge have not yet been worked through in accordance with Part IV of the schedule to the lease. It is not necessary to set out in detail the relevant provisions of the lease. In summary there are three parties to the lease, namely (1) the Lessor, (2) the Lessee and (3) the Company. The Lessor at all material times has been the Appellant and the Lessee at all material times has been the Respondent. The Company is a management company namely Stewart Management Company Limited. Clause 3(5)(b) of the lease contains a covenant by the Lessee that the Lessee will:

“(b) Contribute and pay on demand the proportionate part set out in Part V Paragraph J of the Schedule hereto of all costs charges and expenses from time to time incurred or to be incurred by the Company in performing and carrying out the obligations and each of them under Part IV of the Schedule hereto as set out in the notice mentioned in paragraph (10) of Part IV of the Schedule hereto PROVIDED ALWAYS that if the Lessor shall under the provisions of Clause 6(3) hereof perform or carry out all or any of the obligations of the Company hereunder the Lessee shall contribute and pay to the Lessor on demand the due and proper proportion of all reasonable costs charges and expenses as more particularly hereinbefore mentioned.”

Paragraphs (8) to (10) of Part IV of the schedule to the lease lay down a procedure for the preparation of accounts of expenditure to the 31 March and then the service of an appropriate notice within 2 months of these accounts. The LVT’s decision that the sums claimed in respect of insurance were not payable was based upon the conclusion that these machinery provisions have not been gone through and that the demand for the insurance premium was premature. 

7.	However clause 6(3) of the lease provides:

“If during the term hereby granted the Company shall fail or neglect to perform and observe its obligations or any of them hereunder or shall go into liquidation the Lessor shall be entitled to undertake (or by action or otherwise compel the Company to undertake) the obligations or any of them hereby agreed to be undertaken by the Company and shall be entitled to recover from the Lessee a due proportion such proportion not exceeding that referred to in Paragraph J of Part V of the [schedule hereto] of all monies costs charges and expenses incurred by the Lessor or Lessee in connection therewith.”
(Note: the photocopy lease before me has a passage cropped off but I infer that the missing passage is as shown within the square brackets).

8.		The evidence from Mark Kelly in his second statement dated 16 February 2010 showed that in 1985 Stewart Management Company Limited failed to effect insurance and in consequence the Appellant took over, in default, the placing of the insurance and the Appellant has insured the building from 1985 onwards.

9.		The Appellant argues that the machinery provision in Part IV especially at paragraphs (9) and (10) relate only to the levying of service charges by the Company (i.e. by Stewart Management Company Limited) and have no operation where clause 6(3) has taken effect and where the Lessor (i.e. the Appellant) has placed the insurance. In these circumstances it is argued the proviso to clause 3(5)(b) entitles the Appellant to require payment on demand of the due and proper proportion of all reasonable costs etc which have been incurred. It is said that this conclusion (i.e. that the money is recoverable on demand) is further confirmed by the wording of clause 6(3).

10.	In my judgment the Appellant is correct in its argument upon this point. I find that the machinery provisions in Part IV paragraph (9) and (10), which require the preparation of an account and a certificate of costs up to 31 March in each year and a service of a notice within 2 months thereafter does not apply where the Appellant is operating its power under clause 6(3) and is itself performing the relevant obligation (here the placement of insurance).

11.	Accordingly the Appellant’s appeal is allowed and I conclude:

(1)	That the amount of the insurance premiums demanded by the Appellant (i.e. as demanded in the County Court proceedings) was reasonably incurred – the LVT so found and this is not challenged – and had been properly demanded as being due.

(2)	The amount of the administration costs was reasonably incurred– the only reason given by the LVT for finding they were unreasonably incurred was the LVT’s conclusion, which I have found to be incorrect, that these administration costs had been incurred in pursuing a sum which was not due.

(3)	Accordingly the sums claimed by the Appellant of £455.27 in respect of insurance premiums and £106.92 in respect of administration costs were reasonably incurred and were properly payable by the Respondent to the Appellant.

						Dated 29 June 2011
						His Honour Judge Nicholas Huskinson