Luke Highet Bendram Jamieson v London and Quadrant Housing Trust

Introduction

1. This appeal arises from a decision made by the First-tier Tribunal about leasehold service charges; the appeal relates not to the service charges themselves but to the FTT’s consequential decisions about the landlord’s costs. The appeal has been determined under the Tribunal’s written representations procedure. The appellant, Mr Luke Jamieson, has not been legally represented, and the landlord, the London and Quadrant Housing Trust, has chosen not to participate in the appeal. The legal background

2. The FTT is a no-costs forum save in certain specified jurisdictions, which do not include service charge disputes, and save in cases where a person has acted unreasonably in bringing, defending or conducting proceedings (rule 13(1) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013).

3. Section 27 A of the Landlord and Tenant Act 1985 gives the FTT jurisdiction to decide whether service charges, under a lease of a dwelling, are payable and if so to what extent. Similarly, paragraph 5 of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 enables the FTT to make determinations about leasehold administration charges. Such challenges can be complex and costly. Many leases allow a landlord to recover its costs of legal proceedings from the tenants through the service or administration charge; that led to the paradoxical position that a tenant might successfully challenge a service charge and yet have to pay their landlord’s legal costs.

4. In order to avoid that situation, two provisions were enacted. The first is section 20 C of the 1985 Act , which reads: “(1) A tenant may make an application for an order that all or any of the costs incurred, or to be incurred, by the landlord in connection with proceedings before … the First-tier Tribunal, or the Upper Tribunal, … are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the tenant or any other person or persons specified in the application. … (3) The … tribunal to which the application is made may make such order on the application as it considers just and equitable in the circumstances.”

5. The second is paragraph 5A of Schedule 11 to the 2002 Act , which reads: “(1) A tenant of a dwelling in England may apply to the relevant court or tribunal for an order reducing or extinguishing the tenant's liability to pay a particular administration charge in respect of litigation costs. (2) The relevant court or tribunal may make whatever order on the application it considers to be just and equitable.”

6. Both provisions give the FTT a discretion whether or not to make the order sought by the tenant. The range of what is “just and equitable” is broad, and an appeal against an order, or the refusal to make an order, under either provision will fail unless the FTT made an error of law or made a decision which no reasonable tribunal could have made. The proceedings in the FTT

7. The appellant holds a shared ownership lease of Flat 96, Braeburn Mansions, a two-bedroom flat in a purpose-built block. His landlord, the London & Quadrant Housing Trust, is not the freeholder; it holds a superior lease (“the headlease”), and under the terms of the headlease it pays a service charge to the freeholder. It does not provide services itself, but instead passes on to its own tenants the relevant proportion of the service charge it pays, and also charges them its own management fee for dealing with the service charge accounts, estimates, budgets and so on.

8. The appellant therefore has to pay a service charge which is defined in part as a proportion of his landlord’s liability under the headlease. The appellant’s lease requires the leaseholder to pay an estimated service charge in advance and to make a balancing payment if more is needed once the actual service charge is known, the latter being defined as . ““the Leaseholder's Proportion of the Service Costs actually incurred by the Landlord during that Account Year”

9. The service charge year under the appellant’s lease ends on 31 March each year. The service charge year in the headlease is the calendar year, and as we shall see that gave rise to the dispute that the FTT had to resolve. The other provision relevant to the appeal is the following: “In relation to the Account Year current at the date of this Lease, the Leaseholder's obligations to pay the Estimated Service Charge and the Act ual Service Charge shall be limited to an apportioned part of those amounts calculated on a daily basis for the period from the date of this Lease to the end of the Account Year.

10. The appellant’s lease was granted on 31 May 2023.

11. The applicant made an application to the FTT for a determination of the amount of service charges payable in respect of the service charge year 2023-2024.

12. There were two issues between the parties. One was a disagreement about what the applicant had paid in respect of the year 2023-24. Before the date of the hearing in the FTT the respondent admitted an accounting error and so this point was resolved. The other was a disagreement about the sum of £3,049.98 charged to the applicant in respect of “Managing Agent Costs”. These were in fact costs payable by the landlord to the freeholder under the headlease. The landlord was required to pay its service charges in two equal instalments on 1 January and 1 July each year. In the year 2023-2024 the landlord had been charged £1,524.99, and had passed both those charges on to the appellant.

13. The appellant challenged that charge of £3,049.98 (= £1,524.99 x 2). He point out that for the year ending 31 March 2024 he was liable to pay only an apportioned part of the actual service charge incurred by the landlord under the headlease; he should not have to pay a full year of the landlord’s service charges. The way he put it was that he was being asked to pay in advance for the period 1 April 2024 to 30 June 2024; and he pointed out that he would have difficulty in recovering that sum if he sold his flat.

14. Instead, the appellant thought that he should have had to pay: “a pro-rata amount of £261.19 (i.e., £1,524.99*31/181) for the period between 31 May 2023 and 30 June 2023, a whole amount of £1,524.99 for the period between 1 July 2023 and 31 December 2023, and a pro-rata amount of £762.50 (i.e., £1,524.99*91/182) for the period between 1 January 2024 and 31 March 2024. This gives a total of £2,548.68 ”.

15. The respondent’s position was that both charges of £1,524.99 were incurred by it during the appellant’s service charge year, and that it had correctly charged him the full amount of both, but had not charged him for the period 31 May to 30 June 2023.

16. The FTT agreed with the respondent that the appellant had to pay the costs incurred by the landlord during the service charge year ending on 31 March. It went on to say: “32. However, that is not the end of the matter. Schedule 9, paragraph 2 (d) of the Lease makes provision for a pro-rata amount to be paid in the year when the Lease is entered into. The tribunal finds that the term “apportioned” in this context means pro-rata for the relevant temporal “portion” of the service charge year ….

33. Accordingly, the total amount incurred in the must be limited to an apportioned part calculated on a daily basis i.e. the number of days the Respondent has been a Leaseholder, from 31 May 2023 to 31 March 2024 (306 days). £3,049.98 divided by 366 days (as 2024 was a leap year) gives a daily rate of £8.33. The apportioned amount is therefore £2,548.98 (£8.33 x 306).

17. The FTT therefore decided that that was the amount payable by the appellant by way of service charge., instead of £3,049.98.

18. The appellant had made applications under section 20 C of the 1985 Act and paragraph 5A of Schedule 11 to the 2002 Act . The FTT made the orders requested, limited to 50% of the landlord’s costs. The reasons it gave for limiting the orders were as follows: “37. During the hearing, the tribunal formed the impression that the structure of the interlocking covenants in the Lease and the Superior Lease, and the different service charge periods in each, were not straightforward and that this was no fault of any of the parties.

38. Although the Applicant has been partially successful, his argument that the January 2024 invoice amounted to a 3-month advance payment, was wrong. Accordingly, having heard the submissions from the parties and taking into account the determinations above, the tribunal determines that it is just and equitable in all the circumstances for an order to be made under section 20 C of the 1985 Act or para 5 of Schedule 11 of the 2002 Act limiting the Respondent’s recovery of costs through the service charge or administration charge and the Applicant’s liability to pay to 50%. The appeal

19. The appellant has permission from this Tribunal to appeal the orders made under section 20 C and paragraph 5, on the ground that he had in fact been wholly successful, save for 30 pence, and that it was unfair that the FTT did not make orders in respect of the whole of the landlord’s costs.

20. The FTT has a discretion in making orders under section 20 C and paragraph 5, and the discretion is broad. The appellate tribunal “…should only interfere when they consider that the judge of first instance … has exceeded the generous ambit within which a reasonable disagreement is possible” (see ). Moreover, orders under these two provisions are not conventional costs orders where generally the successful party can expect an order in their favour; the tribunal is being asked to override a landlord’s contractual entitlement. Tanfern Ltd v MacDonald [2000] 1 WLR 1311

21. The appellant relies on Primeview Developments Limited v Ahmed and others [2017] UKUT 57. The FTT in that case made quite a complex decision under section 20 C, by analysing which of the several leaseholder respondents had succeeded on each of several different issues. The landlord appealed on more than one ground, but an important plank of its argument was that the overall result of the FTT’s order was that it would be able to recover only just over 30% of its costs whereas in terms of service charges recoverable it had been awarded 95.7% of the amount it sought.

22. The Tribunal at paragraphs 71 and 72 of the appeal decision said this: “71. …there is nothing objectionable in an issues based approach in principle, provided [the FTT] does not lose sight of the extent to which individual issues were simply steps on the way to a determination of the extent of each leaseholder's liability. The authorities relied on by the respondents discouraging issue based costs awards are not directly in point, but they emphasise that one significant factor which should be in the mind of any court or tribunal making such an award is the extent to which issues are discrete rather than simply individual components of a single, larger dispute. The same factor is relevant when a tribunal considers whether it is just and equitable that an order should be made under section 20 C of the 1985 Act .

72. The FTT determined that the hearing was equally concerned with three issues, one of which (jurisdiction) Primeview lost, while in the other two it was either successful or substantially successful. That being so the FTT's approach to apportionment produces a surprisingly unbalanced result which, it seems to us, cannot be regarded as fair. The effect of the FTT's decision was that Primeview could recover 30.25% of its costs through the service charge despite having succeeded in two out of three issues and been found entitled to recover almost all of the sum in dispute.”

23. The decision in Primeview involved a number of other points and is not a direct parallel to the very straightforward issue in the present appeal, but it is a useful reminder that the FTT in considering an application for orders under section 20 C and paragraph 5 should not get into over-complicated analysis of individual arguments. The real point is what is a just and equitable order in light of the outcome.

24. In the present case the applicant was wholly successful in showing that his liability should have been apportioned by reference to the number of days of the service charge year that he had held the lease, although his calculation gave a figure 30p different from the FTT’s. The FTT’s judgment that his argument was “wrong” seems to me to be irrelevant and unfair. He was right: in the first, incomplete, service charge year he was required to pay only an apportioned amount of the costs incurred by the landlord under the headlease. He was therefore being overcharged. The way he put it was to say that he was being asked to pay costs in advance; the FTT put it differently, but that seems to me to be quite immaterial to the fact that the applicant was entirely successful.

25. Equally the FTT’s assertion that the lease provisions were not straightforward and that neither party was at fault was not, in my judgment, a relevant consideration. The apportionment provision was not complicated. And this was not an application under rule 13(1)(b) (see paragraph 2 above) and the issue was not whether the applicant or the respondent had acted unreasonably in bringing or defending the proceedings

26. That being the case I take the view that the order made by the FTT cannot be regarded as fair and so falls outside the bounds of the FTT’s discretion. I set it aside, and substitute the Tribunal’s decision to make orders under section 20 C of the 1985 Act and under paragraph 5 of Schedule 11 to the 2002 Act in respect of the whole of the landlord’s legal costs in the FTT. Judge Elizabeth Cooke 4 March 2026 Right of appeal Any party has a right of appeal to the Court of Appeal on any point of law arising from this decision. The right of appeal may be exercised only with permission. An application for permission to appeal to the Court of Appeal must be sent or delivered to the Tribunal so that it is received within 1 month after the date on which this decision is sent to the parties (unless an application for costs is made within 14 days of the decision being sent to the parties, in which case an application for permission to appeal must be made within 1 month of the date on which the Tribunal’s decision on costs is sent to the parties). An application for permission to appeal must identify the decision of the Tribunal to which it relates, identify the alleged error or errors of law in the decision, and state the result the party making the application is seeking. If the Tribunal refuses permission to appeal a further application may then be made to the Court of Appeal for permission.