Upper Tribunal considers ‘building fabric’ and lift maintenance in long-running service charge dispute between housing association and assured tenants
A dispute at the Upper Tribunal (Lands Chamber) over the liability of some tenants of housing association Notting Hill Genesis to pay for certain services has been only partly resolved.
Deputy chamber president Martin Rodger KC said in his ruling that while he could settle the liability of tenants to contribute to the cost of services provided by their freeholder from 2015 to 2023 - and the absence of liability on the part of the tenants with agreements which include the printed schedule to contribute to those costs in future - “what has not been resolved is the liability of the tenants with category 2 or 3 agreements to contribute in future.
“That question must await agreement or determination on another occasion.”
The case was brought by Helal Uddin and 31 other residents of east London blocks Endeavour House and Mayflower House, where NHG leases flats from freeholder Celtic Motors.
In April 2024 the First-tier Tribunal (Property Chamber) found that, with the exception of two categories of charges, sums charged to the respondents by NHG for services provided between 2016 and 2023 were payable under the terms of the respondents' tenancy agreements.
But the FTT found that none of the respondents were liable to contribute towards the cost of services supplied by the freeholder, and that some of them were not liable to contribute towards the costs of lift maintenance and servicing undertaken by NHG.
Mr Rodger said the issues of liability turned on the meaning of labels applied to different categories of expenditure in the respondents' tenancy agreements.
NHG lacked complete copies of these, but most had schedules of charges on a printed list of services, and others included a screenshot of a list from accounting software.
Since 2016 the cost of services supplied by the freeholder has represented two-thirds or more of the service charges paid by the respondents, and over the seven year period in question NHG had sought to collect more than £870,000 from tenants of 104 flats in the buildings to meet those costs.
The charges for lift maintenance were much smaller, but the effect of the FTT's decision was that some tenants were liable to pay them, while others in the same building were not.
Mr Rodger noted six different forms of tenancy agreement were used in the two buildings.
Each obliges the tenant to pay a weekly rent and a service charge, in return for the latter NHG agrees to provide the services set out in an appendix or schedule.
Some of these were missing or unavailable and "it is a surprising feature of this case that the tenants themselves appear never to have been asked to provide copies of the agreements they are likely to have received when they took their tenancies”, Mr Rodger said.
In the service charge demands, the charge for services provided by the freeholder has been described variously as 'managing agent communal cost', 'managing agent cost', 'third party service charge-tenants' and 'third party service charge–leaseholders’ and in the annual accounts “the description reaches new levels of obscurity, being referred to as 's.106 recoverable charge’”, Mr Rodger noted.
The FTT decided tenants were not obliged to contribute towards the cost of the services supplied by the freeholder. It said that there was no ambiguity in the printed list and nothing on it would be understood by the reasonable reader to include a charge for services provided by the freeholder.
The FTT said it was impossible to discern from the screenshot, or from the tenancy agreements to which it was attached, what 'PSCTP' stands for or what charges were included where this unexplained heading was used.
It reached the same conclusion for all versions of the tenancy agreements, including those with no list and those where the agreements, or the service charge schedules, had been lost. It also determined that it was impossible to say whether the charges had been reasonably incurred because no evidence had been supplied by NHG showing what the charges were for or how the total PSCTP figure had been built up.
Mr Rodger said the only part of the FTT's decision now challenged concerned the cost of lift maintenance, a service provided by NHG rather than the freeholder.
He said the printed list included ‘daily building fabric’ as a service for which the tenants were required to pay and NHG argued that the cost of maintaining the lifts could be recovered under that heading.
But the FTT had not accepted this phrase would be understood by the reasonable reader as including lifts but rather to referred to the structure of the building.
It reached a different conclusion in relation to tenancies which could not be found, or which had a blank or missing schedule as it accepted NHG's evidence that since at least 2016 every demands for service charges had included a sum for either lift repair or lift maintenance.
The FTT gave permission to appeal on the basis it was wrong to find that the reference in the printed list of services to 'daily building fabric’ was not sufficient to oblige the tenants whose agreements included that list to contribute towards the cost of lift maintenance.
Mr Rodger said the FTT had been satisfied that the smaller sums claimed for lift servicing and maintenance were reasonable “and I substitute a determination that the tenants whose agreements include the printed schedule have the same liability to pay those sums as the remaining tenants”.
He concluded: "The liability of the tenants to contribute to the cost of services provided by the freeholder from 2015 to 2023 has now been settled.
“So too has the absence of liability on the part of the tenants with agreements which include the printed schedule to contribute to those costs in future.”
But for tenants with PCSTP agreement or those that were missing, blank or incomplete he said liability had not been resolved and “that question must await agreement or determination on another occasion.”
Mark Smulian
