This section of our Case Law Library looks at cases related to:
- Reasonableness of a Major Works Service Charge
- Classification of works as ‘repairs’ or ‘improvements
- Liability under the terms of a Lease
Are the works Improvements or Repairs?:
This case established some important guiding principles in respect of deciding whether works are repairs or improvements. Firstly, the Lands Tribunal decided that it not correct to assume that a repair “ceases to be a repair if it also effects an improvement”. Secondly, the Tribunal also decided that in order for works to be classified as a repair they must be “cheaper than the alternatives, taking into account both initial and future costs”.
In this decision the Upper Tribunal found that a distinction needed to be made between repairs and improvements, which by their nature go beyond a mandatory duty under a Lease to keep parts of a building in good repair. Before undertaking improvement works, the Tribunal decided that a Landlord was obliged to give consideration to: (1) cheaper alternatives and (2) the views and financial interests of the affected Leaseholders.
Grant Funding for Works:
Decision by the Upper Tribunal that the Service Charge liability of the Leaseholder needed to take account of third party funding for the works in question. The Local Authority Landlord could not be taken to have incurred costs under the terms of the Lease if a third party had agreed to reimburse part of those costs.
This time the Upper Tribunal took a different approach to the Oliver v Sheffield City Council case, and decided that the landlord was entitled to recharge the full cost of the works as a service despite having received a grant to fund part of the costs. The Upper Tribunal decided the facts of this case were different, because (unlike in the Oliver v Sheffield City Council case) the Landlord had not been provided the grant to carry out any specific works, but rather for the more general purpose of improving at least 179 homes.
Liability of a Right to Buy tenant:
Decision by the Court of Appeal that the sole purpose of Sections 125A-C is to allow a purchaser to identify their maximum potential contribution for the items listed during the initial period of the lease
Decision by the Lands Tribunal that a leaseholder who purchased under the right to buy was only liable for the costs of works undertaken before the grant of lease if the invoices issued to the landlord in respect of those works were dated in a period after the start of the ‘initial period’. In this case the Lands Tribunal decided that the initial period started on the same date as the reference period quoted in the estimates sent with the section 125 notice.
In this case the Upper Tribunal sets out some important points of guidance in respect of the limitations on what Service Charges may be invoiced to a purchaser under the Right to Buy during the first five years of the Lease:
- By listing costs under Section 125A and Section 125B a Landlord does not guarantee that these costs will be incurred during the reference period.
- If works do not take place in the reference period then a Landlord is not limited as to what can be charged.
- If works ‘straddle’ the periods before and after the end of the reference period, then the costs should be apportioned: the costs incurred before the end of the reference period will be subject to limitation, those incurred after will not.
- A Landlord may recover costs which were not listed on the estimate but within the limits set out in Section 16B (3) of the Housing Act 1985
Proof of Expenditure
In this case the Upper Tribunal decided that a First Tier Tribunal panel had been wrong to conclude that the failure of a landlord to provide valid invoices for the cost of the work meant that the landlord should be disallowed from claiming any of the work of the works from the leaseholder concerned. The Upper Tribunal remitted the case back to the FTT for a full consideration of the evidence in respect of whether rechargeable costs had been incurred.