• FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case Reference : MAN/00CA/LAC/2018/0015

Property : Various Properties at ,

Applicant : Mr A McGlinchey and 24 others

Respondents : One Vision Housing Association

Type of : Reasonableness of Service Charges Application Section 27A and Section 20C Landlord and Tenant Act 1985

Tribunal Members : Mr J R Rimmer Mrs S Hopkins

Date : 19th July 2019

Order : (1) The service charge costs that are the subject matter of this application are reasonably incurred at reasonable cost (2) An order in favour of the Applicants is made under section 20C Landlord and tenant Act 1985

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A Background

1 The Applicants are the owners of a number of leasehold properties situated upon a large development in Lydiate, Merseyside.

2Those properties were constructed in the early 1950s by the local authority for the area at that time, West Rural District Council. At the time of local government reorganisation in 1973 they passed to Sefton Metropolitan District (now Borough) Council as part of its housing stock. In turn that authority has turned the responsibility for that stock to One Vision Housing Association.

3 A large number of tenants have exercised the “right to buy” their homes from their landlord and included in the housing stock on this development are 13 blocks comprising four flats, set amongst a much larger number of semi- detached and terraced houses. These could be acquired under long leaseholds under the “right to buy” legislation.

4 Within the 13 blocks there are 27 such flats that have been purchased. Some are held by the original occupiers, some are held by their assignees. Depending upon when they were purchased, some of the leases were granted by the local authority, some by Respondent.

5 By reason of the properties now approaching 60 years in age the Respondent has determined to embark upon a comprehensive programme of works, to include provision for new roofs to all the properties on the development. These constitute major works with the Landlord and Tenant Act 1985 and the Respondent embarked upon the consultation process for such works that is a requirement of Section 20 Landlord and Tenant Act 1985, whilst at the same time including its own assured rented properties within the programme.

6 The Applicants have now sought to bring the matter before the Tribunal as they have, in some cases collectively and in others individually, a number of concerns as to the cost and quality of the work concerned, together with the manner in which the Respondent has set about its task.

7 The Tribunal does feel the need to express its view that with the benefit of hindsight, which is always a wonderful talent, a number of these issues might, conceivably, have been resolved in a different way, had the Respondent had more open lines of communication with its leaseholders.

8 In looking back, it may also be the case that many leaseholders may not have appreciated the significant complexity of the lease into which they entered, so

2 far as they related to the separate obligations of landlord and tenant for the maintenance and repair of their homes, in which they had placed significant investment of both time in maintaining their property to a good standard and condition

9 Having nevertheless reached a position where an application was made to the Tribunal, directions were given in November 2018 that have been complied with to the extent that a hearing could now take place. The Tribunal is grateful to the Applicants, who have been unrepresented up to the date of the hearing for the significant efforts they have put in to provide a coherent case and to the Respondent and its representatives for collating and producing clear bundles (3) of documents for its assistance.

The Law

10 The law relating to jurisdiction in relation to service charges, falling within Section 18 Landlord and Tenant Act 1985, (“the Act”) is found in Section 19 of the Act which provides: (1) relevant costs shall be taken into account in determining the amount of a service charge payable for a period- (a) only to the extent that they are reasonably incurred, and (b) where the are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard

11 Further section 27A Landlord and Tenant Act 1985 provides: (1) An application may be made to a leasehold valuation tribunal for a determination whether a service charge is payable and, if it is, as to – (a) the person by whom it is payable (b) the person to whom it is payable (c) the amount which is payable (d) the date at or by which it is payable, and (e) the manner in which it is payable

and the application may cover the costs incurred in providing the services etc and may be made irrespective of whether or not the Applicant has yet made any full or partial payment for those services (subsections 2 and 3)

Subsection 4 provides for certain situations in which an application may not be made but none of them apply to the situation in this case.

12 Reference will also be made below to Section 20 of the Act, but in view of the nature of the issue in relation thereto its provisions, and the Regulations

3 relating to the consultation process for major works, are not set out here at length.

B Preliminary issues

13 A number of matters were raised by the respondent as preliminary issues for the Tribunal to determine, largely without objection by the Applicants: (1) In the list of Applicants are the names of the leaseholders of 124, Grosvenor Road, and 19, Bridge Road, Maghull. Neither of these properties are within the development at Lydiate and are not affected by the proposed works. They are therefore removed from the proceedings. (2) Although named as a party, Mr Anthony McGlinchey is not the leaseholder of 43A, Road. The assignee of the lease is Mrs Carolyn McGlinchey, who should be substituted as a party (3) In respect of 39A, Liverpool Road, the named Applicants are Beverley Lawton and Annette Lawton. The registered proprietor is Annette Bramwell who should be the sole party in respect thereof. There was no difficulty in making these amendments.

14 The lease in respect of 52, Oakhill Drive is peculiarly different from the other leases of the other flats under consideration in that in clause 293 thereof there is particular reference to the contribution to be made to the landlord’s costs of maintaining, repairing and renewing: “(1) The foundations and exterior walls of the lower flat (2)The concrete floor slab between the upper flat and the lower flat” Although that floor comprises more than just a concrete slab. It was not clear to the respondent if there was a lacuna between the two leases for the flats as to responsibility for, and liability to pay for work done other than to the concrete slab. Furthermore, did liability extend to that part of the slab which was not, by reason of the design of the building, over the lower flat?

15 To the Tribunal’s mind the only sensible construction that could be put upon the lease was that the term “concrete roof slab between the upper flat and lower flat”, was used as a descriptive term to identify that part of the building between the two levels and not to limit, in some peculiar way, the responsibilities of the respondent and place some, of an unusual nature, upon the leaseholder of flat 52.

C Inspection

16 On the morning of 24th June 2019 the Tribunal inspected the development on which the subject flats were situated and found it to be a substantial estate of brick properties under tile roofs, some brickwork being rendered, comprising a larger number of houses and a smaller number of flats. There are 13 blocks of four flats, giving an outward appearance of large semi-detached houses,

4 but divide into upstairs and downstairs flats, either side of the central partition wall.

17 It would appear that sufficient space was created on the development for properties to have garden areas and then further green spaces and grassed areas are located throughout the area. Such individual flats as were seen by the Tribunal would appear to have separate rear gardens for each flat in a particular block.

18 The design of the blocks is such that the roofs are not of simple design but are of a particular pitch and hipped nature, with some flat roof areas for the upstairs flats. It is understood that this may have been to allow access to a storage area in the days of coal fired heating, as evidenced by alterations and adaptations seen to some flat areas on the inspection.

19 The development is well situated for local amenities and public transport. At the time of construction it was surrounded by a semi-rural environment, but later development has assimilated it into a larger suburban locality where the boundary between Lydiate and Maghull is no longer easily distinguishable.

D The Issues

20 During the course of the proceedings the Applicants sought to indicate with some clarity the issues that they had with the Respondent and its service charges. Although particular in their complaints about the proposed roof works, they raised other issues that they felt should be conveniently raised during the course of the proceedings. If at any stage they were not clear, the Respondent sought to identify with greater clarity the point it thought was being made.

21 Two schedules provided in the bundle of documents were assistive: that at page 243 onwards identifying the complaints raised and the responses thereto and that at page 535 onwards identifying the relevant service charge obligations and maintenance and repair responsibilities in the leases.

22 It is appropriate to consider each issue separately as they are set out below

23 The major roof works It is clear that this programme is the catalyst for the need by the leaseholders generally to air their grievances with the Respondent. They are not satisfied that the works are required, nor are they satisfied that the suggested costs are reasonable. This apparent from many of the witness statements submitted by individual Applicants as well as their joint statement of case.

23 The Respondent has carried out a condition survey in respect of its tock on the Lydiate development. This comprised a desk-top survey backed up by such practical surveys as it has carried out (essentially visually, from ground

5 level). It has determined as a result that it is now appropriate to embark upon a comprehensive re-roofing project. This would be in line with a generally held view that the life expectancy of a roof is approximately 60 years. That is a recognised turning point where the rising cost of ongoing repairs justifies capital outlay on replacement. 24 Leaseholders are equally adamant that such work is not required and is premature. This is based upon personal experience. No evidence is provided by way of report or survey for, or on behalf of the Applicants. That upon which the Respondent bases its decision is limited.

25 The cost of the work is unreasonable The applicants provide within their evidence two estimates from independent contactors that they have approached. Heather Bunkum at 2, Haigh Crescent provided one of £12,000.00 while Sharon Hesketh at 144, Coppull Road provides one for £3,000.00 for her roof (which would be double for one extending over the other half of her building).

26 The Respondent’s view is firstly that there is no clear comparison of what is included and what isn’t and that its requirements in respect of such matters as health and safety, suitability of contractors for a large scale contract, confirmed compliance with overall standards and policies required by the Respondent are such that those contractors are likely to be excluded. The Respondent also identifies potential asbestos issues as a key issue in determining likely cost and not apparent in the estimates provided.

27 It should be noted that even though the Applicants did not provide details of any contractors to be considered at the time of the consultation process, it is still open to them at a later time to challenge the reasonableness of costs incurred, or being incurred, in respect of the actual works carried out.

28 The proposed works revisit work that some leaseholders have carried out themselves A number of leaseholders have, over a period of time invested monies in repairs and improvements to parts of their respective flats now falling within the proposed programme, or affected by it, notably to soffits, gutters and adaptations to flat roofed areas. The statement of Raymond Wokenforth (39B, Liverpool Road) is a good example of leaseholders’ views.

29 The Respondent’s view is that it is clear from the leases of the respective flats (see above) that the obligation for repair and maintenance of roofs is the responsibility of the Housing Association, not the leaseholders and that such works have carried out in contravention of those provisions.

30 Work not of a reasonable standard A number of leaseholders complain that the works that have been carried out thus far are not done to a reasonable standard. Heather Bunkum provides photographic evidence in her support. Reference should also be made here to

6 the particular complaint of Yvette Fairbank (76, Coppull Road) about water ingress during work on her roof in October 2018 .

31 It appears to be the case that the Respondent accepts that in some limited circumstances the Applicant’s have a case, but these are indeed limited and the contractor is working, when required, upon remedial action where investigations support this. In the Respondent’s view these circumstances are no more prevalent than might be expected in respect of major works and responses are appropriate to the nature of the problems that arise.

32 Consultation requirements not complied with Both Mr Wokenforth and Sarah Jarvis (130, Coppull Road) indicate that they were excluded from the consultation process, in whole or in part, as they did not receive relevant notices. The respondent avers that they were properly served upon Mr Wokenforth, but conceivably not at his own postal address, and Miss Jarvis was unfortunate in acquiring her property after service upon her predecessor in title.

33 Misleading indications of cost at the time of purchasing the property Both Sharon Clements (122, Coppull Road) and Sarah Jarvis allege that the indications given within the right to buy procedure as to likely costs for the forthcoming 5 years was inaccurate in relation to the costs now being incurred for the roof works. In Miss Clements case the respondent indicates that the proposals in relation to the roof works were forthcoming after the expiration of the 5 year period and in Miss Jarvis’ case related only to likely repairs and not renewal.

33 Access to estimates Following the consultation process Beverley Lawton indicates she was refused access to the estimates obtained when she sought to see them. Sharon Hesketh (144, Coppull Road) apparently sought copies but did not obtain them. Heather Bunkum suggests she sought copies because she could not get time off work to visit the Respondent’s offices, but was refused.

34 The Respondent made no admissions in relation to any refusal of access, indicates that they complied in all respects with the consultation requirements and in any event, as it now appears, Beverley Lawton would not have been entitled to inspect them in any event.

35 Conflict of interest between the Respondent and the contractors Concern was expressed generally by Applicants as to the relationship between the Respondent and the chosen contractor in view of the “in-house” nature of Carroll Build’s relationship. The Respondent is happy that there is an arms- length relationship and they were the providers of the lowest quotation. The Respondent is not legally barred from using them, and indeed sometimes does not do so, but the relationship tends to be more manageable and open than with wholly unrelated contractors.

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36 This issue may have become clouded by concerns that the some Applicants appeared to be aware before the Respondent that as a result of the initial consultation process one tenderer was in liquidation and the process needed to be revisited. This reinforced the Applicants’ concerns as to the process generally.

37 Agreement with another leaseholder to allow him to replace his own roof Sharon Clements points out that one leaseholder was granted granted permission to replace his own roof and not have the work done in the major contract. It would appear that this leaseholder has, for reasons not entirely apparent, been granted a lease of the roofspace to his building and in those circumstances the Respondent views the permission as unique to deal with that unusual situation.

38 Other service charge issues In addition to matters arising in respect of the roof works the Applicants provide other details of dissatisfaction with the provision of, charges for and attitude towards services. They are summarised below and are dealt with by the Tribunal later within this decision, but the fuller details can be gleaned from the Schedule at pages 243 onwards and the detailed responses provided by the Respondent therein. Where they relate to actual costs, rather than, the manner in which the Applicants see the Respondent conducting itself in relation to them, they are deserving of full consideration. (1) The cost of insurance compared provided in respect of the buildings when compared with that which might be obtainable by the leaseholder. (2) Costs and standard of repairs generally. (3) Lack of clarity as to what charges relate to and a confusing billing system (4) Commencing proceedings for the recovery of charges whilst the tribunal process is taking place. (5) Work being carried out despite objections to it.

E Hearing

39 Following its inspection of the development, the Tribunal reconvened at the Civil Justice centre, Vernon Street, Liverpool for a hearing attended by a number of leaseholders and representatives of the Respondent, represented respectively by Mr Becker of Counsel and Miss James of Trower, Hamlins, Solicitors.

40 The Tribunal was able to visit at some length, over a considerable period of time, the issues raised in the earlier submissions and statements of case provided by the parties, principally to gain further and better explanations of the views held and the reasons for them.

41 Although it had the benefit of a number of witness statements the Tribunal did not consider it necessary to review them directly. There was already

8 extensive comment as to the content from the other parties. Furthermore, the general conduct of those present was to suggest that the views that had been expressed were anything other than the honest beliefs and opinions of those who had provided them in a genuine effort to assist the Tribunal to reach appropriate conclusions.

42 Nevertheless, the Tribunal has taken the opportunity of reviewing those statements, together with the statements of case and responses, in coming to those conclusions.

F Obligations under the leases

43 Before reaching those conclusions in relation to the issues raised by the Applicants it is necessary to consider the obligations that the parties have in relation to maintenance and repair of the properties and the responsibilities for paying for them.

44 Subject to the observations made above in relation to the unusual provisions in respect of 52 Oakhill Road, the leases fall into several broad categories, according to whether they were granted by the Respondent on the one hand, or its predecessor Council on the other. Thereafter the differences relate to where the relevant provisions are in the lease and how the apportionment of them is described. They are listed in the schedule referred to above, in paragraph 21.

45 By far the two most common forms of lease, with minor variations within that schedule, both contain covenants by the leaseholder to pay, as part of the rent, a contribution towards the costs incurred by the landlord in repairing, maintaining, renewing and insuring those parts of the building that are being retained by the landlord (the exterior and structure). The landlord in turn covenants to effect that repair, maintenance, renewal and insurance and to account for the costs to the leaseholder on an annual basis.

46 A small number of properties are held under slightly different leases, but perusal by the Tribunal of those leases reveal that they contain the similar obligations on the landlord and the leaseholders to pay for them.

G Determination

47 The Tribunal determined that the most suitable starting point for its determination would be to look at the obligations in relation to the maintenance, repair, renewal and insurance of the structure and exterior of the building in which these relevant flats are situated.

48 The leases are all quite clear in respect of those matters. The obligation is imposed upon the landlord, One Vision Housing, and no one else, to carry out

9 the work. It is the responsibility of the leaseholders to pay for it in accordance with their leases and the appropriate proportions set out in them

49 The corollary to that is that the leaseholders have no responsibility, or entitlement, to effect their own works in respect of those matters, nor to effect their own insurance. There are sound reasons for this. If leaseholders were entitled, or even obliged by the lease to do so there would be issues of piecemeal repair etc and insurance of parts, and not necessarily the whole, of buildings.

50 The Tribunal is not satisfied that these positions were made as clear as they could have been to the original purchasers, nor to their assignees for there to have been so much individual activity as there has been. Legally however the Tribunal is of the view that the position is clear cut.

51 The extensive roof replacement programme is therefore one that the respondent may embark upon, subject to the work being reasonably required, to a reasonable standard and at a reasonable price. Whether any accommodation can be reached in respect of the works carried out by any leaseholder might be preserved, and cost saved, might conceivably become apparent as the programme progresses, but this may be a forlorn hope.

52 Similarly, the Respondent is entitled to insure the structures of the buildings and recover the cost. It may be that issues of double insurance could have existed and that neither insure would have been fully at risk. This could be the subject of enquiry by those leaseholders affected.

53 Having confirmed that basic position. the Tribunal must then move on to consider whether what is proposed or done is reasonable. So far as the major roof works are concerned there are two fundamental positions: That of the Respondent is that the existing roofs have reached the end of their useful lives and it is appropriate to effect a programme that deals with all its stock on the development. So far as the Applicants are concerned, some, or all, of the work is unnecessary.

54 The Respondent has carried out an exercise to review its original roof coverings after a period of over 60 years. The Tribunal considers that a reasonable step. This is beyond a commonly accepted period when the cost of repairs begins to justify replacement. Whilst it may not necessarily the case that all roofs are in need of immediate replacement the Tribunal accepts that position will be reached sooner rather than later.

55 Is it reasonable to embark upon on a scheme encompassing all the housing units? To the Tribunal’s mind there is not necessarily a right way, nor a wrong way – either do all in one scheme, or have a longer, more rolling programme. Both may be reasonable. One will allow economies of scale in resources, materials and project management; the other may allow better

10 preserved roofs to remain for some time longer. One matter that was not necessarily aired before the Tribunal is that there is in any event an inevitability that work will be required to replace all roofs in the relatively short term. It is well established that replacement roofs will be required: a time just over 60 years from construction is likely to be when work becomes necessary.

56 Is the work done or proposed being achieved at reasonable cost and to a reasonable standard? The Applicants make two valid points: they can obtain cheaper quotations for individual roofs and there are some issues with the standard of work,

57 There are, however, difficulties with the quotations obtained in that there is a wide variation between then and it is not clear to what extent they are like for like when compared with the costs actually being incurred by the Respondent. Tenders were sought and obtained and the lower one chosen. The Respondent also points out that it has an obligation to seek to ensure that certain standards are complied with by its contractors and to see that they are sufficiently robust to provide the capability and material for a large scale contract.

58 Individual Applicants may be able to get work done more cheaply, but they are not entitled under their leases to do so. The Tribunal must ask itself a simple question. Given that the obligation to carry out the work falls on the Respondent are the costs incurred reasonable? Within the parameters within which it is required to work, the Tribunal considers that this is the case.

59 In so far as the achievement of reasonable standards of work is concerned, the Tribunal noted on its inspection the apparent quality of the work and also noted the problems itemised by some Applicants. The tribunal sees no systemic failings. It appreciates that for certain leaseholders difficulties occur that should be of only a short term nature. It is conceivable that if problems of a more long-term nature manifest themselves on a more widespread basis the issue may be revisited in respect of future service charge costs.

60 There remain two associated issues. Firstly, it has been noted that one leaseholder has effected his own roof works. The explanation given by the Respondent as to this arising because of the peculiar arrangement in relation to the roof space is accepted. It is not seen by the Tribunal as setting any precedent.

61 Secondly, two Applicants raise issues in relation to the indications that they were given as to likely costs in the 5 years following exercising the right to buy. The tribunal was not impressed by the somewhat dismissive tone adopted on behalf of the Respondent – in one case that it referenced repair, not renewal an in the other that the period had just expired prior to the re- roofing exercise. This issue is not one that the Tribunal can embark upon

11 within its scope. While it can determine payability, the issues that may arise in relation to how those estimates were reached and the Applicants’ reliance upon them would take this into another forum.

62 The Respondent also undertook an appropriate S20 consultation process. This was not without its hitches. Particular problems arose for Mr Wockenforth in that the notice was served at the property, which was occupied by his tenant, and Miss Jarvis, who was caught in the middle of her purchase process. It should be borne in mind that the process is such that where it can be established that it has been substantially complied with it is not the purpose of the scheme to provide any accidental financial benefit to a leaseholder, or financial burden upon a landlord, provided that the cost are reasonable. The Tribunal would not, in this case, interfere with what are not in any event compliance failures and both leaseholders were able to catch up with the process as it progressed, according to the evidence that has been submitted.

63 That the landlord’s placed the contract with Carroll’s did not create a conflict of interest. They provided the lower quotation are at a sufficient arms length to be utilised. There was a higher quotation and no other final interests were expressed. No nominations were made by leaseholders. The Respondent cannot be expected to have gone any further.

64 It is unfortunate that efforts by some Applicants to see or obtain copies of the quotation did not come to fruition. The Respondent appeared somewhat dismissive of their complaints in that respect. This might be another occasion where a less legalistic approach might have satisfied some of their concerns.

65 The position in respect of insurance is similar. It is the Respondent’s duty to arrange insurance and for the leaseholders to share the costs in appropriate proportions. It is quite likely that if they were able to insure their own properties they might obtain a policy more cheaply. It is always difficult to make exact comparisons, particularly in the modern insurance market where incentives for new policies are available and combined buildings and contents insurance might offer a better deal. The significant point, however is that the Applicants cannot insure, according to the leases, it is the landlord’s responsibility. Nothing has been provided to suggest that the cover and premium provided under the landlord’s policy is unreasonable. In any event, as was mentioned at the hearing, it has been established in a number of authoritative cases that: (1) If a premium is secured in the insurance market and at arms-length it is reasonable. (2) Such a premium may not necessarily be the cheapest. (3) It is commercially acceptable for a large landlord to place insurance so as to secure a block policy. (4) It may not be commercially viable for a landlord to seek different policies for different properties within a portfolio.

12 (5) If the premium is considerably higher than might be obtained elsewhere the leaseholder is entitled to call on the landlord to show that there are no special features that took the transaction outside the normal course of business. See, for example, Havenridge Limited v Boston Dyers Limited [1994] 49 EG 111 Berrycroft Management Company Limited v Sinclair Gardens Investments (Kensington) Limited (1996) EWHC Admin 50Forcelux Limited v Sweetmn and Another (2001) 2 EGLR 173 Avon Estates () Limited v Sinclair Gardens Investments (Kensington) Limited [2013] UKUT o264 (LC) Waaler v Hounslow LBC [2017] EWCA Civ

66 The point has been made above that some concerns raised by Applicant’s may have been dealt with more sympathetically. That the Respondent may perhaps need to address the perception is a point that the Tribunal would wish to make. Those matters, other than insurance, that are raised within paragraph 37, above, namely the concern about the instigation of proceedings whilst the Tribunal process is being followed and the concerns of Miss Jarvis about the general treatment of long leaseholders, whilst not suggesting that they affect the overall assessment of reasonableness, indicate concerns that may be symptomatic of a fragile relationship.

H Conclusion

67 It is hopefully clear from what is said above that the Tribunal is satisfied that in the circumstances relating to this large estate, as set out by the parties, the service charges are reasonably incurred at reasonable cost, both in respect of the major roofing works and other matters raised by the Applicants. There is nothing to the tribunal’s mind that makes them unnecessary, excessive, or unreasonable.

68 Observations were also sought in relation to Section 20C Landlord and Tenant Act 1985 and whether professional costs incurred by the Respondent in these proceedings should be included in future service charge calculations. The respondent has chosen to make clear that it does not intend to include such charges. As an exercise in caution the tribunal is prepared to make an order that it is just not to include such charges in future service charge calculations.

J R RIMMER (CHAIRMAN)

© CROWN COPYRIGHT 2019

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