Assethold Limited v Alexandra Adam & Ors.

Under section 19(1) of the Landlord and Tenant Act 1985, reasonably incurred costs require both a reasonable decision-making process and a reasonable outcome. The test is objective, but the Tribunal must assess the landlord’s decision in the circumstances and on the information available when the cost was incurred. It must not substitute hindsight derived from evidence obtained during the proceedings. A landlord may choose between more than one reasonable course of action; the chosen course need not be the cheapest. Interim safety measures may therefore be reasonably incurred where professional advice identifies an intolerable risk, even if that advice is later shown to be wrong. The measure must remain interim and be maintained only for a reasonable period.

Assethold Limited appealed against a decision of the First-tier Tribunal (Property Chamber) concerning service charges for a waking watch at Corben Mews. The FTT found that the landlord’s professional report had substantially overstated the fire risk and that the waking watch was unnecessary. It concluded that the cost was not reasonably incurred under section 19(1)(a) of the Landlord and Tenant Act 1985. In the alternative, it found that only one month’s cost for Block B could be reasonable, and that only 50% was recoverable because of the poor standard of service. The appeal concerned the correct test for reasonable incurrence and its application to the landlord’s decision to impose an interim waking watch on both blocks.

The appeal was allowed to the extent that the FTT’s finding under section 19(1)(a) was set aside. The Upper Tribunal substituted its own decision.

1. Applicable test. The FTT correctly understood London Borough of Hounslow v Waaler [2017] EWCA Civ 45. Section 19(1) requires an objective assessment of both process and outcome. The landlord must act reasonably in deciding what action to take, in selecting any contractor and in determining the amount to spend. The Tribunal must not impose its own preferred solution where the landlord has selected a reasonable course from a range of reasonable options.
2. Process. The FTT was wrong to conclude that the landlord acted irrationally by relying on the final Hydrock report rather than immediately obtaining a second opinion. A reputable firm’s report, signed by three professionals, described the fire risk as intolerable. Acting on that advice by putting interim measures in place was rational on the information then available.
3. Outcome. The FTT also applied hindsight. The question was whether a waking watch was a reasonable response when the cost was incurred, not whether the advice was ultimately correct. Adopting a waking watch was reasonable as an interim measure pending remedial works or further investigation. It was reasonable for both contiguous blocks, as Hydrock recommended a watch for both.
4. The FTT’s unchallenged finding that the reasonable interim period was one month remained binding. Its finding that the standard of service justified recovery of only 50% of the cost also remained. Accordingly, £14,000 was reasonably incurred under section 19(1)(a), subject to valid future demand.

• First-tier Tribunal (Property Chamber): determined that the waking-watch charges were not reasonably incurred under section 19(1)(a) of the Landlord and Tenant Act 1985, subject to alternative findings concerning one month, Block B and the standard of service.
• Upper Tribunal (Lands Chamber): allowed the appeal on reasonable incurrence, set aside the FTT’s decision on that issue and substituted a finding that £14,000 was reasonably incurred.