Assethold Limited v Nelio Patricio Teixeira Franco

A leaseholder must identify why a variable service charge is unreasonable before the tribunal may reject it as unsubstantiated. Consultation under section 20 is not required for estimated service charges.

A contractual clause allowing recovery of costs incurred for the purpose of preparing and serving a section 146 notice may make pre-forfeiture proceedings costs payable as administration charges. The landlord must prove that the particular proceedings were in fact brought for that purpose. The First-tier Tribunal has no jurisdiction under Schedule 11 to assess an undemanded county court costs schedule as an administration charge.

Assethold Limited, the freeholder, appealed aspects of a First-tier Tribunal decision on the reasonableness and payability of service and administration charges demanded from Nelio Patricio Teixeira Franco, the long leaseholder of Flat A.

The proceedings had begun in the county court and were transferred insofar as they raised matters within the First-tier Tribunal’s jurisdiction. The appeal concerned an estimated charge for meter-cupboard works, pre-issue costs of the current proceedings, an administration charge for earlier proceedings, and a post-issue county court costs schedule.

The central issues were the burden of challenging charges, the scope of the lease’s section 146 costs covenant, and the limits of the First-tier Tribunal’s jurisdiction.

1. Appeal allowed in part. The Tribunal set aside and substituted parts of the First-tier Tribunal’s decision. The county court order required consequential amendment by adding £531 and £2,040, and subtracting £2,000.

2. The estimated meter-cupboard charge was reasonable and payable. A leaseholder is not entitled simply to put a landlord to proof of reasonableness, but must identify why a charge is unreasonable. The respondent had made no challenge. Further, consultation under section 20 of the Landlord and Tenant Act 1985 is not required for estimated charges. The First-tier Tribunal therefore erred in rejecting the estimate as unsubstantiated and because no consultation material had been produced.

3. The £2,040 pre-issue charge for the current proceedings was reasonable and payable. Under the lease’s section 146 covenant, costs of county court and tribunal proceedings may be recovered as an administration charge where they were incurred for the purpose of preparing and serving a notice under section 146 of the Law of Property Act 1925. A determination of payability is required before forfeiture for non-payment of service or administration charges by section 81 of the Housing Act 1996. The pleaded purpose and the absence of any reasonableness challenge established payability.

4. The First-tier Tribunal also erred in treating the £3,600 charge for earlier proceedings as a costs application. It had jurisdiction to determine its payability as an administration charge. However, the landlord provided no contemporaneous evidence that the earlier proceedings had been brought for the section 146 purpose. A later assertion of intention did not prove that purpose, so the substituted decision was that the charge was not payable.

5. The £6,290 post-issue costs schedule was not a demanded administration charge. It was a county court costs claim. The First-tier Tribunal had no jurisdiction under Schedule 11 to the Commonhold and Leasehold Reform Act 2002 to assess it, and its £2,000 order was set aside without remittal.

• Upper Tribunal (Lands Chamber): Allowed the appeal in part and substituted determinations on the challenged service and administration charges: [2022] UKUT 285 (LC).
• First-tier Tribunal (Property Chamber): On 21 January 2022, determined service charges and costs payable following transfer of issues from county court proceedings. Its decision was varied on appeal; no citation is stated in the judgment.
• Romford County Court: The claim was transferred in part to the First-tier Tribunal under section 176A of the Commonhold and Leasehold Reform Act 2002. A consequential county court order was made on 21 January 2022.