Radcliffe Investment Properties Limited v Nigel Keith Meeson & Anor

The reasonableness of a service-charge cost is a fact-sensitive question. It is not governed by an inflexible rule that the cause of the expenditure is irrelevant. Where a landlord's failure to obtain an up-to-date fire risk assessment causes an avoidable waking-watch cost to be incurred as part of making a building safe, the tribunal may conclude that the cost was not reasonably and properly incurred. The cost is then not recoverable under the lease. The statutory cap in section 19(1) of the Landlord and Tenant Act 1985 does not arise if there is no contractual entitlement to recover the cost.

The landlord appealed against a First-tier Tribunal decision concerning the recoverability through service charges of £57,894 spent on a waking watch at a converted residential building.

Following a fire-alarm malfunction, the fire authority identified concerns about compartmentation, fire protection and the external wall system. It required a waking watch. The landlord had not reviewed or replaced a pre-occupation fire risk assessment after acquiring the building. The First-tier Tribunal held that only the first seven days' cost was recoverable, because the later cost resulted from the landlord's failure to obtain an appropriate assessment.

The appeal concerned whether the tribunal had applied the correct test of reasonableness and whether the leaseholders had to pay the disputed costs.

1. Appeal dismissed. The First-tier Tribunal was entitled to find that the waking-watch costs after the first seven days were not payable by the leaseholders.
2. The contractual question was whether the costs had been reasonably and properly incurred in providing a service under the leases. The tribunal would then have had to consider the statutory restriction in section 19(1)(a) of the Landlord and Tenant Act 1985. Although the First-tier Tribunal did not separate those questions, any distinction did not affect the result: the contractual test additionally required the costs to have been properly incurred.
3. Continental Property Ventures Ltd v White [2007] L&TR 4 did not establish a general rule that the origin of a cost is irrelevant to whether its incurring was reasonable. Reasonableness must be assessed on the particular facts, consistently with Avon Ground Rents Ltd v Cowley [2019] EWCA Civ 1827.
4. The landlord had failed to fulfil its continuing duty under article 9 of the Regulatory Reform (Fire Safety) Order 2005 to obtain a suitable and sufficient, up-to-date fire risk assessment. The First-tier Tribunal was entitled to find that a timely assessment would have exposed the relevant fire-safety defects. The otherwise avoidable waking-watch expenditure was therefore part of the increased cost of making the building safe.
5. That conclusion was an evaluative finding open to the First-tier Tribunal. The disputed expenditure was not recoverable under the lease, so the section 19(1) statutory cap did not take effect. The Tribunal left a possible order under section 20C to agreement or further submissions.

• Upper Tribunal (Lands Chamber): dismissed the landlord's appeal and upheld the First-tier Tribunal's conclusion that the disputed waking-watch costs were not payable by the leaseholders.
• First-tier Tribunal (Property Chamber): decision issued on 31 July 2022. It allowed recovery of the first seven days of the waking watch only and disallowed the balance.