The Garden Quarter (Caversfield) Management v Vincent Ortet

When a service charge is demanded before relevant costs are incurred, reasonableness must be assessed under section 19(2) of the Landlord and Tenant Act 1985. A tribunal must identify whether it is considering an interim demand or a final charge and must explain the factual and legal basis for its assessment. Its reasons should identify the work charged for, the issues raised, the standard of work where relevant, and how any sum awarded has been calculated. A decision that does not permit the parties or an appellate tribunal to understand the reasoning is inadequately reasoned and may be set aside.

The appellant management company appealed against a decision of the First-tier Tribunal concerning a £3,392.16 service charge for external decoration and associated works at a block of four leasehold flats. The First-tier Tribunal held that only £1,000 was payable, primarily because it considered the works poorly executed, but did not explain how that figure was calculated or address the fact that the demand was made before the works were completed. Permission to appeal was granted because the decision was inadequately reasoned. The central issues were whether the First-tier Tribunal had properly explained its assessment and whether it had applied the correct provision of the Landlord and Tenant Act 1985.

1. Appeal allowed; decision set aside. The First-tier Tribunal’s reasons did not explain the basis for allowing £1,000. They did not identify the whole scope of the works, distinguish the quality of the various elements, or explain how the figure was calculated. The additional reasons were also insufficient because they referred generally to external work, including soffits, without identifying what work had been inspected or what standard had been applied.
2. The First-tier Tribunal’s criticism that the appellant should have instructed another contractor was unexplained. The contractual arrangements for remedial work were before it, but the decision did not explain why the appellant should have acted in breach of that contract.
3. The First-tier Tribunal also applied the wrong statutory focus. Under section 19(1) of the Landlord and Tenant Act 1985, relevant costs already incurred are assessed by reference to reasonable incurrence and reasonable standard. Under section 19(2), where the charge is payable before the relevant costs are incurred, the question is whether the amount demanded at that stage was reasonable. The demand here was an interim demand made before the works, so the First-tier Tribunal should have addressed that question. It had not determined the respondent’s challenge that the works were unnecessary.
4. The matter was remitted on agreed terms. The respondent’s April 2023 application was stayed pending the final demand. If that demand is challenged, the earlier application should be determined with it; otherwise it may be dismissed. The appellant would not enforce the interim invoice meanwhile. An order was also made under section 20C of the Landlord and Tenant Act 1985 preventing recovery of the landlord’s appeal costs through the service charge.

• First-tier Tribunal (Property Chamber): Determined that £1,000 of the £3,392.16 service charge was payable.
• Upper Tribunal (Lands Chamber): Set aside the First-tier Tribunal’s decision for inadequate reasons and remitted the matter on agreed terms.