214 Bermondsey Street Limited v Crispin Corfe & Ors

In determining whether service charges were reasonably incurred, a tribunal must consider relevant material in the bundle, including explanations contained in pleadings where the procedural rules do not prescribe a particular form of evidence. It should not disallow costs on a point that it has introduced without giving the parties a fair opportunity to address it. The reasonableness of obtaining works or an assessment is distinct from the amount reasonably incurred, which may be reduced to reflect poor quality. A cost may remain recoverable where the work was reasonably commissioned and materially useful, despite defects in its execution.

The appellant freeholder sought service charges from the long leaseholders of three flats. The disputed items concerned fire-safety assessments following amendments to the Regulatory Reform (Fire Safety) Order 2005. The First-tier Tribunal accepted that commissioning a further assessment was reasonable but disallowed the invoices because they were addressed to another company, the VAT treatment was unexplained, and the landlord had not justified instructing a different contractor. It also found the report to be of very poor quality.

The landlord appealed on the first three grounds. There was no appeal against the assessment of the report’s quality. The central issues were whether the FTT had overlooked relevant evidence, whether it had acted fairly in raising the contractor issue, and what sum was reasonably recoverable.

1. The appeal succeeded on all three grounds. The FTT had overlooked explanations in the appellant’s statements of case concerning the invoices being addressed to AHGR Limited and the omission of VAT from one service-charge claim. The explanations were material and were in the bundle. The FTT’s procedural rules did not prescribe the form in which evidence had to be given. It could not therefore disallow the invoices on those grounds.
2. The FTT also erred in deciding that the landlord had failed to show that instructing Assessed Risk, rather than the original consultant, was reasonable. That issue had not been identified in the directions or raised by the respondents. The appellant should have been given an opportunity to answer it. The explanation that the original consultant lacked the necessary experience and qualifications was a sufficient answer, and was not challenged on appeal.
3. The acceptance that it was reasonable to incur the cost of the report remained intact. However, under sections 19 and 27A of the Landlord and Tenant Act 1985, only the amount reasonably incurred was recoverable. The report was of very poor quality, containing substantial errors, but its conclusion that combustible wooden panelling created a high risk and required replacement provided a material justification for remedial action.
4. The Tribunal could not require the report to be amended and would not find further facts. Doing the best it could with the FTT’s assessment, it substituted £1,250 including VAT as the amount reasonably incurred and recoverable through the service charge. The decision was set aside at paragraphs 22 and 25 of the FTT’s determination to that extent.

• First-tier Tribunal (Property Chamber): determined that the disputed Assessed Risk invoices were not payable, while accepting that obtaining a further fire-safety assessment was reasonable.
• Upper Tribunal (Lands Chamber): allowed the appeal on grounds 1, 2 and 3, set aside the relevant parts of the FTT’s decision, and substituted a determination that £1,250 including VAT was reasonably incurred and recoverable.