Is it reasonable and valid of service charges charged by Marina Heights Limited?

Rita Akorita v Marina Heights Limited [2017] UKUT 255 (LC)

Summary

The case of Rita Akorita v Marina Heights Limited [2017] UKUT 255 entails a dispute between a lessee, Rita Akorita, and a freeholder, Marina Heights Limited, on service charges. The Upper Tribunal took into consideration the appeal with respect to reasonableness and validity of service charges charged by Marina Heights Limited. It identifies some of the important issues relating to service charges, lease interpretation, and the requirements of the evidence that is to be adduced in support of such charges.

Facts

Rita Akorita was a tenant of a property managed by Marina Heights Limited. She was undertaking, by the terms of her lease, to pay service charges for the maintenance and repair of the common parts of the building and other shared services. Disputes then arose as to the quantum and reasonableness of such service charges. It was claimed that Akorita objected to many of the charges on the basis that these expenditures represented poor value, failed to show what inhabitants were getting for the money they were paying, or involved massive charges for work that either was not necessary or was handled so wretchedly that it would need to be repeated within a short time.

The First-tier Tribunal (Property Chamber) hears disputes that relate to residential property. This includes service charges and other matters under the Landlord and Tenant Act 1985.

Issues

The most important issues before the court in this case were:

1. Whether service charges Marina Heights demanded from the inhabitants were reasonable and whether they abided by the terms of the lease.

2. Whether the specific items included in the service charges were necessary and properly incurred.

3. Meaning of the provisions of the lease relating to the calculation and apportionment of service charges

4. The adequacy of Marina Heights evidence in supporting of charges

First Instance

She now appeals against it before the First-tier Tribunal on various grounds concerning the service charges. Akorita showed to the effect that some of the charges were disproportionate, some of the works were not necessary or were poorly done, and there was no transparency in the matter of service charge demand.

On the other hand, Marina Heights was able to produce invoices, maintenance logs, and even expert testimony to support charges. Their claims were that all of the charges were per terms of the lease and related to necessary upkeep on the property.

The First-tier Tribunal considered evidence provided by both parties and reached a variety of Akorita's arguments. It held the finding that most of the service charges were unreasonable and that Marina Heights failed to prove any evidence supporting their charges. In reducing the amount of service charges Akorita was bound to pay, the Tribunal weighed in its decision.

Decision on Appeal

Consequently, Marina Heights appealed against the decision of the First-tier Tribunal before the Upper Tribunal for Lands Chamber, arguing that such a decision was erroneously made by the Tribunal and the reasonableness and proper documentation of the service charges were not considered by it.

The Upper Tribunal considered the evidence and findings of the First-tier Tribunal. It dismissed the appeal and ruled that the service charges, which Marina Heights had initially sued for, were indeed excessive and not wholly justified. On pains, the Upper Tribunal made the point again that in imposing any service charge, a landlord is under a duty to provide clear, detailed, and cogent evidence.

The Tribunal was careful to point out that service charges levied by the lessor should have a direct and sufficient connection with actual, necessary, and reasonable expenditure relevant to the services and benefit accruing to the lessees.

Comments

The decision of Rita Akorita v Marina Heights Limited points towards several important principles in relation to service charges: pertaining to residential tenancies:

1. Reasonableness and Justification: The service charges at all times must necessarily be such that the landlords warrant that they are reasonable and justifiable. Only necessary work, properly carried out, would be valid; with adequate supporting evidence to be provided by the landlord to justify such charges.

2. Transparency: The criterion for how service charges are to be valued and apportioned should again be very clear. Good, detailed records and documentation should be kept regarding the same, to establish the basis for the charges.

3. Quality of Work: Charges should ideally only be for work that is necessary and is to an acceptable standard. Unnecessary or sub-standard work should not be pushed down in cost to the lessees.

4. Burden of Proof: It insinuates that there shall be clear and convincing proof for levying service charges, including invoices with a clear breakdown of the work undertaken, maintenance logs, and expert testimony, if required.

5. Tribunal Role: First-tier and Upper Tribunals are mostly engaged in the scrutiny of these service charge disputes and adjudication. Their ruling shall spell out a message of equities and adherence to terms of the lease, which is always acting as a check against the unreasonable demand by the landlord.

6. Cases for Future Disputes: The case will guide what will be a reasonable charge in the future together with the evidence for that charge.

On the other hand, Rita Akorita v Marina Heights Limited simply reiterates principles of fairness, transparency, and accountability in the administration of service charges within residential leases. It is a good case reminding all lessors that they have a full justification for the charges to lessees and to lessees that they reserve the right to question unreasonable charges made by the lessor. This case boosts the jurisprudence concerned with residential property and service charges, especially within future disputes.

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