The case of Southwark LBC v Akhtar 2017 UKUT 150 (LC) has, at one corner, the London Borough of Southwark as appellant, and on another corner, respondent, Mrs. Akhtar, on the validity and reasonableness of charges to service.

Southwark LBC v Akhtar Upper Tribunal [2017] UKUT 150 (LC)

Summary

The case of Southwark LBC v Akhtar 2017 UKUT 150 (LC) has, at one corner, the London Borough of Southwark as appellant, and on another corner, respondent, Mrs. Akhtar, on the validity and reasonableness of charges to service. The Upper Tribunal discontinued the opportunity of Lands Chamber to listen to an appeal case reviewing the First-tier Tribunal's ruling of reasonableness and accuracy of service charges placed on Mrs. Akhtar's leasehold property by Southwark LBC. The decision is very crucial in establishing what is considered the key components of service charge disputes in the leasehold houses in the public sector.

Facts

Mrs Akhtar was a tenant of a flat belonging to the London Borough of Southwark, Southwark LBC. She was under an obligation by the terms of the lease to contribute to the cost, by means of service charges, of keeping the structure and common parts in reasonable repair. The respondent, Southwark LBC, demanded service charges from Mrs. Akhtar against which Mrs. Akhtar objected that the total charge was unreasonable and that costs claimed which form the subject of such a service charge were not reasonably incurred.

The specific areas of contention were about the repair, maintenance and the service charges for management that were charged on the same. Mrs Akhtar also argued that the amount charged was not commensurate to the service actually afforded to her, with the meter reading not even tallying in some cases.

Issues

There are two main issues that arise from this case:

1. Whether the service charges that the Southwark LBC demanded payment for was reasonable

2. Whether the items in the service charge account were of a reasonable nature as well as reasonably incurred.

3. Whether the evidence led by Southwark LBC was sufficient to support the service charges .

4. Whether the statutory consultation process for major works was complied with.

First Instance

Mrs Akhtar challenged the service charges at the First-tier Tribunal on five grounds. Evidence was given in relation to the fact that number of works charged for in the accounts were not necessary or had not been carried out to a satisfactory standard. In relation to the major works it was further argued that Southwark LBC should have consulted with leaseholders before carrying out the works.

It referred to the evidence submitted, such as the invoices, statements of work, and the expert testaments. Judgment was given in her favor on a number of those issues, and although on the overwhelming majority of the charges it considered to be reasonable and had proved to the entire satisfaction, and several others it held to be justified and imposed on the Appellant, there were some charges which it held to be unreasonable and not justified; it similarly found the defects in consultation in relation to some of the major works in respect of the referred works in the informal notice, and thus the Tribunal reduced the service charges.

Decision on Appeal Southwark LBC appealed the First-tier Tribunal's decision in the Upper Tribunal (Lands Chamber) in respect of a number of findings, not least the extent of various deductions it had made to the service charges and its interpretation of the statutory consultation requirements.

The Upper Tribunal heard evidence and arguments de novo on this issue and itself dismissed the appeal, holding that Southwark LBC had failed to satisfy it as regards what was reasonable in respect of the charges. The judgment is another statement of the long-held view that landlords, and therefore local authorities, have got to be able to make out a clear and therefore usable case under s.81 of the Housing Act 1996 in respect of service charges with cogent evidence. The court reaffirmed that consultation with leaseholders over major works needs to be proper, and any failure may well result in the charges being struck down or reduced to nil.

Comments

In its decision on Southwark LBC v Akhtar, a number of vital points for landlords and leaseholders were identified:.

1. Reasonableness and Justification: The service charge shall be reasonable, and grounds for the reasonableness of such charges, through clearly justified and detailed documentation and evidence to prove when was the work necessary and of good quality, shall be available to support such charges.

2. The Consultation Requirements: The legal consultation requirements shall be fulfilled for any major works qualifying as the abovementioned types. This includes requirements for consultation with leaseholders on:".

3. Transparency and Accountability: The case most definitely indicates that there is a call for transparency from the landlords in the calculation and apportioning of service charges. The tenant is to get its breakdown, with the landlord keeping records to be in a position to show valid services and works done at such costs.

The role of the tribunals: The First-tier Tribunal and the Upper Tribunal act as very important watchdogs over such service charge disputes. Decisions from either of these tribunals set a mechanism that ensures there is no exploitation and that all the parties deal in a manner that is within the precinct of the legal requirements.

Precedent for Future Disputes: Well, this case will remain a precedent for other service charge disputes, and in this case, in relation to the public sector, it has set some kind of standards in terms of the kind of evidence and compliance that is needed from landlords to justify service charges.

In conclusion, this case of Southwark LBC v Akhtar is a very important reminder of the principles operating service charges in leasehold properties. It further reiterates the call to landlords to reasonableness, openness, and their adherence to statutory requirements while administering service charges. The judgment in practice basically safeguards the interests of the lessees from exorbitant charges and ensures the liabilities lie on the landlord for their management.

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