The dispute concerns the reasonableness and recoverability of certain service charges charged against Mr Garside and another appellant, lessees under a long lease, by RFYC Ltd, which owns the freehold of a property.
Garside & Anor v RFYC Ltd & Anor [2011] UKUT 367 (LC) (15 September 2011)
Summary
The decision in Garside & Anor v RFYC Ltd & Anor [2011] UKUT 367 (LC) was a case whose determination and decision required proper understanding and enforcement of provisions relating to service charges in a lease agreement. The dispute concerns the reasonableness and recoverability of certain service charges charged against Mr Garside and another appellant, lessees under a long lease, by RFYC Ltd, which owns the freehold of a property. The issues fell to be determined by the Upper Tribunal (Lands Chamber), which gave guidance as to how service charges are to be considered and justified under residential long leases.
Facts
The appellants, Mr Garside and another lessee, held long leases of flats in a residential block managed by RFYC Ltd (the respondent). There was imposed upon the lessees a obligation by way of lease to pay a service charge for the upkeep and maintenance of common parts and services.
A dispute arose over certain service charges that RFYC Ltd demanded and which Mr Garside and the other lessee claimed were unreasonable. Particularly, a number of charges demanded by RFYC Ltd were those for building insurance, management fees, and a number of repairs and maintenance works. The lessees argued that such charges were excessive and did not represent value for money.
Issues
The first issues this case explored are:
1. Whether these service charges levied by RFYC Ltd are reasonable.
2. Whether in principle the items forming the service charge were necessary and whether they had been properly incurred.
3. What is the meaning of the terms of the lease with regards to the scope and the method of calculation of the service charge.
4. Whether the freeholder has the obligation to adduce clear evidence to support the service charges.
First Instance
The lessees appealed against the service charges in the First-tier Tribunal (Property Chamber) on various grounds, alleging unreasonable expenditure on insurance and management fees, and some items of repair work, none of which were satisfactorily explained by the freeholder.
The First-tier Tribunal heard evidence from both parties, which involved calling for detailed accounts and invoices, together with calling witnesses. It found for the lessees on many matters and held that some of the charges were unreasonable. Thus, it reduced the service charges on the basis that the service charges included some items of cost that couldn't be justified or were disproportionate in amount.
Decision on Appeal
RFYC Ltd appealed on the ground that the reductions already conceded by the First-tier Tribunal should be reduced further, and that the original service charges should be reinstated, to the Upper Tribunal (Lands Chamber).
The Upper Tribunal has gone adequately through the findings of the First–tier Tribunal and has taken into first instance preliminary evidence, along with an explanation for the Tribunal's decision. The Upper Tribunal sustained the First–tier Tribunal's decision since it also held the view that the service charges initially demanded were excessive and patently not satisfactorily justified by evidence that RFYC Ltd had provided.
The Upper Tribunal further underscored the reasonableness that should be exercised in terms of service charges. It reiterated the basic requirement that every landlord is under a duty to clearly demonstrate, with credible evidence, the charges he may wish to impose on lessees. Accordingly, the tribunal said it had to represent only the actual expenditure incurred and necessary, proportionate to the services and benefits accruing to lessees.
Comments
The Garside & Anor v RFYC Ltd & Anor case has provided invaluable guidance to both landlords and tenants on how to manage service charges under residential leases and the proper way of resolving disputes concerning service charges. The summary obligation arising from this case is summarized below:
1. Reasonableness of Charges: There is an obligation for a landlord to ensure that the service charges he makes are reasonable, and, thus, he ought to be in a position to show the accounting for the same by showing exactly what work was done, how it came to be necessary, and that it amounted to a reasonably priced cost.
2. Transparency and Documentation: Proper documentation and transparency in calculation and apportionment are germane to service charges. A landlord is under an obligation to maintain proper record books for expenditure and also the reasons for such expenditure.
3. Quality and Necessity of Works: The inefficacy of the charges must have to be related to works and must necessarily be completed to a good standard. In this behalf, a landlord will not charge against any unnecessary or bad performance of any works.
4. Purpose of Tribunals: First-tier and Upper Tribunals are held to hear service charge matters, and in the course of this hearing, they rule on them. In the process of their ruling on past cases, the virtue of fairness was held while upholding stipulations indicated in a lease.
5. Precedent for Future Disputes: Such a ruling thus forms a precedent in future service charge disputes and hence provides guiding principles as to what comprises a reasonable charge and what evidence is required to be furnished to clarify them.
This case of Garside & Anor v RFYC Ltd & Anor is one in proper order that very clearly illustrates the importance of striking a good balance between the landlord's rights to recover expenditures and the lessee not being needlessly charged extra for any reason. The judgment holds sway over principles of transparency, accountability, and fairness in the administration of service charge arrangements under residential tenancies. It also points out that landlords could clearly make supported evidence of their charges and ensures that tenants are made to pay only for services which are actual, reasonable, and necessary.
Social
Valuation Services provided by Ringley's Valuation Team
Legal Services provided by Ringley Law
Building Surveying Services
Meet our Expert Property Commentators
The dispute concerns the reasonableness and recoverability of certain service charges charged against Mr Garside and another appellant, lessees under a long lease, by RFYC Ltd, which owns the freehold of a property.
Garside & Anor v RFYC Ltd & Anor [2011] UKUT 367 (LC) (15 September 2011)
Summary
The decision in Garside & Anor v RFYC Ltd & Anor [2011] UKUT 367 (LC) was a case whose determination and decision required proper understanding and enforcement of provisions relating to service charges in a lease agreement. The dispute concerns the reasonableness and recoverability of certain service charges charged against Mr Garside and another appellant, lessees under a long lease, by RFYC Ltd, which owns the freehold of a property. The issues fell to be determined by the Upper Tribunal (Lands Chamber), which gave guidance as to how service charges are to be considered and justified under residential long leases.
Facts
The appellants, Mr Garside and another lessee, held long leases of flats in a residential block managed by RFYC Ltd (the respondent). There was imposed upon the lessees a obligation by way of lease to pay a service charge for the upkeep and maintenance of common parts and services.
A dispute arose over certain service charges that RFYC Ltd demanded and which Mr Garside and the other lessee claimed were unreasonable. Particularly, a number of charges demanded by RFYC Ltd were those for building insurance, management fees, and a number of repairs and maintenance works. The lessees argued that such charges were excessive and did not represent value for money.
Issues
The first issues this case explored are:
1. Whether these service charges levied by RFYC Ltd are reasonable.
2. Whether in principle the items forming the service charge were necessary and whether they had been properly incurred.
3. What is the meaning of the terms of the lease with regards to the scope and the method of calculation of the service charge.
4. Whether the freeholder has the obligation to adduce clear evidence to support the service charges.
First Instance
The lessees appealed against the service charges in the First-tier Tribunal (Property Chamber) on various grounds, alleging unreasonable expenditure on insurance and management fees, and some items of repair work, none of which were satisfactorily explained by the freeholder.
The First-tier Tribunal heard evidence from both parties, which involved calling for detailed accounts and invoices, together with calling witnesses. It found for the lessees on many matters and held that some of the charges were unreasonable. Thus, it reduced the service charges on the basis that the service charges included some items of cost that couldn't be justified or were disproportionate in amount.
Decision on Appeal
RFYC Ltd appealed on the ground that the reductions already conceded by the First-tier Tribunal should be reduced further, and that the original service charges should be reinstated, to the Upper Tribunal (Lands Chamber).
The Upper Tribunal has gone adequately through the findings of the First–tier Tribunal and has taken into first instance preliminary evidence, along with an explanation for the Tribunal's decision. The Upper Tribunal sustained the First–tier Tribunal's decision since it also held the view that the service charges initially demanded were excessive and patently not satisfactorily justified by evidence that RFYC Ltd had provided.
The Upper Tribunal further underscored the reasonableness that should be exercised in terms of service charges. It reiterated the basic requirement that every landlord is under a duty to clearly demonstrate, with credible evidence, the charges he may wish to impose on lessees. Accordingly, the tribunal said it had to represent only the actual expenditure incurred and necessary, proportionate to the services and benefits accruing to lessees.
Comments
The Garside & Anor v RFYC Ltd & Anor case has provided invaluable guidance to both landlords and tenants on how to manage service charges under residential leases and the proper way of resolving disputes concerning service charges. The summary obligation arising from this case is summarized below:
1. Reasonableness of Charges: There is an obligation for a landlord to ensure that the service charges he makes are reasonable, and, thus, he ought to be in a position to show the accounting for the same by showing exactly what work was done, how it came to be necessary, and that it amounted to a reasonably priced cost.
2. Transparency and Documentation: Proper documentation and transparency in calculation and apportionment are germane to service charges. A landlord is under an obligation to maintain proper record books for expenditure and also the reasons for such expenditure.
3. Quality and Necessity of Works: The inefficacy of the charges must have to be related to works and must necessarily be completed to a good standard. In this behalf, a landlord will not charge against any unnecessary or bad performance of any works.
4. Purpose of Tribunals: First-tier and Upper Tribunals are held to hear service charge matters, and in the course of this hearing, they rule on them. In the process of their ruling on past cases, the virtue of fairness was held while upholding stipulations indicated in a lease.
5. Precedent for Future Disputes: Such a ruling thus forms a precedent in future service charge disputes and hence provides guiding principles as to what comprises a reasonable charge and what evidence is required to be furnished to clarify them.
This case of Garside & Anor v RFYC Ltd & Anor is one in proper order that very clearly illustrates the importance of striking a good balance between the landlord's rights to recover expenditures and the lessee not being needlessly charged extra for any reason. The judgment holds sway over principles of transparency, accountability, and fairness in the administration of service charge arrangements under residential tenancies. It also points out that landlords could clearly make supported evidence of their charges and ensures that tenants are made to pay only for services which are actual, reasonable, and necessary.
Valuation Services provided by The Ringley Group
Social
Meet our Expert Property Commentators
Mary-Anne Bowring FTPI FRICS FARLA FCABE Founder/Head of Asset Management
Strategic partnerships, holistic delivery/ opportunities, growth, value engineering, thought leadership
Ian Barber MD BTR Mobilisation & Leasing
Runs HQ & site lease-up teams. Drives rent pricing, mobilisation, marketing, happy residents!
Jon Curtis MRICS Head of Building Engineering
Chartered Building Surveyor. Lectures on EWS1 & building safety. Runs CapEx programmes.
Kate Robinson MTPI MD Blocks/FM Management (London Region)
Master plan setup, ops and staffing and resident engagement. ISO45001 champion.
Lee Harle Partner Ringley Law
Plot conveyancing. Debt litigation. Group Company Secretary.
Anthony Kingdon MIRPM AssocRICS MD Blocks/FM Management (North Region)
Stakeholder engagement. Mixed tenure specialist. Budget management. Plant audit, PPM compliance.
Chris Georgalis MRICS Head of Commercial Valuation
Chartered Valuer. Rental valuations: retail, leisure. IRR modelling and valuations for secured lending. Compulsory purchase & rent reviews
Nichola Pughe MRICS Head of Residential Valuation
Chartered Valuer. Rental development & mixed use valuations, IRR modelling. Leasehold enfranchisement specialist
Natalie Birmingham Helpdesk Support Manager
Trainer & Helpdesk Manager: people, systems,contractors. ISO45001 supply chain accreditation.
Steve Norman Planning Director
Land due diligence (opportunities & constraints) Has contributed to a number of award winning schemes.
