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This is the case in which the validity and reasonableness of service charge sought by OM Property Management Ltd from Mrs Burr, a leaseholder

OM Property Management Ltd v Burr [2013] EWCA Civ 479

Summary

This is the case in which the validity and reasonableness of service charge sought by OM Property Management Ltd from Mrs Burr, a leaseholder, brought in OM Property Management Ltd v Burr [2013] EWCA Civ 479. In that respect, the judgment of the Court of Appeal provided wide-ranging guidance both on the construction of the service charge clauses contained in residential leases and on the role of the leaseholder in challenging a service charge.

Facts

Mrs Burr owned a leasehold flat within a residential development that was run by OM Property Management Limited. The lease required her to pay not only the service charges payable in respect of the cost of maintaining, repairing, and insuring the common parts of the development but also to pay for services. Various disputes had multiplied, relating to the amount and reasonableness of service charges demanded by OM Property, from Mrs Burr.

She disputed most of the heads of the service charges as being unreasonable. Apart from that, some of the services or works had not been carried out at all or done to a satisfactory standard. She now further submits that OM Property did not explain and justify the charges with proper documentation. The case was referred in the first place for determination in the First-tier Tribunal (Property Chamber).

Issues

Demo nation the crucial problems of the case:

Decided at the case issues were:

1. The question of whether such service charges, as sought by OM Property, was reasonable and properly incurred.

2. Interpretation of the lease term in realisation of the full scope as well as the share of service charges

3. Are the given documentation and other material and information adequate for support of the service charges as provided to OM Property?.

First Instance

The First-tier Tribunal considered the documentary evidence and other submissions made by both parties. Mrs. Burr discharged voluminous information to substantiate the claim that some of the charges were excessive, others unreasonable. The OM Property, among others, provided its documents including their records of the service charges and the reasons why they are increased ;.

First-tier Tribunal held that Mrs Burr had succeeded on a number of the issues and held some of the Charges were unreasonable, nor in any event, proved. It reduced the service charges payable by Mrs Burr and did so in relation to each of the service charge years in question. OM Property was not happy and appealed to the Upper Tribunal.

Decision on appeal

The Upper Tribunal earlier on dismissed an appeal against the decision of the First Tribunal insofar as it related to reasonable service charges and their adequacy of evidence produced by OM Property. This, therefore, fortified earlier decisions that clearly laid the burden on landlords to coherently justify whatever demand for service charges was held to be justified with cogent evidence.

Following this, the OM property appealed to the Court of Appeal whereby the misconception of the terms of the lease was weak and the discretion that was made available to the management of the lessor was not taken into account.

The Court of Appeal evidentially reheard arguments. It reminded that any service charge demand must be reasonable and transparent. It was found OM Property had not given enough information in respect of the number of the disputed charges. And that appeal was dismissed and reductions determined by the FTT were upheld.

Comments

These key considerations in the context of service charge disputes, arising out of residential leases, are well elucidated in OM Property Management Ltd v Burr.

1. Reasonableness of charges: It was re-echoed in the above said judgment that the service charges would have to be relevant to actual need, only reasonable in quantum, and only related to requisites-services and maintenance—the onus is on the landlord to prove that charging is justified and proportionate to service rendered.

2. Evidence and Documentation: Further recitation of the judgment or decision is the one which states that in any case or claim under s27A, the landlord is under a duty to retain holding comprehensive keys supporting documents and/or the proof of demand for service charge. Either of the non-existence of clear or satisfactory evidence to provide is not going to meet the threshold in the law on matters relating to the enforceability of a service charge.

3. It therefore goes to elaborate more on the lessee's rights on when in position to object, proving that the lessees retain jurisdiction over any unreasonable service charges, hence putting lessees in a better position to demand transparency and accountability from the landlords.

4. 4. Role of the Tribunals and Courts: Altogether, this case represents nothing but the face of the First-tier Tribunal, the Upper Tribunal, and the Court of Appeal to the judgments that were rendered in regard to the service charge disputes brought before them. The judgments are going to play a major impact in creating benchmarks to determine each respective lease term and in making decisions as to whether the service charge is reasonable.

5. Implications for Property Management Practitioners: The ruling will serve as a reminder to all property management companies and landlords that proper practice, management record keeping, and charging policies need to be of a standard of good order.

Thus, OM Property Management Ltd v Burr is a landmark case in the area of residential leasehold service charges. This brings out the reasonableness standards for calling of evidence regarding matters that relate to service charges, hence giving lessees further protection against excessive and unreasonable demands by landlords. Moreover, it would continue to be the leading precedent for the landlords and tenants, who would have been interested in finding a solution for the dispute and dealing with it, in all likelihood.

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