Memo to Michael Gove: Is this an example the professional freehold-owning landlordism that anti-leasehold reform lobbyists have in mind?
Had all 436 leaseholders taken part in the action the pay-back would have been £479,000. Instead, it will be only £120,000 for those who participated in the court action
In the epic service charge challenge at St David’s Square, in London’s Docklands, mounted by Liam Spender (right), the tribunal gave the landlord a second chance to account for the costs of the door entry, intercom and electronic gates.
These are leased for eternity from Essex firm Countryside Communications, not affiliated with the developer of the same name).
Countryside was tapped up to rent these systems to the estate by the original developer, St George, a part of Berkeley Group. The tribunal’s reasonable assumption was that the landord, FIT Nominee Limited and FIT Nominee 2 Limited, both subsidiaries of the NatWest Group plc, or its managing agent FirstPort, would be able to distinguish between the costs for rental and maintenance.
But they couldn’t.
The ruling here states:
The Respondents were asked to provide a breakdown of the costs of the Countryside Contracts for the relevant period illustrating specifically how much is attributed to rent and how much to maintenance. They have been unable to provide a breakdown from Countryside. This is surprising. Countryside must
have some idea, at least at a ball park level, of the split. The Respondents referred the Tribunal to estimates they obtained from other contractors …
Since August 2021 the landlord of St David’s Square has been arguing that the prices charged were reasonable because they were the fair costs of renting the systems instead of buying them outright. It now appears that there was never any evidence to support this assertion.
At a hearing in January 2023 the landlord asserted that the costs could never be challenged as being unreasonable because they are part of a long-term agreement. It now appears there was never any evidence to back this key assertion in the landlord’s case.
The charges continued in 2021 before being reduced by 50% from 1 January 2022. Even with the 50% reduction leaseholders are still paying more than 100% over the amount allowed by the Tribunal in its latest ruling.
The ruling continues:
“Faced with an absence of information from Countryside, the Tribunal agrees with the Applicants that these estimates should be followed in relation to a determination of reasonable costs for the relevant period. This represents an 81% reduction in costs originally sought by the Respondents. The Applicants submit that the same reduction should be applied to the other fittings: TV Distribution and Car Park Gates and Barriers. The Tribunal accepts that this is a pragmatic approach.”
For the participating leaseholders, the reduction works out at an average of around £1,000 for every flat with a covered car parking space paying service charges for the period 2018 – 2020.
The 120-odd leaseholders (out of 436) who participated are also protected from the landlord’s legal costs.
Those leaseholders at St David’s Square who did not take part may be feeling a little sour, and it is an open question how useful the ruling would be if they were to mount their own claim at this stage. They will get nothing back from the ruling, and may yet be forced to pay the landlord’s legal costs via the service charge.
The landlord’s barrister said at a hearing in January that the landlord intended to charge leaseholders for its legal costs, as is its right under the lease. The landlord has not put a number on its legal costs to date, but at the January hearing the landlord’s barrister said the legal bill was a figure so large as to be “challengeable in its own right”.
Given the damning findings of the Tribunal, it remains to be seen whether the landlord will carry out its intention to bill leaseholders for its legal costs.
The government is promising extensive reform of residential leasehold before the end of the current Parliament. It is unknown if these reforms will stop the current “Catch 22” situation in which landlords are allowed to use leaseholders’ money to pay lawyers to defend them from the same leaseholders, and to recover their costs even if they go on to lose the case.
The landlord and the leaseholders have until Friday 2 June 2023 to ask for permission to appeal any aspect of the decision.
The 3 May 2023 ruling on Countryside’s costs is here:
Applicants further issues on Countryside’s costs:
JB Leitch tells tribunal no breakdown of Countryside costs is available:
Original 29 March 2023 FTT ruling: