By Manjit Rai, Legal Adviser
July 2015
On 25 June 2015 the Upper Tribunal ruled in the case of Edozie v Barnet Homes [2015] UKUT 348 (LC), 25 June 2015.
The purpose of this article is to explain the facts and issues behind this decision and how it contrasts with the Upper Tribunal decision made in Oliver v Sheffield CC [2015] UKUT 0229 (LC).
Edozie v Barnet Homes
What was the issue?
The issue was whether the council had to reduce the service charges by an element representing the grant aid.
What were the facts of the case?
The council carried out major works on one of its housing estates with grant aid from the London Development Agency and tried to recover a share of the costs from leaseholders, through their service charges.
Ms Edozie, who was the long leaseholder of two flats within three blocks refused to pay the full amount of service charge charged in respect of the works; she believed that she should only be required to pay a contribution.
Barnet argued that the apportionment of the grant between the tenants of the leasehold flats was a matter within its discretion and that it had acted reasonably, and indeed generously, in not requiring the tenant to pay for certain substantial items.
Barnet pointed out that it could properly calculate the service charge disregarding the fact that any grant had been received, but that it had, in any event, made reductions in costs which would otherwise have been properly chargeable to the tenants of the leasehold flats.
What did the First-tier Tribunal decide?
The First-tier Tribunal (Property Chamber) (“Tribunal”) agreed that Barnet had apportioned the costs reasonably and that it was arguable under the terms of the long leases that the full costs were chargeable to the tenants of the leasehold flats.
What did the Upper Tribunal decide?
The Upper Tribunal (Lands Chamber) (UT) reached the same conclusion as the Tribunal. The tenant did not have a legitimate complaint that she has been given insufficient credit for the LDA grant when calculating the amount of the service charge payable by her. The Upper Tribunal held that no abatement was required.
How did this case contrast with the Upper Tribunal decision made in Oliver v Sheffield City Council [2015] UKUT 0229 (LC)?
The ruling in the Oliver case was the opposite of that in the Barnet case. Although, it is important to note that the terms of the particular grant and the lease will be key in each case. Landlords and tenants should check these carefully before demanding or challenging service charges in these circumstances.
What were the issues?
The case concerned a dispute about the payment of a service charge, there were a number of challenges but the crucial point for us to consider is the extent to which a landlord can recover the cost of works that have been in part funded by a grant.
What were the facts of the case?
Ms Oliver was the long leaseholder in a block of flats on Lansdowne Estate, which was owned by the Council.
The Council carried out city wide major works. Some of the works were eligible for a contribution from a commercial energy company as part of the Community Energy Savings Programme (“CESP”).
In total 15 of the 25 blocks on the Lansdowne Estate were eligible to receive CESP funding. The contribution to Ms Oliver’s block was £43,570.44.
The Council decided not to pass the CESP directly to the leaseholders as a set off against their service charge contributions.
The Council decided to attribute the money to the funding of works to its city-wide housing stock. The effect of this was that every leaseholder’s service charge was reduced irrespective of whether their block had been entitled to CESP funding.
What did the Upper Tribunal decide?
The Upper Tribunal allowed Ms Oliver’s appeal. Where funding has been provided from a third party and the purpose of the funding is specifically intended to meet the cost of certain works, it is not acceptable to calculate the amount a leaseholder must pay under a service charge without reference to the receipt of that money. This is, wherever such funding is provided the landlord cannot be said to have incurred, in full, the costs of the works. The Council could not therefore treat the money as general revenue, which it could apply to the cost of works on other estates or blocks.
Obviously, this case is of wider application to wherever a landlord receives grant money for works to an estate. It must set-off that grant money before billing the leaseholders.
Key points to note from these two conflicting decisions?
In the Barnet case, the existence of the grant did not mean that the cost of the works had not been incurred. The grant provided in the Oliver case was by a commercial third party for specified works. Barnet had a far wider discretion as to how the grant money should be spent than was available to Sheffield City Council.
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