Hanne & Co Recent Litigation Success

The Case 

Our client (the freeholder of two large residential blocks) instructed Victoria Copeman and trainee Sam Storey to defend them in an application made by a group of leaseholders to the First-Tier Property Tribunal, for a determination on the following points: 

1. The reasonableness of the apportionment of the service charges to each of the leaseholders.

2. The reasonableness of the building insurance premiums.

Our client had recently completed the construction a penthouse on each of the residential blocks: the size of the two penthouses far exceeded that of the rest of the apartments, which only differed from each other very slightly in size. It was on this basis that the leaseholders challenged the apportionment of service charges and reasonableness of insurance premiums.  

In respect of the insurance premiums, the leaseholders argued that they were unreasonable partly due to the addition of the penthouses, which increased the premiums, and the fact that there were other buildings in the area which they regarded as having similar characteristics, whose leaseholders incurred far cheaper insurance premiums. 

Our client’s barrister, Daniel Webb (Selbourne Chambers), was successful in persuading the tribunal that insurance premiums for any given building are extremely sensitive to the unique construction of each building. Therefore, the unusual concoction of structural wood, wooden floors and cladding resulted in much higher insurance premiums than buildings which looked similar to the untrained eye from the outside. He was able to argue this with the help of the evidence of the leaseholder’s insurance broker. 

Regarding the service charges, the freeholder was able to rely on the definition of the tenant’s proportion of the service charge in the lease as being 1/22^nd ‘or such other amount as the Landlord may notify the Tenant from time to time’. This allowed the freeholder the discretion to apportion the service charges equally across all 24 apartments (now including the two new penthouses on each block) on the condition that, in line with the guidance set out in Braganza v The Riverside Group Ltd [2023] UKUT 243 (LC) at [45], it was rational to do so (the decision was made in good faith and was not made arbitrarily or capriciously). The evidence given by the freeholder during the hearing satisfied the tribunal that the decision was indeed made in good faith.  

There was an additional triumph on the question of costs. The leaseholder applicants made a section 20C application that the costs incurred by the freeholder in the hearing should not be levied on the service charge. The Tribunal declined to make an Order for the costs of the hearing to be prevented from being levied on the leaseholders, allowing the freeholder to recoup their costs by way of future service charges. 

Instruct Property & Commercial Litigation Support Today 

Victoria and Sam welcome instructions for all matters relating to Property and Commercial litigation. If you require their assistance and would like to get in touch, please call on 020 7228 0017 or email them at victoria.copeman@hanne.co.uk and sam.storey@hanne.co.uk.