Service Charge: Whether Costs of Works Commissioned by a Leaseholder Were Recoverable Through the Service Charge (Thirty One Crescent Grove Ltd v Atherden – 2024)

Where a leaseholder commissioned internal decoration works, were the costs of such works recoverable from other leaseholders through the service charge?

The background

In Thirty One Crescent Grove Ltd v Atherden [2024], the respondent owned a flat on the second floor of a converted building containing six residential units. The appellant landlord, the freeholder company, was owned by the leaseholders of the building.

The landlord company incurred costs of £3,880 in decorating the stairwell. The respondent disagreed with this charge. Finding that a leaky gutter was causing issues for the respondent and another leaseholder, the respondent commissioned works which he paid £600 for. The respondent argued that this charge should be shared between the leaseholders and was recoverable through the service charge. The freeholder disagreed on the basis that its shareholder members had not agreed to incur the charge.

The First-tier Tribunal found that, given no consultation had taken place under s.20 of the Landlord and Tenant Act 1985 in respect of the landlord’s £3,880 charge, the leaseholder was liable only for a sum of £250. Further, the £600 charge was found to be reasonable and payable, and should be included in the service charge account payable by leaseholders.

The landlord company appealed to the Upper Tribunal.

The decision

The Upper Tribunal allowed the landlord’s appeal, concluding that the respondent leaseholder was liable for his proportion of the stairwell works charge and finding that he was not entitled to recover through the service charge the costs of works he had commissioned himself.

Evidence showed that the respondent had been happy for the stairwell works to go ahead, and no challenge had been raised in respect of service charge consultation. The FTT itself had introduced the issue of the s.20 consultation. The UT found that the FTT’s conclusion was made without jurisdiction, having reached it on a point not raised by the leaseholder, and set aside its decision. As the respondent had not challenged the reasonableness of the charge, his share of the £3,880 was payable.

In assessing whether the respondent should be reimbursed through the service charge for the £600 he spent on the roof works, the UT stated that the landlord was responsible for repair and maintenance of this area. With no controlling share, the members of the landlord company – the leaseholders – were to discuss and agree expenditure between them. The company had not made a mutual decision to incur the £600 charge, and this was not therefore landlord’s expenditure which was recoverable by way of service charge.

Advice and action for landlords

This decision is a note of warning for leaseholders who choose to incur charges for works themselves, when ordinarily those works would be commissioned by the landlord.

Individual leaseholders who undertake such works must be prepared to shoulder the costs themselves, as these costs could not be considered landlord’s expenditure where the landlord has not agreed to carry out the works, no matter how formally or informally.

Landlords and managing agents will gain reassurance from this decision, supporting their ability to retain control over works and preventing dilution of the service charge by leaseholders who choose to undertake works themselves.