19 janvier 2023
RED alert - January 2023 – 2 de 5 Publications
Welcome to the first of our RED Alerts of 2023.
Featured in this month's update:
Assethold Ltd v Alexandra Adam and 14 other leaseholders of Corben Mews  UKUT (LC)
In this case, the Upper Tribunal (Lands Chamber) (UT) considered whether costs associated with the use of a "waking watch" as an interim safety measure could be recovered via the service charge. The case was an appeal from the First Tier Tribunal (FTT), which had previously held that the costs were not recoverable from the leaseholders on the basis that they had not been reasonably incurred by the landlord.
This case concerned a warehouse building known as Corben Mews which had been converted into residential accommodation. Following a fire risk assessment in 2021 undertaken by the landlord's contractor, Hydrock, the landlord was informed that the risk of fire in Corben Mews was "extreme". Alongside more long-term remedial measures, Hydrock's report recommended that the landlord either install an extended alarm system or arrange for a waking watch for the building. A "waking watch" involves hiring a person to be permanently present on site in order to warn anyone in the building should a fire break out.
In reliance upon the recommendations in the report, the landlord hired a waking watch at a cost of £28,000 per month. The waking watch was in place for a little under one month before it was cancelled by the landlord. In June 2021, the landlord issued service charge demands to the leaseholders demanding payment of the costs of the watch.
The leaseholders applied to the First-tier Tribunal to determine whether the landlord was entitled to recover these charges.
The FTT decided in favour of the tenants and held that the landlord was not entitled to recover the costs of the waking watch.
The FTT referred to the Court of Appeal case of Waaler v Hounslow London Borough Council (2017) EWCA Civ 45 which confirmed that, when determining whether costs had been "reasonably incurred", the Court should consider whether the landlord's decision-making process was rational and whether the outcome of that process (i.e. the appointment of a waking watch) was reasonable. In this instance, the FTT held that:
The landlord appealed the decision to the UT who upheld the appeal.
The UT accepted the FTT's analysis of the Waaler case. However, it concluded that the FTT's application of the test set out in that case was incorrect. In particular:
This decision will be welcomed by landlords who are facing potentially hefty bills for various fire safety measures they are required to put in place in order to comply with their fire safety obligations. This is especially the case given the passing of the Building Safety Act 2022 last year which sought to limit the costs payable by leaseholders in respect of fire remediation works.
However, this case also provides more general guidance on a landlord's ability to recover service charge costs, even outside the realm of fire safety. The UT's decision helpfully reinforces the correct interpretation of the test laid down in Waaler which landlords should bear in mind when considering whether or not to incur costs they intend to subsequently recover from leaseholders.
19 January 2023
par Alicia Convery
19 January 2023
par Charlotte Nayler
19 January 2023
par Saleem Fazal MBE