A recent appeal case at the Upper Tribunal should act as a reminder to prepare thoroughly for the Tribunal, if defeat is to be avoided. Brady Solicitors’ property litigation experts explain.
Balkhi v Southern Land Securities concerned a contribution towards the building’s sinking fund, and the leaseholder’s challenge as to its reasonableness. Whilst we shall try to avoid getting into the nitty gritty of the case, a quick overview is needed to understand the facts.
Mr Balkhi held an underlease for an apartment in a large, old Mayfair building. His apartment was managed by Southern Land Securities, which had the head lease for all the residential space in the building.
The freeholder (Pollen Estate Trustee Company) was responsible for maintaining the interior and exterior of the old building and demanded the costs for these from Southern Land Securities (SLS) through the service charge. As his landlord, SLS were then entitled to claim 20.4% of the costs from Mr Balkhi.
From 2011, the sinking fund demands increased substantially and Mr Balkhi refused to pay.
SLS brought a claim in the County Court and, as is often the way, the judge saw the words ‘service charge’ and ordered that the case be transferred to the First-tier Tribunal.
Both Mr Balkhi and SLS agreed that it could be a paper hearing at the FTT, without the need for either party to appear in person.
Based on the evidence in front of them and lacking any direct guidance as to the crux of the case, the FTT found that the sinking fund demands were in fact reasonable and that Mr Balkhi was liable to pay.
Mr Balkhi appealed and this was heard in the Upper Tribunal.
This time, Mr Balkhi appeared in person and with two written reports; SLS relied on witness statements provided by an employee in its legal team.
Assessing the somewhat limited evidence in front of them, the Upper Tribunal judge determined that, although the building was old, the substantial increase in sinking fund contributions were not reasonable – and reduced the contributions accordingly. Other factors such as incorrect calculation of the proportion of service charge contributed to this final decision.
The Upper Tribunal was clearly frustrated at the lack of evidence presented to them, commenting: ‘Doing the best we can upon unsatisfactory material, we conclude that the amounts claimed by Southern Land Securities from Mr Balkhi where unreasonably high.’
To help them reach a decision, the Upper Tribunal should ideally have been given details of:
- How much service charge was due
- When it was due
- How it was calculated
- The basis on which it was payable
Without this evidence, the Tribunal had to fill in the gaps and make assumptions based on the limited evidence it received.
The Tribunal was critical of the witness statements provided by Southern Land Securities – ‘The documents he produced are by no means easy to follow and have not been presented in a helpful manner. As he did not give evidence there was no witness on behalf of the respondent who could be asked any questions to explain any of the documents produced.’
The Tribunal’s frustration is clear. And the message clearer still.
Tribunal hearings – whether First-tier or Upper – demand thorough preparation and relevant, accurate evidence. It is essential to ensure that Tribunal judges understand the matter in question and the relevant facts; by leaving it to chance you create a very real risk of the Tribunal making a decision that is not in your favour.