Question 1

Bike Shed Request

Accepted Answer

Q: A request to provide a bike shed has been made by a few members of the management company. It is understood that the lease is paramount. Have looked at it, it seems to say OK if the management company reasonably considers it is for the general benefit. Am I right to worry about this? If only a few members are wanting the shed (say less than half), we have 15 freehold houses with gardens (25 flats) who may well not consider the idea relevant for them, all members would it seems have the right to use the shed, and initial cost could be well over £5000.00 followed by maintenance, management and insurance etc. Directors would not wish to risk a tribunal challenge with possible severe consequences for them if this were even a remote possibility. I look forward to your response. We have benefitted a great deal from your advice in the past. Many thanks FPRA Legal Adviser Nick Roberts replies: I would agree with you that the wording of Clause 3.1 in Schedule 5 of the apartment leases covers the situation that you are querying. Provision of a bicycle could certainly count as a ‘facility amenity or improvement’ such as is contemplated by that clause. I also think that, whilst it is clearly appropriate to take soundings from the leaseholders and the house owners, you might reasonably come to the conclusion that it was ‘for the general benefit of the Estate and its tenants owners and occupiers’ even if a minority of the leaseholders and house owners indicated that they would actually use it. I would agree with you that what may perhaps complicate the situation is the fact that a facility such as a bicycle shed could well be seen as of more benefit to the leaseholders of the apartments than to the house owners. If houseowners own a bicycle, they could, if they wished, presumably build some form or shed or shelter in their own gardens. That then raises the further issue of whether you could alternatively build a bike shed and charge it to the service charge paid by the apartment owners, rather than the general estate service charge payable by all the owners. I see from a service charge breakdown that you sent in connection with a previous query that the service charge is split in this way (indeed, it would have to be, when insurance and other expenses are paid by the apartment owners via the service charge, whereas the house owners would pay their own). It would then of course follow that only the apartment owners would be able to use the bike shed. I have given the matter some thought, and I must say that I think the arguments each way are finely balanced. On the one hand, the same wording appears as both Clause 3.1 of Schedule 5 of the Leases, and also as Clause 1.3 of the First Schedule to the deed of mutual covenant relating to the freehold houses. The ‘Estate’ includes both houses and apartments, and these factors together might be taken as indicating that additional facilities etc. can be provided for everyone, but not for the apartment owners as a separate group. On the other hand, one can think of numerous additional services which it might be reasonable and appropriate to provide for the apartments which would be irrelevant to house owners: entryphones (or video-entryphones), and communal satellite dishes might be examples. I can quite imagine that some judges might feel constrained by the way the clauses were worded to say that one had to provide additional facilities for everyone or not at all, whilst others would say that, as it was always clearly intended that the houseowners and the leaseholders of the apartments would pay a different service charge, it should be possible to provide additional services either generally, or for the apartment owners as a separate group. If you think that the matter is likely to be disputed, then, if you still want to proceed, I do not think you have any option but to get a ruling on this. This then raises the issue of where you would have to go to get a ruling on this. Disputes about whether or not something can be included within a service charge normally go the First-tier Tribunal (Property Chamber), which is given the power by s.27A of the Landlord and Tenant Act 1985 to make prospective rulings as to whether, if costs were to be incurred, they would fall within the scope of the service charge or not. However, this raises a complication. Section 27A of the LTA 1985 and indeed all the provisions about service charges and related matters which are contained in ss 18-29A of the Act apply only to leasehold service charges. This is inconvenient when parts of the service charge cover both leasehold apartments and freehold houses, but I afraid that it follows inexorably from the way that ‘service charge’ is defined in s.18(1), which clearly refers to service charges which are payable by ‘tenants’ (i.e., in this context, leaseholders). If opposition was likely to come from house owners, I do not therefore think there would be any point in applying to the F-tT (which is likely to be the more convenient course of action): you would instead have to apply to the County Court for a ruling on this, as the F-tT would simply have no jurisdiction. If, on the other hand: (1) you decided to make the bike shed a facility for leasehold owners only, and to charge the costs relating to it to the apartment service charge only, and (2) the house owners were all content to accept this, but (3) some apartment owners opposed the construction of the shed – either saying that it was not reasonable to provide one, or that, if it were provided, it should be charged to both house and apartment owners - then I think it ought to be possible to resolve those issues by an application to the F-tT for a prospective ruling on this. I should perhaps add that any ruling by the F-tT would not be binding on the house owners. For this reason I would suggest going to the F-tT only if all of the houseowners do not wish to be involved and are, in effect, already ‘out of the picture’. I appreciate that is all becoming rather complicated, but I must say that quite a high proportion of the queries that I have dealt with for FPRA over the years have involved problems arising out of developments which mix leasehold flats and freehold houses. It really is quite difficult to draft documentation which properly deals with both. I personally feel that, given the state of the present law, such mixed developments should ideally be avoided; but sometimes there is just no other way, particularly where conversion of existing buildings forms all or part of the scheme. [Submitted October 2016]

Question 2

Bike Shed Request

Accepted Answer

Q: A request to provide a bike shed has been made by a few members of the management company. It is understood that the lease is paramount. Have looked at it, it seems to say OK if the management company reasonably considers it is for the general benefit. Am I right to worry about this? If only a few members are wanting the shed (say less than half), we have 15 freehold houses with gardens (25 flats) who may well not consider the idea relevant for them, all members would it seems have the right to use the shed, and initial cost could be well over £5000.00 followed by maintenance, management and insurance etc. Directors would not wish to risk a tribunal challenge with possible severe consequences for them if this were even a remote possibility. I look forward to your response. We have benefitted a great deal from your advice in the past. Many thanks FPRA Legal Adviser Nick Roberts replies: I would agree with you that the wording of Clause 3.1 in Schedule 5 of the apartment leases covers the situation that you are querying. Provision of a bicycle could certainly count as a ‘facility amenity or improvement’ such as is contemplated by that clause. I also think that, whilst it is clearly appropriate to take soundings from the leaseholders and the house owners, you might reasonably come to the conclusion that it was ‘for the general benefit of the Estate and its tenants owners and occupiers’ even if a minority of the leaseholders and house owners indicated that they would actually use it. I would agree with you that what may perhaps complicate the situation is the fact that a facility such as a bicycle shed could well be seen as of more benefit to the leaseholders of the apartments than to the house owners. If houseowners own a bicycle, they could, if they wished, presumably build some form or shed or shelter in their own gardens. That then raises the further issue of whether you could alternatively build a bike shed and charge it to the service charge paid by the apartment owners, rather than the general estate service charge payable by all the owners. I see from a service charge breakdown that you sent in connection with a previous query that the service charge is split in this way (indeed, it would have to be, when insurance and other expenses are paid by the apartment owners via the service charge, whereas the house owners would pay their own). It would then of course follow that only the apartment owners would be able to use the bike shed. I have given the matter some thought, and I must say that I think the arguments each way are finely balanced. On the one hand, the same wording appears as both Clause 3.1 of Schedule 5 of the Leases, and also as Clause 1.3 of the First Schedule to the deed of mutual covenant relating to the freehold houses. The ‘Estate’ includes both houses and apartments, and these factors together might be taken as indicating that additional facilities etc. can be provided for everyone, but not for the apartment owners as a separate group. On the other hand, one can think of numerous additional services which it might be reasonable and appropriate to provide for the apartments which would be irrelevant to house owners: entryphones (or video-entryphones), and communal satellite dishes might be examples. I can quite imagine that some judges might feel constrained by the way the clauses were worded to say that one had to provide additional facilities for everyone or not at all, whilst others would say that, as it was always clearly intended that the houseowners and the leaseholders of the apartments would pay a different service charge, it should be possible to provide additional services either generally, or for the apartment owners as a separate group. If you think that the matter is likely to be disputed, then, if you still want to proceed, I do not think you have any option but to get a ruling on this. This then raises the issue of where you would have to go to get a ruling on this. Disputes about whether or not something can be included within a service charge normally go the First-tier Tribunal (Property Chamber), which is given the power by s.27A of the Landlord and Tenant Act 1985 to make prospective rulings as to whether, if costs were to be incurred, they would fall within the scope of the service charge or not. However, this raises a complication. Section 27A of the LTA 1985 and indeed all the provisions about service charges and related matters which are contained in ss 18-29A of the Act apply only to leasehold service charges. This is inconvenient when parts of the service charge cover both leasehold apartments and freehold houses, but I afraid that it follows inexorably from the way that ‘service charge’ is defined in s.18(1), which clearly refers to service charges which are payable by ‘tenants’ (i.e., in this context, leaseholders). If opposition was likely to come from house owners, I do not therefore think there would be any point in applying to the F-tT (which is likely to be the more convenient course of action): you would instead have to apply to the County Court for a ruling on this, as the F-tT would simply have no jurisdiction. If, on the other hand: (1) you decided to make the bike shed a facility for leasehold owners only, and to charge the costs relating to it to the apartment service charge only, and (2) the house owners were all content to accept this, but (3) some apartment owners opposed the construction of the shed – either saying that it was not reasonable to provide one, or that, if it were provided, it should be charged to both house and apartment owners - then I think it ought to be possible to resolve those issues by an application to the F-tT for a prospective ruling on this. I should perhaps add that any ruling by the F-tT would not be binding on the house owners. For this reason I would suggest going to the F-tT only if all of the houseowners do not wish to be involved and are, in effect, already ‘out of the picture’. I appreciate that is all becoming rather complicated, but I must say that quite a high proportion of the queries that I have dealt with for FPRA over the years have involved problems arising out of developments which mix leasehold flats and freehold houses. It really is quite difficult to draft documentation which properly deals with both. I personally feel that, given the state of the present law, such mixed developments should ideally be avoided; but sometimes there is just no other way, particularly where conversion of existing buildings forms all or part of the scheme. [Submitted October 2016]

Bike Shed Request

Search

Articles Archive