FirstPort and the freeholders FIT Nominee (1) and FIT Nominee (2) are appealing against the leaseholder victory at St David’s Square, a prime site in London’s Docklands.
The decision follows FirstPort managing director Kully Sudhra telling leaseholders on 12 May 2023 that all would benefit from the payout.
https://www.leaseholdknowledge.com/wp-content/uploads/2023/05/2023.05.12-LetterfromFirstPort.pdf
Presumably, FirstPort and the landlord are hoping the payout will be considerably reduced in the Upper Tribunal.
This means FirstPort, ultimately owned by French private equity giant Emeria, and FIT Nominee – ultimately owned by Natwest Group plc and holding St David’s Square on trust for the ARC Time Freehold Income Fund, which claims to have more than £200 million invested in 30,000 leaseholds – are appealing a decision that they lost, and funding their case with the leaseholders’ money.
Earlier this year, the first tier tribunal ordered that the landlords should not dump their legal costs of the January hearing on leaseholders. However, FirstPort did issue service charge demands in July 2023 that included nearly £55,000 in landlord legal costs. The money is said by FirstPort to have been returned. The landlord’s solicitors blamed FirstPort’s accounting team for the error.
Meanwhile, the leaseholders participating in the action – 101 at various stages in the action, against 335 non-participating leaseholders – are represented by City solicitor, and LKP trustee, Liam Spender, who has to take time off as holiday to fight the case.
The Upper Tribunal decision on the appeals is here
The landlord’s arguments for appeal are here
The leaseholders counter appeal reasoning is given in the Upper Tribunal decision above.
The big item in dispute concerns bills around the rental and maintenance of a video intercom and door entry system leased from Essex firm Countryside Communications. The first tier tribunal ruled that 81% of these charges were unreasonable, or £475,000 in total.
The leasing contract – a significant income stream to be paid out by the leaseholders – was put in place by St David Square’s developer, the Berkeley Group, in the year 2000, but it was still managing to cost £590,721.43 between 2018 and 2020. An entirely new replacement system may have cost as little as £268,000, the tribunal was told in January. Leaseholders at the site have paid millions to Countryside over the past 20 years, and the contract continues.
Mr Spender argued that these sums – amounting to 10 per cent of the annual service charges – were based on an unwritten understanding between FirstPort and Countryside Communications on the landlord’s behalf. The current landlord offered no proof that it was ever liable to pay under the contract, which is still in the name of Berkeley subsidiary St George (North London) Limited, despite it not being the owner of the site since at least May 2003.
During January’s hearing, FirstPort and its supplier claim to have lost the contract in question some time around 2009, when leaseholders at the site last challenged service charges. The contract was only re-discovered during the preparation for the January hearing. The site manager admitted during cross-examination that he placed annual orders with Countryside despite never seeing the contract in question and making no effort to find it.
FirstPort and the landlord, represented by barrister Simon Allison, argues that the contract terminated in July 2020 and proposes that a 25% reduction of the costs in 2020 alone be substituted instead. This would involve paying back to the leaseholders a mere £50,000, nearly 10 times less than the amount won by the leaseholders.
The Upper Tribunal case may be important to leaseholders everywhere.
The landlord is going to argue that any amount of service charges incurred under a long-term agreement cannot be challenged for reasonableness. If the Upper Tribunal decides in the landlord’s favour, this will seriously undermine the limited protection leaseholders have against unreasonable service charges.
It will also open the door to landlords entering into long-term agreements for everything from toilet paper to capital equipment to prevent leaseholders challenging the costs.
Mr Spender’s argument that permission to appeal be conditional on the landlord repaying what the first tier tribunal had ruled was not payable was not accepted by the Upper Tribunal. The Upper Tribunal said leaseholders should rely on their contractual rights.
Unfortunately, FirstPort has already ignored the terms of the lease — which required the money to be credited back on the next service charge demand — issuing demands in July for more service charges without the credits.
FirstPort has also yet to pay back £80,000 in government electricity subsidies for the communal areas of the estate, despite entering into a consent order promising it would do so in the July 2023 service charge demands. The consent order was made to avoid another set of tribunal proceedings brought by the leaseholders earlier this year.
The Upper Tribunal is yet to decide a further application by Mr Spender that it direct that the landlord be liable for his costs if the appeal proceeds and the landlord loses (again).
So to date, the leaseholders have not had a penny back of their money that was so painstakingly won at the first tier tribunal.
On the other hand, the landlord’s attempt to appeal the decision that costs associated with the temporary recruitment of staff were unreasonable was refused, which means the leaseholders should eventually get back around £10,000.
In addition, permission to appeal was refused over FirstPort’s management fees being reduced by 10% for 2018, 2019 and 2020. That might amount to another £40,000 or so.
The Upper Tribunal has given the leaseholders permission to appeal on insurance commissions charged by FirstPort. Liza Jayne-Amies, head of FirstPort’s in-house insurance broker, failed to attend for cross-examination in January, saying she was too busy at work.
The first tier tribunal nevertheless found on the issue for the landlord, saying there was no evidence the commissions affected the premium charged. The Upper Tribunal found that in the absence of the only witness it was arguable that there was no basis on which the first tier tribunal could have made that finding.
There was no reference by the landlord to appeal a curious aspect of the case revealed in January.
This involved a disabled leaseholder, Mr Atkinson, who appeared at the hearing accompanied by a carer. In 2018 he was awarded damages in the county court for disability discrimination concerning the use of the swimming pool and disrepair to his flat.
In January, the tribunal heard that not only were the £8,625.75 landlord’s legal costs put through the service charge, despite the county court making a cost ruling against the landlord, but so were about £8,000 in costs and damages for disability discrimination awarded to the leaseholder.
A further £13,000 paid under a settlement agreement to the same disabled leaseholder was also put through the service charge. The landlord conceded the last £5,028 of this part of the claim only on the first morning of the hearing, almost four years after the charges were first billed to leaseholders.
The case underlines a key issue in the Tribunal system.
Even if leaseholders are prepared to undertake a year-long slog to get their money back, they end up being forced to pay the landlord’s legal costs. The landlord can fail to comply with an order to repay the leaseholders, even while appealing against them.
Radical reforms of this area are promised by the government, perhaps as soon as the King’s Speech opening the new session of Parliament in November 2023.
Related posts:
Victory over FirstPort at St David’s Square with £100,000s to be re-payed to leaseholders over insurance and leasing of ancient door entry system
Black Friday for FirstPort: ALL leaseholders at St David’s Square to share £479,000 service charge triumph. And £55,000 in energy subsidies to be paid up
FirstPort blows a fuse: Why are energy subsidies absent from the £265,784 electricity bills – an increase of 154% – at St David’s Square, tribunal is asked
We just made it up: landlord pays back £120,000 for intercom costs at St David’s Square that it cannot account for (and is leased for eternity)
Mr Spender goes to war over St David’s Square service charges … and landlord caves in over more than £100,000 buildings insurance commissions on eve of tribunal
FirstPort / E&J Estates face insurance challenge over ramping up rebuild costs
I recently requested 6 years of EDF electric bills from Energy centric and it shows that EDF applied the government discounts direct so Firstport had nothing to do with it. Why would EDF operate different systems between developments? I’m happy to send the email showing this.
Jacqueline,
The Managing Agent negotiated a good three Year deal for the communal electric supply from EDF. The Government “Discounted Energy Relief Scheme Rate” was automatically applied to bills from the 1st October 2022 till the 31st March 2023, I am happy to share this information
With Rick Haythornthwaite taking over as Chair after the fiasco over the idiot Farage what happens if turns out the banks pension arm has been rather unethical dealing with leaseholders. After the banks questionable lending in this sector its not a AAA rated bit of the business
To have an FTT decision agreed and then agree a full refund and then try to appeal the case suggests FirstPort is back to their bad old ways. Hardly surprising their board team no longer speak to LKP and decline to meet the leasehold APPG.
Observers of Tribunal rules will note that is a leaseholder agrees a service charge the FTT and UT no longer have power to act. Somehow if a landlord via their agent agrees a charge – as they did in this case following the FTT decision the same rule does not apply. Something rather nasty in the woodshed of Tribunal rules?
Martin,
Firstport have never left their bad old days,if anything they have become worse.
I would agree FP have always had issues but some of the issues they face now are different to those they had in the past. Under their Peverel status they were found guilty of running a collusive tendering ring. After I made a complaint about what they did at my site they also had to write to all ARMA members to apologise for their “historic” failure to meet the standards expected of a professional agent. Under their most recent ex CEO they at least introduced a more robust procurement process which separated the staff who placed contracts from the staff who approved potential contractors. Sadly we’re now working on a case where FP proposed a large contract with a company showing as dormant at Companies House. website
I had an interesting conversation with an EDF person today who assured me they pay no fees to brokers and that clients send out the bills paid to them. That begs the question how on earth do brokers get paid and how do brokers advise they can get better discounts. ….. more to follow
Martin,
I have picked up on a similar story to the “proposed a large contract” Allegations of nepotism have been made about a specific FirstPort employee when awarding contracts to others.
We read the communal electric meter on a Monthly basis and submit it to EDF, the bill arrives as a hard copy and can also be accessed on line. The meter readings for rate 1 and rate 2 are always precisely the same as the ones we submit. I have found EDF to be a professional firm to deal with and they have refunded money owed in the past without hesitation when presented with documentary evidence.
Firstport appear to of adopted trench mentality mode, they are in a big hole entirely of their own making and are being assaulted on all fronts metaphorically speaking.
Jacqueline,
They have.
Why don’t these people enact Right to Manage? RTM takes First Port and other similar intermediaries out of the equation. I have enacted many RTMs putting the leaseholders in control of their blocks.
It has been brought to my attention that a number of contractors to Firstport have had their payment terms extended to 45 days, this has resulted in cash flow problems for some sole traders and SME who operate on the Fylde & Wyre Coast.
Other reported cases include contractors refusing to carry out window cleaning, gardening work and general cleaning of the communal areas due to not being paid, has anyone else been made aware of this?
It is reported that firstport have now extended payment terms to many Contractors to 90 Days. I wonder how many Sole Traders or SME will cope with that?
As regards to RTM for some of us this is impossible.
First how do I contact the leaseholders? 3/4 are BTL. A lot are not even registered with the land registry who inform me is perfectly legal and normal.
Speaking to the renters of the BTL flats their landlords don’t care because rentals are in such short supply tenants will take any property in any condition and pay any amount in their ability to do so. So when the renters complain and ask them to speak to MA who ignores them, their landlord also ignores them.
And finally my landlord is avon rents and the MA their company y&y management which means the costs will be enormous in both time and money as that company will spend years fighting it based on other cases.
Dear Mr. Smith,
This Right to Manage Company have quite a few Shareholders who rent out Apartments and are very happy with their return on investment.
They have told me that they have peace of mind that their investment is maintained properly and looked after by those who actually reside here, some are actually good Friends of mine.
I am not quite sure about you comment about the land registry, but I can assure you from first hand experience that any responsible Landlord will endorse Right to Manage because it is quite simply a win, win in terms of return on investment.