LONDON BOROUGH OF LEWISHAM v LUIS REY-ORDIERES AND OTHERS
Decision date: 28 January 2013
Neutral citation: [2013] UKUT 14 (LC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
This appeal concerned whether service-charge uplifts (professional/on-costs set at 26% and a 10% management fee) charged under a PFI-based contract were "reasonably incurred" within s.19(1)(a) of the 1985 Act. The Upper Tribunal held that contractual payment under a PFI is persuasive but not conclusive evidence of reasonableness; it fixed on-costs at 24% of base costs (3.48% fees; 10.52% preliminaries; 10% overheads/profit) and allowed a 10% management fee to be charged on total costs. The LVT’s reduction of preliminaries to 3.5% and disallowance of the management fee were overturned in part.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: high
The binding ratio is that sums fixed by an EU-procured long-term contract are persuasive evidence of reasonableness under s.19(1)(a) but do not preclude tribunal scrutiny of percentage uplifts; where on-costs are expressed as percentage uplifts rather than separately itemised, the landlord must demonstrate that those percentages were reasonably incurred as proportionate to base costs.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The tribunal observed (obiter) that preliminaries and general overheads perform distinct functions (site-specific preliminaries vs head-office overheads) and should not be treated as duplicative absent evidence; and that, for large PFI refurbishments, apportioning on-costs by individual leaseholder inspections may be unrealistic and percentage uplifts can be fair if benchmarked.