Imagine, if you will, that a manager has been appointed over a residential building under s.24, Landlord and Tenant Act 1987. In the usual way, the manager sets a service charge budget for the year and the leaseholders pay interim costs against that budget. During the period covered by the budget, something unexpected happens and the manager finds that there are insufficient funds in the service charge account to cover the costs. Can the First Tier Tribunal vary the management order to permit an additional ad hoc service charge demand to be made, or must the manager find some other way to cover the costs (e.g. borrow from a bank) and then seek to recover those from the leaseholders during the next service charge period?
That was the question in Orchard v Mooney  UKUT 173 (LC). The manager had become embroiled in litigation with one of the leaseholders concerning a leak and was seeking clarification from the FTT as to her powers of entry into the leaseholders flat in order to investigate the problem. That litigation had not been anticipated when the service charge budget was set and the manager was concerned that the service charge fund was insufficient to cover the costs. Accordingly, she applied to the FTT to have the management order varied so as to allow her to raise a further charge. The FTT granted that order and the leaseholders with whom she was engaged in litigation appealed.
The Upper Tribunal dismissed the appeal. There was nothing in s.24, 1987 Act which prevented the FTT from making a variation of this sort. This was not (as the leaseholders had contended) a costs order in the normal sense (which the FTT could not have made), it was just a power to raise an additional service charge. The leaseholders were entitled to challenge the service charge in the usual way (s.19, LTA 1985) in due course. Whilst the procedure adopted by the FTT had been relatively informal (e.g. short timescale for submissions and evidence) that was a consequence of the application being urgent and had not caused any prejudice to the leaseholders.