Landlord and tenant – Service charges – Liability – Apportionment – Appellant lessees in block of flats appealing against decision of First-tier Tribunal concerning reasonableness and payability of service charges — Whether wording in lease rendered void by section 27A(6) of Landlord and Tenant Act 1985 – Appeal allowed
The appellants were the lessees of thirty-nine flats in Vista, Fratton Way, Southsea, Hampshire. The property was a mixed-use block with a commercial unit on the ground floor and 69 residential units. Each lease set out the tenant’s share of three types of service charge including insurance costs, building services costs and estate services costs. Those figures differed from flat to flat because they were calculated on the basis of the square footage of the units, but the form of the provision was the same for all: a stated percentage, or alternatively a proportion to be reasonably determined by the landlord.
For some years, the respondent landlord had been demanding service charges in different proportions from those stated in the lease. Issues arose: (i) whether the landlord was able to do so, subject to the jurisdiction of the First-tier Tribunal (FTT) under section 27A of the Landlord and Tenant Act 1985 Act or whether the words “or such part as the landlord may otherwise reasonably determine” were rendered void by section 27A; and (ii) the effect of those words being rendered void.
The appellants appealed against a decision of the FTT about the reasonableness and payability of service charges for the year 2018. The appeal related to the apportionment of service charges between the flats. Central to the appeal was the effect of section 27A(6) of the 1985 Act and of the tribunal’s decision in Windermere Marina Village Ltd v Wild and Barton [2014] UKUT 163 (LC); [2014] 3 EGLR 12; [2014] EGILR 38.
Held: The appeal was allowed.
(1) The FTT had been asked to make a decision about the apportionment of the service charges. The appellants argued that section 27A(6) rendered void the words “or such part as the landlord may otherwise reasonably determine,” so that the only way the landlord could change the apportionment was by an agreed variation of the lease. The FTT recorded the respondent’s argument that those words did not purport to oust the FTT’s jurisdiction and that it retained jurisdiction to determine whether the apportionment as determined by the respondent, being different from that stated in the lease, was a reasonable apportionment.
(2) Contrary to the appellants’ argument, the FTT decided that the cases of Windermere Marina and Gater v Wellington Real Estate Ltd [2014] UKUT 561 (LC); [2015] PLSCS 12 decided that the tribunal’s jurisdiction to determine a reasonable apportionment was not ousted by wording purporting to provide that the matter was one for the landlord or the landlord’s agent. But in the present case, the respondent was not trying to say that the landlord could alter the apportionment at its own discretion and that the tribunal had no say in the matter. On the contrary the respondent accepted that the tribunal had jurisdiction to say whether the apportionment was reasonable or not. So, the two cases quoted by the appellants did not have the effect of nullifying the lease provision.
That was a misunderstanding of the decisions in Windermere Marina and Gater which said that a clause purporting to provide for a determination of apportionment by the landlord or the landlord’s agent was void whether or not it provided that the landlord’s decision was final and binding or similar; and whether or not the landlord agreed to submit to the jurisdiction of the tribunal. Accordingly, in the leases in question the words “or such part as the landlord may otherwise reasonably determine” were void. They would be deleted and would no longer appear in the lease.
(3) The deletion of the void wording in Windermere and Gater created a vacuum. There was still a determination to be made, because the tenants had to pay a “fair proportion” of the service charge. In the absence of the agreed method of determination it was for the FTT to decide what a fair proportion was; and it had to make its own decision, rather than reviewing the landlord’s apportionment. Similarly, in Fairman v Cinnamon (Plantation Wharf) Ltd [2018] UKUT 421 (LC) the deletion of void wording that enabled the landlord to determine when a change in the apportionment of charges was “necessary or reasonable” meant that the FTT had to decide whether a change was necessary or reasonable and, if it was, to decide for itself what the new apportionment should be.
In the present appeal the remaining wording was different. The leases set out a fixed percentage, to which the landlord’s discretionary apportionment was an alternative. There was no provision for a “fair proportion” or the like. Without the void wording, the lease obliged the tenant to pay a stated percentage of the service charge. There was nothing left to decide. The FTT had no jurisdiction to amend the stated percentage as a result of section 27A(4).
Accordingly, the decision of the FTT would be set aside and the Upper Tribunal would substitute its own decision that the words “or such part as the landlord may otherwise reasonably determine” in the leases were void. The respondent could recover only the apportionments stated in the lease and if it wished to change that apportionment it would have to do so by varying the leases with the appellants’ agreement.
The appellants did not appear and were not represented; Simon Allison (instructed by Penningtons Manches Cooper) appeared for the respondent.
Eileen O’Grady, barrister
Click here for a transcript of Williams and others v Aviva Investors Ground Rent
