Service charge – Assured tenancy – Tenancy agreement providing for rent including service charge to be increased annually following review of respondent landlord’s rent setting formula – Appellant tenant applying to leasehold valuation tribunal (LVT) for determination of liability to pay service charges – Section 27A and 18(1)(b) of Landlord and Tenant Act 1985 – LVT deciding it lacked jurisdiction to determine application – Whether amounts payable under tenancy agreement “service charges” within meaning of Act – Whether varying according to relevant costs – Appeal dismissed
The appellant tenant held an assured tenancy of a flat from the respondent landlord under a 1999 tenancy agreement. The agreement specified the starting rent and service charge but provided that those amounts might change and that: “The service charge is part of the rent and will change at the same time.” The agreement provided for an annual rent increase, to be implemented in April of each year following an annual review of the respondent’s rent-setting formula. The rent was to be paid weekly in advance.
Each year, the respondent served notice on the appellant to alter the rent, including service charge, that was payable under the tenancy agreement. The service charge element was calculated by reference to the actual costs from the previous year and, once set, was a fixed charge for the financial year and did not vary according to the actual costs incurred by the respondent during the course of that year. The respondent absorbed any shortfall or retained any excess; there was no provision for end-of-year accounts or the payment of a balancing charge, and the tenants did not receive service charge accounts.
The appellant applied to the leasehold valuation tribunal (LVT), under section 27A of the Landlord and Tenant Act 1985, for a determination of his liability to pay service charges for the years 1999 to 2006. The LVT decided that it did not have jurisdiction to determine the application since the sums payable under the tenancy agreement were not “service charges” within section 18(1) of the Act, not being sums “the whole or part of which varies or may vary according to the relevant costs” as required by section 18(1)(b). It considered the absence of any mechanism for the collection of any underprovision, or the repayment of any surplus, to be determinative. The appellant appealed.
Decision: The appeal was dismissed.
The LVT had correctly concluded that it lacked jurisdiction to determine the appellant’s application. The tenancy agreement did not indicate that the altered rent was to be calculated in any particular manner nor did it link the altered rent, including service charge, with an alteration in the cost of providing the relevant services. Although the respondent’s decision on that matter might well be informed by the estimated costs of providing the services in the forthcoming year, the ability of a landlord to increase the rent, if it so chose, by taking into account increases in the cost of services did not make that rent a payment the entirety or part of which varied or might vary according to the relevant costs. There was no direct relationship between the amount of the costs as a cause and the amount of the service charge as a consequence; interposed between the amount of the costs and that of the charge was the independent decision of the landlord or a rent assessment committee as to how much the new rent and service charge should be. Although they might take into account the estimated service costs for the forthcoming year, that was at one remove from a situation where the rent varies or might vary according to those costs. Accordingly, no part of the rent or service charge payable by the appellant varied or might vary “according to the relevant costs”.
The appellant submitted written representations; Cobbetts LLP made submissions for the respondent by written representations.
Sally Dobson, barrister
