The Court of Appeal has confirmed that there is no objection in principle to a degree of flexibility in the apportionment of a service charge, provided that the decision is taken by the First-tier Tribunal.
Section 27(A)(1) of the Landlord and Tenant Act 1985 grants the FTT jurisdiction to determine matters concerning the payability of service charges, including the amount to be paid. Section 27A(4) acts as a fetter in so far as it precludes the FTT from making a decision about an apportionment which “has been agreed or admitted by the tenant”. Section 27A(4) must, however, be read in light of section 27A(6), which voids any agreement by a tenant that provides for a determination of any question that could be the subject of a referral to the FTT under section 27A(1).
In Aviva Investors Ground Rent GP Ltd and another v Williams and others [2021] EWCA Civ 27; [2021] PLSCS 13, the lessees were owners of residential flats in a mixed-use development in Southsea, Hampshire. The service charge provisions of the tenants’ leases provided for payment of three components: insurance costs, building services costs and estate costs. Payment was calculated by way of a fixed percentage “or such part as the landlord may reasonably determine”.
The issue the Court of Appeal had to determine was whether the landlord was fixed with those percentages or whether the ability to vary the same was transferred from the landlord to the FTT? The Upper Tribunal (Lands Chamber), held that the landlord was restricted to the fixed percentage by relying upon Section 27A(4), a reversal of the decision of the FTT. The landlord appealed.
Relying on Windermere Marina Villages Ltd v Wild and Barton [2014] UKUT 163 (LC); [2014] PLSCS 165, Fairman v Cinnamon (Plantation Wharf) Ltd [2018] UKUT 421 (LC) and Oliver v Sheffield City Council [2017] EWCA Civ 225; [2017] PLSCS 83, the Court of Appeal found that section 27(A)(6) was concerned with no more than removing the landlord’s role (or that of another third party) from the decision-making process so as not to oust the jurisdiction of the FTT under section 27(A)(1).
The statutory objective was satisfied if the landlord’s role in varying the percentages was transferred to the FTT. The Court of Appeal remarked that to reach a broader conclusion than that would emasculate the contract and, in practical terms, render it unworkable. Further, the authorities indicated that a degree of flexibility in the apportionment of a service charge was not objectionable, in principle, provided that the decision was taken by the FTT.
Elizabeth Dwomoh is a barrister at Lamb Chambers
