Read your lease

Large social landlords often charge long leaseholders (e.g. under RTB leases) a management fee. Increasingly, for reasons of simplicity, such landlords have adopted a “tiering” system whereby all flats pay £X, all houses pay £Y etc. Such sums are usually identified as the average costs attributable to that type of building/tenure over a period of time.

In Accent Housing Ltd v Howe Properties (NE) Ltd [2024] EWCA Civ 297, the Court of Appeal has – again – reminded landlords of the need to ensure that any charges are in conformity with the terms of the lease. Howe Properties (NE) Ltd was the leaseholder of four flats on a development of which Accent Housing Ltd was the freeholder. The leases had each been granted under the “right to buy” provisions (Housing Acts 1980 and 1985) and provided for the respondent to pay a service charge in respect of the management costs incurred by the freeholder. Accent charged a flat fee of £300 per flat. Howe challenged that fee in the FTT. The Tribunal found that the fee was calculated in accordance with the provisions of the lease and was reasonable in amount.

The Upper Tribunal allowed an appeal. The lease did not permit a flat fee to be charged; rather, the lease allowed 0.7% of the total management costs to be recovered from each leaseholder ([2022] UKUT 273 (LC)).

The Court of Appeal allowed an appeal in part. The Upper Tribunal had misunderstood the leases. They leases provided the freeholder with discretion to charge a “proportionate” or “fair” part of the costs incurred at the estate back to the leaseholders as a service charge; what was fair or proportionate fell to be decided from time to time by the landlord and the Upper Tribunal had been wrong to hold that only a fixed proportion could be charged. The case was, however, remitted to the FTT for re-hearing. It appeared that the £300 figure included costs which were unconnected to the estate. That issue had not been dealt with by the Upper Tribunal or FTT and could not be resolved by the Court of Appeal.

Justin Bates KC acted for Accent Housing Ltd, instructed by Trowers and Hamlins. The case can be found here.