0
Today the Supreme Court has handed down a judgment that will impact upon hundreds of thousands of leaseholders and landlords across the country.
The appeal concerned the interpretation of provisions for calculating the service charges payable under the terms of residential leases and, in particular, how s.27A(6) of the Landlord and Tenant Act 1985 should operate and affect how those provisions should be read.
In this case – as in many hundreds of thousands of leases - the leases provided for leaseholders to pay a fixed percentage but, additionally, allowed the landlord to vary the service charge percentages. The leaseholders had argued that the landlord was not entitled to apply varied percentages and that effect of s.27A(6) was that the provision allowing for reapportionment was to be struck down.
In a unanimous judgment given by Lord Briggs the Supreme Court concluded that the role of the First Tier Tribunal (“FTT”) in considering the reapportionment of residential service charges is limited to a review of the contractual legitimacy of the landlord’s reapportionment and the FTT is not to determine the apportionment for itself. Section 27A(6) of the Landlord and Tenant Act 1985 is an anti-avoidance provision that simply preserves the FTT’s existing jurisdiction to determine whether a service charge demand is contractually or statutorily legitimate but it does not confer jurisdiction on the FTT to determine the apportionment (or make other management decisions) that are for the landlord to make. The previous line of cases, including Windermere Marina v Wild [2014] UKUT 163 (LC); Gater v Wellington [2014] UKUT 561 (LC) and Oliver v Sheffield CC [2017] EWCA Civ 225 were wrongly decided on this point. The upshot of the court’s conclusion was that the apportionment provisions in the leases were unaffected by s.27A(6) and the landlord was entitled to apply the varied apportionments.
This decision marks a significant shift back to the position that existed prior to Windermere. Landlords and managing agents can now be more confident that reapportionment exercises carried out by them in accordance with the contractual machinery will only be subject to a review by the FTT, rather than it carrying out the exercise for itself. This decision will reduce the risk of significant service charge shortfalls and it will narrow the scope for disputes about apportionment going forward.
Simon Allison and Brooke Lyne appeared for the successful landlord, instructed by Ben Robinson from Pennington Manches Cooper LLP.
Justin Bates and Rupert Cohen appeared for the intervener, The Property Institute, instructed by Property Management Legal Services Ltd.
The Judgment may be accessed here.
