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This was an interesting service charge dispute relating to Swedish Quays, a large development carried out by London Docklands Development Corporation in the 1980s. LDDC set up a scheme under which all lessees were to be members of the Swedish Quays Residents Society Limited (“the Society”), which was obliged to meet all the usual landlord’s obligations to repair and maintain common areas and structures. In the leases the lessees did not covenant to pay service charges, but to pay the subscriptions for which they were liable as members of the Society. The rules of the Society provided for how the subscription was to be fixed each year, but did not state that it was to vary according to the costs of providing services. It was already established by the decision in Morshead Mansions Ltd v Di Marco [2008] EWCA Civ 1371 that if a member is sued for sums due under the Articles of the Company, he could not rely on defences which might be available under the Landlord and Tenant Act 1985. The Court of Appeal did not however decide whether a lessee could seek a determination from the LVT under s18 or 27A of the 1985 Act In this case the Applicant sought to challenge the reasonableness of certain proposed major works, and the issue was whether the sums payable under the rules of the Society were variable service charges within the definition in s18 of the 1985 Act. The Tribunal accepted Tom Jefferies’ submissions that the subscriptions payable were variable service charges because the rules of the Society were such that it could only spend money on items which fell within the definition of service charges, so the subscription payable could only vary according to the costs of providing such services. It did not matter that the rules of the Society did not expressly provide that the subscription would vary according to the cost of providing service to lessees. Accordingly the lessee could challenge the reasonableness of the proposed works.
