Fitzroy Place Residential Limited & Ors v Angus Lovitt & Ors
[2024] UKUT 63 (LC)
Howe Properties (NE) Limited v Accent Housing Limited
27 March 2024
[2024] EWCA Civ 297
Court of Appeal
A landlord charged leaseholders a flat fee for managing their estate, but the fee was calculated based on its expenses for ALL its properties, not just this estate. The court said the landlord can charge different amounts to different leaseholders, but only if it's fair and based on the work done for *that* estate. The court also said the landlord can’t use the money from other properties to pay for this one.
Key Facts
- •Howe Properties (respondent) is a long leaseholder of four properties on an estate managed by Accent Housing (appellant).
- •The dispute concerns the legality of Accent's annual service charge, which includes a standardized management fee applied nationwide.
- •Howe challenged the £300 annual management fee, arguing it's disproportionate and unfair compared to charges levied on freeholders and social tenants.
- •The leases contain varying clauses regarding service charge calculation (1/137th, proportionate part, fair proportion).
- •Accent's management fee is based on a tiered system applied to its national property portfolio.
- •The Upper Tribunal (UT) sided with Howe, finding Accent's approach violated the lease terms.
- •Accent appealed to the Court of Appeal.
Legal Principles
Contractual interpretation requires identifying the parties' intention based on what a reasonable person would understand, considering the natural meaning of words, relevant lease provisions, overall purpose, known facts and circumstances, commercial common sense, while disregarding subjective intentions.
Arnold v Britton [2015] AC 1619
The statutory definition of a service charge under the Landlord and Tenant Act 1985 (as amended) defines it as an amount payable by a tenant for services, repairs, maintenance, improvements or insurance or the landlord’s costs of management, part of which may vary according to relevant costs.
Landlord and Tenant Act 1985, section 18(1)
Outcomes
The Court of Appeal allowed Accent's appeal in part.
The court found that "a proportionate part" or "a fair proportion" in the lease clauses doesn't necessarily mean an equal share. A landlord can justify charging different proportions based on objective factors related to service provision, but not on subjective or irrelevant factors like compensating for limitations on charges to social tenants. However, the court upheld the UT's decision that Accent couldn't include costs related to properties outside the estate in the service charge.
The matter of the payability and reasonableness of the management charge was remitted to the First-tier Tribunal (FTT) for reconsideration.
Following the Court of Appeal's judgment, the parties agreed this was necessary.
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