Upper Tribunal Rules on Limits of Landlord's Discretion in Service Charge Apportionment

Citation: [2024] UKUT 63 (LC)
Judgment on


The case of Fitzroy Place Residential Limited & Ors v Angus Lovitt & Ors [2024] UKUT 63 (LC) presents an appeal in the Upper Tribunal (Lands Chamber) centered around a dispute over the apportionment of service charges in a mixed-use development. The judgment by Martin Rodger KC, Deputy Chamber President, provides a comprehensive analysis of the legal principles relating to the interpretation of service charge provisions within residential leases. The decision underscores the importance of clarity in drafting agreements and highlights principles relevant to such disputes.

Key Facts

Fitzroy Place is a high-end, mixed-use development comprising residential units, commercial spaces, and communal facilities such as a gym, cinema, and concierge service. A dispute arose concerning how service charges were to be apportioned among the leaseholders. This centered on the interpretation of the lease’s schedule, which set out how to calculate each leaseholder’s contribution to service costs.

The appellants sought to apply a method of apportionment that varied significantly from that described in the lease schedules. The First-tier Tribunal (FTT) rejected the method adopted by the appellants, leading to this appeal. The FTT’s main consideration was the interpretation of the clause permitting the landlord to vary the service charge apportionment method. The Upper Tribunal reviewed the FTT’s decision to confirm or modify its interpretation of the lease provisions.

The legal principles invoked in this case include the interpretation of contracts, as expounded in relevant precedents such as EMFC Loan Syndications LLP v The Resort Group Plc [2021] EWCA Civ 844. The court must ascertain the objective meaning of contractual language considering the context of the whole agreement and the commercial common sense of the situation.

In particular, emphasis was placed on understanding what a reasonable person, fully aware of the available background information, would infer from the terms used in the contract. The judgment also touched on the unitary approach of contractual interpretation involving an iterative process.

The ultimate question of law was whether the FTT was correct in interpreting the Landlord’s discretionary powers under paragraph 6.2 of the lease, which allowed deviation from an otherwise apparently primary comparison-based service charge calculation as described in paragraph 6.1.


The Upper Tribunal dismissed the appeal, confirming the decision of the FTT that the landlord’s discretionary power under paragraph 6.2 was limited to changing the method of apportionment for individual items or services, not a blanket authority to adopt a new overall basis of apportionment.

The Tribunal found that the lease intended the “primary” method of apportionment based on net internal area to be the main method throughout the term of the lease. It concluded that the discretion under paragraph 6.2 was exercised only for particular expenses that were fair and reasonable, rejecting the Landlord’s adopted method which deviated substantially from this principle without proper basis under the lease.


The Upper Tribunal’s decision in Fitzroy Place Residential Limited & Ors v Angus Lovitt & Ors reaffirms the legal principles of contractual interpretation, particularly in the context of long-term residential leases laden with complex service charge provisions. It clarifies that discretionary powers granted within a lease must be exercised reasonably and within the scope explicitly allowed by the terms of the lease. The judgment reinforces that landlords cannot reinterpret lease clauses broadly to impose a significantly different apportionment methodology than what was originally agreed upon. This case serves as a cautionary tale about the need for precise drafting and that any discretion conferred upon a party within a lease must be clearly defined and circumscribed.