Fitzroy Place Residential Limited & Ors v Angus Lovitt & Ors
[2024] UKUT 63 (LC)
Hawk Investments Properties Limited v Diana and Christopher Eames & Ors
21 July 2023
[2023] UKUT 168 (LC)
Upper Tribunal
A landlord wanted to change how service charges were split between homes and shops in a building. The court said the new way was unfair because it would massively increase charges for the residents and didn't properly consider how much each type of property used the building's services. The court confirmed the landlord has some power to change the way charges are split but needs to do it fairly.
Key Facts
- •Hawk Investment Properties Limited (appellant) appealed a First-tier Tribunal (Property Chamber) (FTT) decision concerning the validity of a new service charge apportionment method for residential maisonettes at Heritage Close, St Albans.
- •The residential leases allowed the landlord to change the apportionment method if the existing method (based on rateable value) became 'inoperable or manifestly inequitable' due to changes in the rating system.
- •The FTT initially found the condition precedent (change in rating system rendering the existing method inoperable or inequitable) not met, but ultimately reviewed the landlord's proposed new apportionment based on floor area.
- •The new apportionment resulted in a significant increase (approximately fourfold) in service charges for residential lessees.
- •The FTT considered both historical factors (e.g., long-standing apportionment, changes in the commercial units) and the lack of a nuanced approach to apportionment in the new scheme.
- •The FTT ultimately deemed the new apportionment method 'not just and equitable'.
Legal Principles
Section 27A(6) of the Landlord and Tenant Act 1985 renders void contractual provisions that determine service charge questions in a specific manner, preventing landlords from ousting the FTT's jurisdiction.
Landlord and Tenant Act 1985, Section 27A(6)
Following *Aviva Investors Ground Rent GP Limited v Williams*, the FTT's review of a landlord's service charge apportionment decision is limited to assessing its contractual legitimacy; in cases where the lease imposes specific criteria (e.g., 'just and equitable'), the FTT assesses compliance with those criteria, not simply rationality.
Aviva Investors Ground Rent GP Limited v Williams [2023] UKSC 6
Where a lease confers a discretion on a landlord, a rationality review applies unless the contract specifies additional requirements such as reasonableness or fairness. In such cases, the FTT assesses compliance with the contract's terms.
Braganza v BP Shipping Limited [2015] UKSC 17; London Borough of Hounslow v Waaler [2017] EWCA Civ 45; Hayes v Willoughby [2013] UKSC 17
Outcomes
The appeal was dismissed.
The Upper Tribunal (Lands Chamber) (UTLC) upheld the FTT's finding that the proposed new apportionment method was not 'just and equitable' as required by the lease, despite setting aside the FTT's initial finding on the condition precedent.
The FTT's initial decision that the condition precedent for changing apportionment had not been met was overturned.
The UTLC found that the abolition of domestic rates had rendered the original apportionment method inoperable, satisfying the condition precedent.
Similar Cases
Tower Hamlets Community Housing Limited v Leaseholders of Painter House
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Aviva Investors Ground Rent GP Ltd and another v Williams and others
[2023] UKSC 6
Michael Connell & Anor v Beal Developments Limited & Ors
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Graham Bradley & Anor v Abacus Land 4 Limited
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