Aviva Investors Ground Rent GP Ltd v Philip Williams and Other Leaseholders of 38 Flats in Vista, Fratton way
| Jurisdiction | England & Wales |
| Judge | Lord Briggs,Lord Reed,Lord Kitchin,Lord Sales,Lord Richards |
| Judgment Date | 08 February 2023 |
| Neutral Citation | [2023] UKSC 6 |
| Court | Supreme Court |
[2023] UKSC 6
Lord Reed, President
Lord Briggs
Lord Kitchin
Lord Sales
Lord Richards
Appellants
Philip Rainey KC
James Sandham
Robert Brown
(Instructed by Northover Litigation)
Respondents
Simon Allison
Brooke Lyne
(Instructed by Penningtons Manches Cooper LLP)
Intervener (The Property Institute) (written submissions only)
Justin Bates
Rupert Cohen
(Instructed by Property Management Legal Services Ltd)
Heard on 8 December 2022
Lord Briggs ( with whom Lord Reed, Lord Kitchin, Lord Sales and Lord Richards agree):
The levying of service charges by landlords under leases of residential property in respect of their expenditure upon repairs and the provision of other services has for long been controversial. This is both because of its propensity to generate disproportionately expensive and time-consuming litigation and because of the tendency of some landlords to seek to minimise that risk by the imposition of contractual restrictions in residential leases upon what would otherwise have been the tenants' rights to have disputes about service charges resolved in court, or in an appropriate tribunal. Section 27A of the Landlord and Tenant Act 1985 (the “1985 Act”) was an attempt by Parliament to alleviate what was perceived to be the unfair restriction of residential tenants' access to justice inherent in such restrictions. This appeal raises the question just how far section 27A goes in restraining what would otherwise be the parties' freedom of contract.
Section 27A was introduced by amendment into the 1985 Act by the Commonhold and Leasehold Reform Act 2002. It provides as follows:
“ 27A Liability to pay service charges: jurisdiction
An application may be made to the appropriate tribunal for a determination whether a service charge is payable and, if it is, as to—
(a) the person by whom it is payable,
(b) the person to whom it is payable,
(c) the amount which is payable,
(d) the date at or by which it is payable, and
(e) the manner in which it is payable.
(2) Subsection (1) applies whether or not any payment has been made.
(3) An application may also be made to the appropriate tribunal for a determination whether, if costs were incurred for services, repairs, maintenance, improvements, insurance or management of any specified description, a service charge would be payable for the costs and, if it would, as to—
(a) the person by whom it would be payable,
(b) the person to whom it would be payable,
(c) the amount which would be payable,
(d) the date at or by which it would be payable, and
(e) the manner in which it would be payable.
(4) No application under subsection ( 1) or (3) may be made in respect of a matter which—
(a) has been agreed or admitted by the tenant,
(b) has been, or is to be, referred to arbitration pursuant to a post-dispute arbitration agreement to which the tenant is a party,
(c) has been the subject of determination by a court, or
(d) has been the subject of determination by an arbitral tribunal pursuant to a post-dispute arbitration agreement.
(5) But the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment.
(6) An agreement by the tenant of a dwelling (other than a post-dispute arbitration agreement) is void in so far as it purports to provide for a determination—
(a) in a particular manner, or
(b) on particular evidence,
of any question which may be the subject of an application under subsection ( 1) or (3).
(7) The jurisdiction conferred on the appropriate tribunal in respect of any matter by virtue of this section is in addition to any jurisdiction of a court in respect of the matter.”
In England the “appropriate tribunal” for the purposes of section 27A is now the First-tier Tribunal (Property Chamber) (“the FtT”) replacing the Leasehold Valuation Tribunal (“the LVT”) which remains the “appropriate tribunal” in Wales (see section 38 of the 1985 Act). Both tribunals are specialists in this field, and operate a limited costs-shifting regime under which tenants are not exposed to paying their landlord's costs, providing they litigate reasonably.
The question on this appeal is how far (if at all) section 27A(6) cuts down a contractual provision in a lease that provides for the tenant to pay a fixed proportion of common costs “or such part as the landlord may otherwise reasonably determine”. The leases in question are leases of residential units within a building in Southsea, Hampshire by which the apportionment of the landlord's service charge expenditure between the tenants in the building may be adjusted by the landlord. A sample of the relevant clause for flat 64 (which is in standard form for all the residential units save as to the stated percentages) reads as follows:
“your share of the insurance costs is 0.7135% or such part as the Landlord may otherwise reasonably determine;
your share of building services costs is 0.7135% or such part as the Landlord may otherwise reasonably determine; and your share of estate services costs is 0.5427% or such part as the Landlord may otherwise reasonably determine.”
The insurance costs, the building services costs and the estate services costs together made up the whole of each residential tenant's service charge liability. The numerically stated percentages were those imposed on the tenant of flat 64 at the commencement of the relevant lease, which was granted for a term of 125 years from 19 December 2008.
The particular service charge dispute leading to this appeal arose, in part, because the Respondent landlords demanded service charges on the basis of an apportionment different from (and, so far as the Appellants were concerned, higher than) the numerically stated percentages in the relevant leases. Mr Williams (the lessee of flat 64) and a number of his neighbouring lessees within the building claimed that the contractual entitlement of the landlords to determine an apportionment other than that numerically stated in the leases was rendered void by section 27A(6). They also claimed, in the alternative, that the re-apportionment imposed by the landlords was unreasonable.
Each of the courts below responded to this challenge in a different way. The FtT (Judge Agnew and Mr D Banfield FRICS) held that the landlords' contractual power to re-apportion was not avoided in any way by section 27A(6) because it did not purport to prevent the lessee from challenging its reasonableness in the FtT. The reasonableness challenge failed, so that the re-apportionment was enforced. The Upper Tribunal (Lands Chamber) (Judge Elizabeth Cooke) held that the whole of the provision for reapportionment was void, so that the fixed percentages were immutable, unless and until the parties agreed otherwise. The Court of Appeal (Lewison, Males and Rose LJJ) held that the provision for re-apportionment was void to the extent that only the landlord could exercise it, but that either party to the relevant lease could apply to the FtT for a re-apportionment under section 27A(1).
All three of the courts below correctly regarded themselves as bound by the decision of the Court of Appeal in Oliver v Sheffield City Council [2017] EWCA Civ 225; [2017] 1 WLR 4473 in which, following Windermere Marina Village Ltd v Wild [2014] UKUT 163 (LC); [2014] L & TR 30 and Gater v Wellington Real Estate Ltd [2014] UKUT 561 (LC); [2015] L & TR 19, I held (with the agreement of Longmore and Lewison LJJ) that a provision which gave contractually determinative effect to a discretionary decision of the landlord about service charges was avoided by section 27A(6) whether or not it provided expressly for the landlord's decision to be final and binding. No submission to the contrary was (for understandable reasons) made in the courts below. But the correctness of those three decisions was squarely challenged by the Respondent landlords in the appeal to this court.
The question in issue is of course purely one of law, namely the construction of a statutory provision, on which an appellate court must form its own view. While it will generally accord respect to the analysis of a lower (and in particular specialist) court or tribunal, if not bound by an earlier decision it must consider the question for itself. The long acceptance of a particular construction by the sector of the community most affected by it (here landlords and tenants of residential property) may disincline an appellate court from departing from it, but in the present case only five years have elapsed since the Oliver decision and, as will appear, the present case may fairly be regarded as having tested the principle there laid down to destruction.
The central thrust of the Respondents' submission to this court, by Simon Allison and Brooke Lyne, is that to treat every contractual power of a landlord to decide any question about the quantum of a service charge as void will in many cases (including this one) mean that the relevant lease contains no provision at all for the determination of the amount or timing of a service charge by anyone other than the FtT, even in the absence of any dispute. As Lewison LJ put it in the Court of Appeal, [2021] EWCA Civ 27; [2021] 1 WLR 2061, at para 39, (applying Oliver), the effect in the present case of section 27A(6) was that:
“the function of making that determination is […] transferred from the landlord to the FTT.”
That would, so it was submitted, lay upon the shoulders of the FtT the administrative burden of making a multitude of service charge related decisions on a regular basis in relation to countless leases, in sharp contrast with its usual adversarial, dispute-resolution function where, for example, a decision by the landlord is challenged on...
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