Graham Bradley v Abacus Land 4 Ltd

Hearing dates: 22 and 23 July 2025

Approved Judgment

This judgment was handed down remotely at 10.30am on 16 October 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Introduction

This appeal from the Upper Tribunal (Lands Chamber) ( “the UT”) concerns a challenge by leaseholders of flats in a building in London to service charges levied by their landlord. The relevant provision requires the landlord to act reasonably, and the particular question is whether the landlord was acting reasonably when it decided to include in the service charge the entirety of costs associated with a gym in the building.

A challenge to the service charges by two leaseholders, Mr Bradley and Mr Rhodes ( “the Leaseholders”), failed in the First-tier Tribunal ( “the FTT”), but succeeded (in part) on appeal to the UT where it was heard by Judge Elizabeth Cooke ( “the Judge”).

The landlord, Abacus Land 4 Ltd ( “Abacus”), now appeals to this Court with the permission of Snowden LJ. We have heard well presented arguments from Mr Tom Morris for Abacus and from Mr Michael Walsh KC, who appeared with Ms Claudia Barry, for the Leaseholders.

For the reasons that follow, I prefer those of Mr Morris and would allow the appeal and restore the decision of the FTT.

The lease terms

Romney House in Marsham Street, Westminster was constructed in the 1930s as an office block but was converted in 2006 to provide 168 residential flats, and four commercial units on the ground floor. It includes a gym in the basement.

The Leaseholders are owners of long leases of two of the flats in the building, Nos 202 and 206. Their leases are in similar form, and it is not disputed that the leases of the flats ( “the Flat Leases”) are all in materially identical form. I can take the lease of No 206 as an example. It was granted on 28 April 2006 by Abacus's predecessor, a company called Romney House Developments Ltd, as Landlord to three individuals as Tenant for a term of 999 years from 1 January 2004 in consideration of a substantial premium and a ground rent, initially of £350 per year.

By clause 3 the Tenant covenants with the Landlord to perform and observe the covenants in schedule 4. This includes covenants to pay service charges in paragraphs 10 and 11.

Paragraph 10 of schedule 4 provides, so far as material, as follows:

“(a) To pay to the Landlord within seven days of demand the Residential Service Charge Proportion of:-

(i) such of the costs charges and expenses which the Landlord shall incur in complying with its obligations set out in Part I of the Sixth Schedule hereto which the Landlord (acting reasonably) designates as being a Residential Service Charge Item

(ii) the costs charges and expenses which the Landlord shall incur in doing any works or things to those parts of the Building utilised by the residential flats owners and/or occupiers for the maintenance and/or improvement thereof and

(iii) any other costs charges or expenses incurred by the Landlord which the Landlord designates as a Residential Service Charge Item

(b) To pay to the Landlord within seven days of demand the Building Service Charge Proportion of:-

(i) such of the costs charges and expenses which the Landlord shall incur in complying with its obligations set out in Part I of the Sixth Schedule hereto which the Landlord (acting reasonably) designates as being a Building Service Charge Item

(ii) the costs charges and expenses which the Landlord shall incur in doing any works or things to the parts of the Building for the maintenance and/or improvement of the Building and

(iii) any other costs charges or expenses incurred by the Landlord which the Landlord designates as a Building Service Charge Item

(c) (if the Tenant has an exclusive right under this Lease to use a Parking Space) to pay to the Landlord within seven days of demand the Parking Service Charge Proportion of:-

(i) all costs charges and expenses which the Landlord shall incur in complying with the obligations set out in Part II of the Sixth Schedule

(ii) the costs charges and expenses which the Landlord shall incur in doing any works or things to the Parking Area for the maintenance and/or improvement of the Parking Area and

(iii) any other costs charges or expenses incurred by the Landlord which the Landlord designates as a Parking Service Charge Item

(d) notwithstanding anything herein contained the parties agree that if the Landlord shall consider that any part or parts of the costs charges and expenses which the Landlord shall incur as aforesaid shall be the subject of contributions from persons other than the lessees for the time being of the Estate then the Landlord shall be entitled to reduce the amount of the costs charges and expenses in question to which the Tenant is obliged to contribute by such sums as the Landlord shall in its absolute discretion consider reasonable rather than allocating the total amount of those costs charges and expenses and in this connection the Tenant acknowledges that the discretion conferred upon the Landlord under the provisions of this clause is an absolute discretion which shall be exercisable by the Landlord in such manner and upon such terms and at such times as the Landlord shall consider appropriate

…

(f) where an item of expenditure shall be incurred which shall fall to be treated as an item to which the Tenant is obligated to contribute towards under the provisions herein contained the Landlord shall be entitled in its reasonable discretion to designate whether such an item of expenditure shall be treated as a Residential Service Charge Item and/or a Building Service Charge Item and/or a Parking Service Charge Item”.

Paragraph 10 uses a number of defined terms. These are defined in clause 1 as follows:

Building means the building … constructed on the Estate [itself defined as Romney House]…

Building Service Charge Item means an item of expenditure which is (or is intended) to be chargeable (in whole or in part) to the lessees of the Building (both residential and commercial)

Building Service Charge Proportion means such fair proportion as the Landlord acting reasonably shall from time to time determine

Parking Service Charge Item means an item of expenditure which is (or is intended) to be chargeable (in whole or in part) to the lessees who have a right to use one or more parking spaces in the Parking Area

Parking Service Charge Proportion means the fraction of the costs charges and expenses referred to in paragraph 10(c) of the Fourth Schedule hereto of which the numerator is the number of parking spaces to be allocated to the Tenant and the denominator is the total number of parking spaces in the Parking Area

Residential Service Charge Item means an item of expenditure which is (or is intended) to be chargeable (in whole or in part) to the residential lessees of the Building

Residential Service Charge Proportion means such fair proportion as the Landlord acting reasonably shall from time to time determine.

Reverting to schedule 4, paragraph 11 contains provisions requiring the Tenant to pay half-yearly sums on account of the estimated service charge for the year; and paragraph 13 to pay any balancing charge due after the costs have been incurred and certified. Paragraph 12 provides that any sums payable under paragraphs 10, 11 and 12 [ sic but presumably intended to be 13] should be deemed to be due by way of additional rent.

The Flat Leases do not specifically refer to the gym. But clause 2 demises the Demised Premises, defined in clause 1 as the Apartment together with the appurtenant rights set forth in schedule 2, and one of those rights, by paragraph 3 of schedule 2, is as follows:

“The right (in common as aforesaid [that is, in common with the Landlord and all others having the like right]) to use such facilities (if any) within the Building and the Estate that may from time to time be designated by the Landlord for use (with or without others) by the Tenant (including but not limited to the lift if any serving the Building)”.

There is also a definition of “Common Parts” in clause 1 which includes the following:

“those parts of the Building and the Estate intended for the communal use by the Tenant with (or at the discretion of the Landlord without) other occupiers of the Building and the Estate”.

It is common ground between the parties that when the Flat Leases were granted the gym was intended to form part of the Common Parts.

The service charge covenant in paragraph 10 of schedule 4 refers to the Landlord's obligations in Parts I and II of schedule 6. Clause 5(a) contains a covenant by the Landlord with the Tenant to perform and observe the obligations set out in schedule 6. Part I of schedule 6 contains a number of obligations on the Landlord in relation to the Building and the Estate (such as to repair the structure and exterior of the Building and to insure) whereas Part II is only concerned with obligations in relation to the Parking Area and parking spaces within it.

The obligations in Part I of schedule 6 include the following:

“3. To keep in good repair and decorative condition:

…

(f) the Common Parts and all fixtures and fittings in the Common Parts (including lifts...