“No Service Charge Is Payable”: The Court of Appeal Confirms a Post-Commencement Bar on Passing Historic Building-Safety Legal Costs to Leaseholders (Adriatic Land 5 Ltd v Long Leaseholders at Hippersley Point, [2025] EWCA Civ 856)

Introduction

The Court of Appeal’s decision in Adriatic Land 5 Ltd v Long Leaseholders at Hippersley Point clarifies the temporal reach of paragraph 9, Schedule 8 to the Building Safety Act 2022 (“BSA”). The central controversy was whether a landlord could levy service charges on residential long-leaseholders for legal and professional costs already incurred before Schedule 8 entered into force on 28 June 2022, but not yet paid by leaseholders. By a 2-1 majority (Nugee and Holgate LJJ; Newey LJ dissenting), the Court ruled that:

• Paragraph 9 bars recovery of such costs once 28 June 2022 has passed, even if the landlord had incurred the expenditure, demanded the charge or the charge had already fallen due; but
• Paragraph 9 does not require repayment of sums actually paid before that date.

The ruling provides a fresh precedent on statutory retrospectivity, the protection of leaseholders from building-safety costs, and the balance between landlords’ proprietary rights and public-interest intervention following Grenfell.

Summary of the Judgment

Adriatic, the freeholder of a 32-flat block over 18 metres (Hippersley Point), incurred substantial legal fees in 2021–22 when applying for unconditional dispensation from section 20 consultation under the Landlord and Tenant Act 1985. The First-tier Tribunal granted dispensation but barred recovery of application costs. On appeal, the Upper Tribunal agreed that paragraph 9, Schedule 8, BSA barred recovery from “qualifying” leaseholders.

Adriatic appealed further, advancing three issues: (1) whether such costs fall within paragraph 9 (“Scope”); (2) whether paragraph 9 applies to costs incurred pre-28 June 2022 (“Retrospectivity”); (3) whether a retrospective reading would breach Article 1 Protocol 1 ECHR (“A1P1”).

Findings:

1. Scope: All three Lords Justices agreed that dispensation-application costs are “legal or other professional services … relating to the liability (or potential liability) of any person incurred as a result of a relevant defect.”
2. Retrospectivity (key split):
   • Majority (Nugee LJ & Holgate LJ): From 28 June 2022 onward no qualifying-lease service charge is payable for covered legal/professional costs, whatever their prior history. Payments made before that date remain undisturbed.
   • Dissent (Newey LJ): Paragraph 9 is only prospective: it does not touch costs incurred before commencement, so Adriatic could recover them.
3. A1P1: Unanimously dismissed. Even on the majority’s interpretation, the provision controls use of property rather than deprives it, and strikes a fair balance given Parliament’s wide social-policy margin.

Analysis

1. Precedents Cited

• Wilson v First County Trust (No 2) [2003] UKHL 40
  Source of the presumption against retrospective legislation and acknowledgment that contractual rights are “possessions” under A1P1.
• Tunnicliffe [1991] 2 All ER 712 & L’Office Chérifien [1994] 1 AC 486
  Discussed Staughton LJ’s spectrum of unfairness and Lord Mustill’s fairness-based approach to retrospectivity.
• Burr v OM Property Management [2013] EWCA Civ 479
  Defines when costs are “incurred” for service-charge legislation: only upon invoicing or payment.
• Granada UK Rental & Retail Ltd [2019] EWCA Civ 1032
  Delineates between newly-imposed liabilities and alteration of accrued rights.
• Bank Mellat (No 2) [2013] UKSC 39, Recovery of Medical Costs [2015] UKSC 3, SC v SSWP [2021] UKSC 26
  Four-stage proportionality test and the “manifestly without reasonable foundation” (MWRF) margin in socio-economic policy.
• URS Corporation v BDW [2025] UKSC 21
  Supreme-Court comments on “backward-looking” Part 5 BSA were considered but held not to dictate the answer because URS concerned s. 135, not Schedule 8.

2. The Court’s Legal Reasoning

a. Scope of Paragraph 9

The Court construed “any person” literally, embracing the landlord itself. Because the dispensation application was pursued to enable recovery of remediation costs for which Adriatic was liable under leases and the BSA, the related professional fees “relate to” that liability. The phrase “relating to” was deemed deliberately wide.

b. Retrospective Reach – Competing Interpretations

c. A1P1 Compatibility

The majority’s reading was characterised as “control of use” of property, not a deprivation. Absence of compensation is rarely fatal for control-of-use measures, and the statute pursued a legitimate aim—protecting residents and stabilising the housing market. In the socio-economic sphere the legislature enjoys a wide margin, satisfied here.

3. Impact of the Judgment

• Leaseholder Protection Solidified – Landlords can no longer rely on pre-commencement expenditure as a route round Schedule 8. This provides immediate cash-flow reprieve for thousands of leaseholders still facing invoices issued after June 2022.
• Landlord Risk Re-Pricing – Freehold investors must price in the impossibility of passing pre-2022 legal/professional costs to qualifying leaseholders after commencement. Transactional due-diligence on ground-rent portfolios will need to reflect the risk.
• Service-Charge Litigation Boundaries – FTT applications for historic costs will be futile where demands remain unpaid. Only arrears crystallised and paid before 28 June 2022 survive.
• Uniform Approach Across Schedule 8 – Although the appeal centred on paragraph 9, the majority reasoning logically extends to paragraphs 2-8: any qualifying-lease demand issued or falling due after 28 June 2022 in respect of relevant defects is likely irrecoverable.
• Divergent Judicial Views – The split emphasises that higher-court clarification (potentially the Supreme Court) may still be sought, especially regarding sums already paid pre-28 June 2022.

Complex Concepts Simplified

Building Safety Act 2022, Part 5

Introduces retrospective and prospective mechanisms to fund and enforce remediation of fire-safety and structural defects in blocks ≥ 11 m/5 storeys.

Schedule 8

A schedule that limits or extinguishes landlords’ ability to charge leaseholders for specific remediation categories, subject to qualifying-lease tests.

Qualifying Lease

A long residential lease granted before 14 Feb 2022 where the tenant lived in the flat or owned ≤ 2 other UK dwellings on that date.

Paragraph 9

Bars service charges for legal/professional services connected to defect liability—e.g., lawyers, surveyors, tribunal fees.

Retrospectivity

Whether a statute alters rights/liabilities arising from past events. Courts presume Parliament does not intend this unless clearly expressed.

A1P1 (Protocol 1 Article 1, ECHR)

Protects “peaceful enjoyment of possessions”. States may regulate property in the general interest, but must strike a proportionate balance.

Conclusion

The Court of Appeal’s majority has delivered the first definitive appellate ruling on how Schedule 8 dovetails with pre-commencement costs. Its effect can be distilled into a practical rule:

“From 28 June 2022, no unpaid service charge under a qualifying lease may be levied for legal or professional costs relating to building-safety defects, irrespective of when those costs were incurred.”

While landlords retain sums actually paid before that date, their contractual expectations going forward are curtailed. The decision reinforces the BSA’s tenant-protection ethos, offering clarity to tribunals, landlords, leaseholders, and lenders navigating the post-Grenfell safety landscape. Future disputes are now more likely to focus on (i) whether a lease is “qualifying”, (ii) whether works/costs fall within “relevant defects” and “relevant measures”, and (iii) pursuing third-party recovery via remediation-contribution orders. The ruling thus marks a pivotal moment in the developing body of “building-safety” jurisprudence in England and Wales.