Mixed-Use Premises as “Dwellings” Under LTA 1985: Service Charge Control Applies Despite Ancillary Residential Use

Introduction

Case: Cloisters Business Centre Management Company Ltd v Anvari & Anor [2026] EWCA Civ 17
Court: England and Wales Court of Appeal (Civil Division)
Date: 21 January 2026

This second appeal concerned whether the lessees of Unit 6, Priory House, Cloisters Business Centre, Battersea (“Unit 6”) held a lease of a “dwelling” for the purposes of the service charge regime in the Landlord and Tenant Act 1985 (“the 1985 Act”). If Unit 6 was a “dwelling”, the lessees could invoke statutory controls over service charges and have the recoverability/reasonableness questions determined in the specialist tribunal jurisdiction.

The key difficulty was that Unit 6 was described as a “self-contained unit” with kitchen and shower facilities, but the lease contained apparently conflicting user provisions: (i) a permitted use of “Offices (and ancillary residential use)” (First Schedule), and (ii) a boiler-plate covenant (Second Schedule) which—due to bracketed drafting—appeared to prohibit residential/sleeping use. The landlord argued that mixed-use premises cannot be a “dwelling” under section 38 of the 1985 Act (save de minimis non-residential use), and that section 18 service charge protection should not extend to business or mixed-use lettings.

Summary of the Judgment

The Court of Appeal dismissed the landlord’s appeal and upheld the decisions below that Unit 6 is a “dwelling” for the purposes of the 1985 Act service charge provisions.

The Court held that the section 38 definition—“occupied or intended to be occupied as a separate dwelling”—does not exclude mixed-use premises merely because the letting permits or requires business use.
The historic “wholly or mainly” residential-use restriction that existed when service charge rights applied to “flats” was deliberately removed when Parliament substituted “dwelling” for “flat” (Landlord and Tenant Act 1987). The Court refused to reintroduce that restriction by interpretation.
Mixed-use premises are capable of being a “dwelling” even where the residential component is ancillary to business use; the Court endorsed (and relied upon) the logic of the “doctrine of Vickery v Martin”.
On the facts, Unit 6 was not currently occupied as a dwelling (it appeared used for storage), but it was intended to be occupied as a dwelling because the lease (properly construed) permitted “ancillary residential use”, and the bracketed prohibition was treated as a drafting oversight and/or subordinated to the specific permitted-use clause.

Analysis

1) Precedents Cited

Contextual meaning of “dwelling” and statutory purpose

R (N) v Lewisham LBC [2014] UKSC 62, [2015] AC 1259: The Court relied on the Supreme Court’s reminder that “dwelling” has no fixed meaning and depends on statutory context and policy (judgment at [24]). This enabled the Court to distinguish “home-protection” statutes from “pocket-protection” service charge legislation.
Q Studios RTM Co Ltd v Premier Grounds Rent No 6 Ltd [2020] UKUT 197 (LC), [2021] L & TR 9: Cited for the proposition that statutory definitions must be read through the purpose of the particular enactment and that meanings should not be transplanted across contexts (judgment at [26]). The Court used this to caution against importing Rent Act security-of-tenure reasoning into the 1985 Act service charge regime.
Uratemp Ventures Ltd v Collins [2001] UKHL 43, [2002] 1 AC 301 (and Thompson v Ward (1871) LR 6 CP 327): The Court treated these as illustrations of how “dwelling-house” can be used in other contexts (security of tenure), but stressed that such observations cannot simply be read across to section 38 (judgment at [25]–[26]).

Section 38 “separate dwelling”: physical separateness and objective purpose

JLK Ltd v Ezekwe [2017] UKUT 277 (LC), [2017] L & TR 29: Used for (i) the Rent Acts’ historic “separate dwelling” analysis (physical self-containment) and (ii) the “objective purpose” approach—design and lease terms inform whether premises are occupied/intended as a separate dwelling (judgment at [27]–[31]). The Court agreed but emphasised that in mixed-use cases the terms of the letting are often the clearest objective manifestation of the parties’ intention (judgment at [31]).
Wolfe v Hogan [1949] 2 KB 194: Cited (via later authority) to support the long-standing approach that whether premises are “let as a dwelling” is assessed by reference to the letting’s terms and objective intention (judgment at [31]).

Mixed-use premises and “dwelling”: the historic line and its modern relevance

Tan v Sitkowski [2007] EWCA Civ 30, [2007] 1 WLR 1628: The landlord’s principal authority. The Court carefully distinguished it as a security-of-tenure/Rent Act policy case, driven by the post-1965 legislative shift excluding mixed-use premises while Part II of the 1954 Act applied (judgment at [33]–[44]). Crucially, the Court noted that the 1985 Act service charge provisions (section 18) are not disapplied for Part II 1954 Act tenancies.
Epsom Grand Stand Association Ltd v Clarke (1919) 35 TLR 525: Foundational authority that premises can be a “dwelling house” notwithstanding concurrent business use (“none the less so because it was also a public house”) (judgment at [36]). The Court treated this “extended sense” as the correct lens for “dwelling” under section 38 for service charges (judgment at [45]).
Hicks v Snook (1928) LGR 175: Cited as confirmation that Parliament affirmed the Court of Appeal’s mixed-use approach by statutory amendment (judgment at [38]).
Wellcome Trust Ltd v Hamad [1998] QB 638: Approved in Tan as the correct articulation of the “extended meaning” stemming from Epsom Grand Stand (judgment at [39]). This reinforced the Court’s conclusion that “dwelling” can include mixed-use.
Patel v Pirabakaran [2006] EWCA Civ 685, [2006] 1 WLR 3112: Particularly influential: Wilson LJ’s conclusion that “let as a dwelling” means “let wholly or partly as a dwelling” (judgment at [40]–[41]). The Court used this to support the proposition that, absent express restriction, mixed-use is included.
Vickery v Martin [1944] KB 679: Central to the Court’s reasoning on the degree of business use. The Court rejected reading in a “non-substantial business use” limitation and relied on Lord Greene MR’s refusal to qualify the statutory text (judgment at [47]). This underpinned the Court’s conclusion that premises may be a dwelling even where residential use is ancillary to business use (judgment at [49], [65]).
Ruddy v Oakfern Properties Ltd [2006] EWCA Civ 1389, [2007] Ch 335: Used to show that service charge protection is “pocket” protection and does not depend on the tenant occupying as a home (judgment at [25]). It also provided support that mixed residential/commercial premises may attract 1985 Act service charge protection (judgment at [45]).

Security of tenure, Part II 1954 Act, and why it did not control section 18

Lane v London Borough of Kensington [2012] EWHC 4185 (QB): Cited to illustrate the separate policy in secure tenancy legislation excluding mixed-use premises where Part II of the 1954 Act applies (judgment at [43]). The Court used this to highlight that section 18 contains no equivalent exclusion.

Contractual construction tools applied to reconcile lease clauses

Levermore v Jobey [1956] 1 WLR 697: Cited for the “practical document” approach to leases and rejecting unrealistically literal readings (judgment at [56]).
Macmillan & Co Ltd v Rees [1946] 1 All ER 675: Used as a contrast where sleeping permission was limited and did not necessarily amount to residential letting; distinguished because this lease permitted “ancillary residential use” (judgment at [59]).
Apache North Sea Ltd v Ineos FPS Ltd [2020] EWHC 2081 (Comm) and William Sindall Plc v Cambridge County Council [1984] 1 WLR 1016: Cited for the principle that general words may be read down to avoid undermining more focused provisions (judgment at [61]).
Esso Petroleum Co Ltd v Addison [2003] EWHC 1730 (Comm) and Johnston & Sons Ltd v Holland [1988] 1 EGLR 264 (CA): Mentioned as part of the “non-derogation from grant” family of reasoning supporting a construction that preserves the core benefit granted (judgment at [61]).

2) Legal Reasoning

(a) Statutory architecture: why section 38 is broad for service charges

The Court began by mapping the 1985 Act’s multiple definitions and switches in emphasis between different Parts: some provisions expressly require premises to be “wholly or mainly” for human habitation (e.g. sections 9B and 16(b) in their respective contexts), while others—critically sections 1 and 18— do not. This mattered because it supported a general interpretive inference: when Parliament intended a predominance-of-residential-use test, it said so; when it did not, the court should not imply it (judgment at [16]–[19]).

The landlord’s argument—that mixed use is excluded unless expressly included—was rejected as reversing that inference and as inconsistent with the Act’s structure, including the role of section 32(1) (which disapplies certain provisions where Part II of the 1954 Act applies). The Court reasoned that if mixed-use lettings were already outside section 38, section 32(1)’s disapplication machinery would have been partly redundant in those contexts (judgment at [18]).

(b) Legislative evolution of service charge protection: deliberate removal of “wholly or mainly”

A key feature of the judgment is its historical explanation of how service charge rights moved from “flats” to “dwellings”:

Early service charge protections (Housing Finance Act 1972; Housing Act 1974; Housing Act 1980) were tied to “flats” and included a use element requiring occupation “wholly or mainly as a private dwelling” (judgment at [20]–[21]).
The Landlord and Tenant Act 1987 amended the 1985 Act by substituting “dwelling” for “flat” in section 18(1), and the earlier “flat” definition (with its “wholly or mainly” requirement) was repealed, leaving section 38’s “dwelling” definition to do the work (judgment at [22]–[23]).

The Court treated this as a strong indicator of legislative choice: if “wholly or mainly” was removed, it should not be resurrected by interpretive technique. This culminated in the Court’s statement that excluding mixed-use where residential use is ancillary would “reinstate” a repealed element of the former “flat” definition (judgment at [49]).

(c) The meaning of “occupied or intended to be occupied as a separate dwelling”

The Court emphasised:

The definition is disjunctive: “occupied” and “intended to be occupied” are alternative limbs (judgment at [28]).
“Separate” primarily addresses physical self-containment (no shared living accommodation), not the exclusivity of residential use (judgment at [27], [29]).
For “intended to be occupied”, the lease terms are often decisive as the objective manifestation of mutual intention, though the unit’s physical configuration remains relevant (judgment at [30]–[32]).

(d) Mixed-use in principle: importing the “extended meaning” line, not Rent Act policy constraints

The Court’s central move was to adopt the “extended meaning” approach from the historic mixed-use dwelling cases (Epsom Grand Stand Association Ltd v Clarke (1919) 35 TLR 525 onward) as the correct guide for section 38 in the service charge context (judgment at [45]).

Tan v Sitkowski [2007] EWCA Civ 30, [2007] 1 WLR 1628 was treated as a context-specific Rent Act decision driven by a legislative policy of excluding mixed-use premises while Part II of the 1954 Act applied. The Court distinguished that policy from the service charge regime, which is designed to regulate reasonableness of variable charges rather than to confer residential security (judgment at [25], [33]–[45]).

The Court’s reliance on Vickery v Martin [1944] KB 679 was pivotal. It rejected any implied threshold test that business use must be insubstantial. Accordingly, even where residential use is truly “ancillary”, mixed-use premises remain “capable of being a dwelling” (judgment at [47]–[49]).

(e) Application to Unit 6: “intended” occupation as a dwelling and reconciling contradictory covenants

On the facts:

The “occupied as a separate dwelling” limb failed because Unit 6 was in use as storage (judgment at [58]).
The case therefore turned on “intended to be occupied as a separate dwelling”, assessed mainly by lease terms (judgment at [59]).

The Court treated “Offices (and ancillary residential use)” as the principal use clause and the apparent residential prohibition in paragraph 16.12 as boiler-plate/optional drafting likely overlooked (judgment at [60], [62]). Applying general principles of contractual interpretation (including the technique of reading down general words to preserve specific grants), the Court held that the lease permitted residential use ancillary to office use and that such residential use “encompasses all residential activities” (judgment at [59]–[63]).

Even if “ancillary” meant subordinate to office use, the Court held this did not prevent Unit 6 from being a “dwelling” under the Vickery doctrine (judgment at [64]–[65]). Factual context arguments (business-centre label; identity of original tenant) were given little weight against the lease terms and the unit’s facilities (kitchen/shower) (judgment at [66]–[67]).

3) Impact

(a) Doctrinal impact: service charge control extends to mixed-use “dwellings” under section 38

The core precedent is that mixed-use premises can be a “dwelling” under section 38 of the 1985 Act for the purposes of section 18 service charge regulation, even where residential use is merely ancillary to business use, provided the premises are self-contained and the objective intention (often derived from the lease) includes residential occupation.

(b) Practical impact: tribunal access for mixed-use long leases

The decision strengthens the ability of tenants under long leases of mixed-use units (e.g., office units with permitted residential use, “shop with living accommodation”, or similar configurations) to invoke the 1985 Act’s service charge controls and obtain determinations in the specialist forum, rather than being shut out by a “business premises” label alone.

(c) Limits carefully preserved: not all “dwelling” protections follow

The Court highlighted that other statutory protections relating to forfeiture for service charge arrears expressly exclude Part II 1954 Act tenancies:

Housing Act 1996, section 81 (via its subsection (4) exclusion) (judgment at [50]).
Commonhold and Leasehold Reform Act 2002, section 167 (via its subsection (4) exclusion) (judgment at [51]).

The impact is therefore nuanced: mixed-use tenants may gain the challenge rights under the 1985 Act, but may not obtain certain ancillary anti-forfeiture protections where Parliament has explicitly carved out business tenancies.

Complex Concepts Simplified

“Service charge” (LTA 1985, s18): A variable amount paid by a tenant for services/maintenance/etc., where the sum depends on the landlord’s costs. The 1985 Act gives tenants routes to challenge whether such costs are reasonably incurred and the works/services are to a reasonable standard.
“Dwelling” (LTA 1985, s38): For this case: a building/part of a building that is occupied or intended to be occupied as a separate dwelling. The Court held this can include mixed-use premises, depending on objective intention and self-contained character.
“Separate dwelling”: Primarily a physical concept: whether the unit is self-contained (no shared living accommodation). It is not a requirement that the unit be used exclusively, or even mainly, for residential purposes unless the relevant statute expressly says so.
“Mixed-use” premises: Premises used for both residential and business purposes (e.g., shop with flat above). The Court held mixed-use does not automatically exclude “dwelling” status for section 18.
“Ancillary residential use”: Residential use that is subordinate to (or supportive of) the principal business use. The Court held that even ancillary residential use can be enough to make premises a “dwelling” for service charge protection.
Part II of the Landlord and Tenant Act 1954: The statutory regime providing business tenants with security of tenure. Some housing protections exclude tenancies where Part II applies, but section 18 of the 1985 Act does not contain such an exclusion.

Conclusion

Cloisters Business Centre Management Company Ltd v Anvari & Anor establishes a clear and practical proposition in service charge law: the 1985 Act’s service charge protections can apply to mixed-use premises because section 38’s definition of “dwelling” is not confined to premises occupied “wholly or mainly” for residential purposes. The Court anchored this in (i) the legislative history removing the “wholly or mainly” test, (ii) the “pocket-protection” policy of the service charge regime, and (iii) the long-standing mixed-use dwelling jurisprudence from Epsom Grand Stand Association Ltd v Clarke (1919) 35 TLR 525 through Vickery v Martin [1944] KB 679.

The case also provides a template for analysis: focus on the unit’s self-containment, the disjunctive “occupied/intended” limbs, and—particularly in mixed-use contexts—the objective intention apparent from the lease, construing apparently conflicting clauses in a way that preserves the principal grant. The result is a broader gateway to tribunal scrutiny of service charges for long-lease tenants of mixed-use units, while leaving intact statutory exclusions where Parliament has expressly denied ancillary protections to business tenancies.