Factual and Procedural Background
The Appellant, Plaintiff, owns a flat in a development known as The Development located in The City. The leases for the flats and houses in the development require payment of service charges. Plaintiff purchased his lease in April 2018 and paid all service charges claimed by Defendant, Company A, until April 2021, totaling £4,725.
In February 2021, Plaintiff applied to the First-tier Tribunal (Property Chamber) under section 27A of the Landlord and Tenant Act 1985 to determine whether the service charges paid were properly due under his lease. The Tribunal issued a decision on 30 November 2021, later re-issued with additional reasoning on 12 April 2022, confirming the charges were due and dismissing Plaintiff's criticisms regarding the information and calculation of charges.
Plaintiff sought permission to appeal on several grounds, which was refused. The only remaining issue, for which permission to appeal was granted, concerned the role of Company A’s surveyor in determining the apportionment of service charges between flats and houses in the development. The appeal was determined on written representations.
The lease terms granted the surveyor the power to amend the “Specified Proportion” used to calculate the service charge. However, the lease’s drafting resulted in the Specified Proportion being a fixed sum subject to annual adjustment by the surveyor, effectively making the surveyor responsible for determining the service charge each year. The surveyor’s approach, practiced for over 13 years, apportioned costs between flats and houses based on benefit derived, with some costs shared by all properties and others charged only to flat owners.
Legal Issues Presented
- Whether section 27A(6) of the Landlord and Tenant Act 1985 voids the role of the landlord’s surveyor in determining the apportionment of service charges.
- Whether the surveyor’s apportionment method is irrational and thus invalid.
- The scope of the First-tier Tribunal’s jurisdiction under sections 27A(1) and (3) in relation to service charge disputes involving apportionment.
Arguments of the Parties
Appellant's Arguments
- Section 27A(6) deprives the surveyor of any function in determining the apportionment of service charges, making it the Tribunal’s role to determine the Specified Proportion each year.
- The surveyor’s apportionment method is irrational, inaccurate, and unclear.
- The lease does not authorize the surveyor to apportion some expenditure only to flat leaseholders and other expenditure to all leaseholders; all leaseholders should contribute equally to all services.
- Because the apportionment is irrational and not contractually valid, service charges based on it are invalid, and demands issued by Company A should be refunded.
Respondent's Arguments
- Section 27A(6) does not apply to the surveyor’s role; the surveyor is entitled to determine the Specified Proportion.
- The Tribunal’s role is to assess whether the surveyor’s opinion is rational; if so, the Tribunal should uphold it.
- The surveyor’s apportionment method is reasonable as it reflects the benefits enjoyed by different leaseholders and complies with the lease terms.
- The Tribunal correctly dismissed Plaintiff’s criticisms and upheld the service charges.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Aviva Ground Rent Investors GP Ltd v Williams [2023] UKSC 6 |
Interpretation of section 27A(6) of the Landlord and Tenant Act 1985 regarding the voiding of agreements that oust Tribunal jurisdiction. |
The Supreme Court took a narrow view of the Tribunal’s jurisdiction, holding that section 27A(6) does not expand Tribunal jurisdiction to discretionary management decisions such as apportionment by the landlord’s surveyor. |
| Braganza v BP Shipping Ltd [2015] UKSC 17 |
Standard for reviewing a contractual decision-maker’s discretion: rationality review. |
The Court applied the rationality test to the surveyor’s apportionment, concluding the Tribunal should uphold the decision unless it was irrational, capricious, or made in bad faith. |
| Southwark LBC v Woelke [2013] UKUT 349 (LC) |
Apportionment of service charges by landlord’s surveyor is generally a matter for the surveyor, not the court, provided the decision is reasonable. |
The Tribunal initially applied this principle, upholding the surveyor’s apportionment as rational and fair. |
| Windermere Marina Village Ltd v Wild [2014] UKUT 163 (LC) |
Section 27A(6) voids clauses that oust Tribunal jurisdiction by making landlord’s surveyor’s apportionment final and binding. |
Plaintiff relied on this authority to argue the surveyor’s role was void, but the Supreme Court in Aviva later clarified the limits of section 27A(6). |
| Oliver v Sheffield City Council [2017] EWCA Civ 225 |
Court of Appeal’s interpretation of section 27A(6) restricting landlord’s ability to vary fixed percentages. |
Referenced as part of the line of authority overturned by the Supreme Court in Aviva. |
| Hayes v Willoughby [2013] UKSC 17 |
Distinction between rationality and reasonableness in reviewing decisions. |
Used to explain the rationality standard applied to the surveyor’s discretionary apportionment. |
| London Borough of Brent v Shulem B Association Limited [2011] EWHC 1663 (Ch) |
Identification of the issue that section 27A(6) may void agreements ousting Tribunal jurisdiction over apportionment. |
Considered but not decided; cited as background to the issue. |
Court's Reasoning and Analysis
The Court began by reviewing the legislative framework, particularly section 27A(6) of the Landlord and Tenant Act 1985, which voids agreements that purport to determine disputed service charge questions in a particular manner or on particular evidence, thus protecting the Tribunal’s jurisdiction.
The Court considered the Supreme Court’s decision in Aviva, which provided definitive guidance on the scope of Tribunal jurisdiction and the effect of section 27A(6). Aviva held that the Tribunal’s jurisdiction is limited to questions of contractual entitlement and statutory regulation and does not extend to making discretionary management decisions for the first time, such as apportionment decisions typically made by landlords or their surveyors.
The Court analysed the lease provisions, noting that the Specified Proportion was drafted as a fixed sum subject to annual adjustment by the landlord’s surveyor, effectively making the surveyor responsible for determining the service charge amount each year. The Court found that although the lease’s drafting was imperfect, the surveyor’s role was authorized and the method of apportionment was rational.
The Tribunal’s original decision, made before Aviva reached the Supreme Court, had upheld the surveyor’s apportionment as rational and fair, relying on prior authority that the surveyor’s decision should be respected unless irrational. The Tribunal’s subsequent amended decision, influenced by the Court of Appeal’s then-prevailing view in Aviva, incorrectly assumed the Tribunal should decide the apportionment itself. The Supreme Court’s later ruling in Aviva reversed the Court of Appeal’s approach, confirming the original Tribunal approach was correct.
The Court applied the rationality test from Braganza v BP Shipping Ltd to the surveyor’s apportionment, concluding it was made in good faith, was not arbitrary or capricious, and took into account relevant considerations such as differing benefits to flats and houses. The Court rejected Plaintiff’s argument that the lease did not authorize differential apportionment.
Since the Tribunal’s original decision was correct in outcome and based on the proper legal approach, the Court found no reason to interfere with the Tribunal’s determination that the service charges were payable in full by Plaintiff. The Court also dismissed Plaintiff’s late arguments regarding refund of charges and surveyor’s irrationality, as these were either not permitted grounds of appeal or unsupported.
Holding and Implications
The appeal is DISMISSED.
The Court upheld the First-tier Tribunal’s original decision that the service charges demanded by Company A were properly payable by Plaintiff in full. The Court confirmed that the landlord’s surveyor’s role in apportioning service charges, as authorized by the lease, is not void under section 27A(6) of the Landlord and Tenant Act 1985, provided the apportionment is rational.
The decision clarifies the limited scope of the Tribunal’s jurisdiction post-Aviva, emphasizing that the Tribunal does not make discretionary management decisions but reviews them for rationality. No new precedent was set beyond applying existing Supreme Court authority. Plaintiff’s application for reimbursement of tribunal fees was refused.