Are service charge proportions amendable?
Can the landlord amend the service charge proportions payable under the lease was the question finally answered by the Supreme Court this month in the long-running case of Aviva v Williams. In the judgment handed down on 8 February 2023, the Supreme Court ruled that a landlord is able to “revise the proportion of the overall costs of maintaining the wider estate that a leaseholder should pay by way of a service charge” where the lease contains a provision enabling that degree of flexibility if changes in circumstances.
The case relates to the long leases of a block of residential flats in Southsea, Hampshire. The wording in each of the leases in question was “ [ ]% or such part as the Landlord may otherwise reasonably determine” therefore specifying a fixed percentage but giving discretion for the landlord to later reassess the service charge.
The leaseholders objected to being charged a higher service charge and brought a claim against the landlord (Aviva) on the basis that “ the re-apportionment was unreasonable and in any event void on account of section 27A(6) of the Landlord and Tenant Act 1985”.
The key issue for the court was section 27A(6).Section 27A provides for disputes to be resolved by application to the First-tier Tribunal (in England or the Leasehold Valuation Tribunal in Wales) giving jurisdiction to the First-tier Tribunal to make a decision as to whether a service charge demanded by a landlord is or would be payable.
The exact scope of the provision was in dispute here though as Section 27A(6) provides that an agreement by a residential tenant “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 subject of an application [to the First-tier Tribunal under section 27A] ”. The court held that “a contractual provision will be void only to the extent it purports to oust the jurisdiction of the Tribunal, for example by making the landlord’s (or some other person’s) decision final and binding, or requiring the Tribunal to presume or ignore certain facts”.
As there was no ousting of the jurisdiction of the First-tier tribunal which was still able to review whether adjustments were reasonable, and it had determined that they were, section 27A(6) was not applicable and therefore the landlords adjustments to the apportionments were valid.
Posted on 03/02/2023 by Ortolan