Service Charges: Whether a landlord’s surveyor had jurisdiction to vary the service charge apportionments payable under a lease (Braganza v The Riverside Group Ltd – 2023)

The Upper Tribunal considers an appeal against a decision made in the First-tier Tribunal  whereby service charges were deemed to be payable in full following a claim by the leaseholder that the method of apportionment was unfair, and that the surveyor did not have jurisdiction to determine the apportionments payable.

The background

In Braganza v The Riverside Group Ltd [2023] the appellant owned a long lease of a flat on a development comprising residential flats and houses. All units were let on long leases, under which all leaseholders covenanted to pay a service charge.

The landlord made service charge demands, calculated as per the requirements of cl.7 of the lease and paid by the appellant up to April 2021. The appellant made an application to the First-tier Tribunal in February 2021 for a determination as to whether the service charges paid had been properly due on the grounds that the apportionment method used by the landlord’s surveyor was not ‘rational, accurate or clear’. The FTT determined that the surveyor’s apportionment was fair and reasonable, and the charges were payable.

The FTT found that the surveyor had not been required to consider any other reasonable methods which may have been available, dismissing the appellant’s claims regarding the supply of information and the method used to calculate and demand service charges.

The appellant’s lease stated at cl.7(8) that:

“(a) If in the reasonable opinion of the Surveyor it shall at any time become necessary or equitable to do so he may increase or decrease the Specified Proportion;

(b) The Specified Proportion increased or decreased in accordance with sub-clause 7(7) hereof shall be endorsed on this Underlease ad shall be substituted for the Specified Proportion set out in the Particulars of this Underlease.”

In his appeal, which challenged the role of the surveyor in determining the apportionments of service charges paid by the leaseholders of flats and houses at the development, the appellant leaseholder relied on the provisions of the Landlord and Tenant Act 1985 s.27A(6) which states that any agreement by the leaseholder is void where it provides for a determination of a question which may be the subject of an application under s.27A. The appellant argued that the effect of this provision rendered cl.7(8) of the lease void, denying the surveyor of the ability to determine the service charge proportions, which was the role of the FTT.

The decision

The Upper Tribunal dismissed the leaseholder’s appeal, finding in favour of the landlord and agreeing with the FTT that the surveyor’s apportionment, including the method of apportionment, had been fair and rational.

The appellant argued that the lease provisions were overridden by the LTA 1985 s.27A(6), meaning that apportionment was a matter for the FTT and not the surveyor.

Referencing the Supreme Court’s decision in Aviva Investors Ground Rent GP Ltd and another v Williams and others [2023], which addressed how s.27A96) of the LTA 1985 should function, the UT stated that the FTT’s jurisdiction extended to determination as to the legitimacy of a landlord’s discretionary management decisions, but the FTT would not make such decisions itself.

In the FTT, the surveyor’s decision was found to be fair and rational, and the FTT concluded that the method of apportionment used by the surveyor was the method it would have chosen to use itself. The UT agreed with this decision; Aviva states that the FTT need only consider whether the decision made by the surveyor was rational. Other than where the decision was not made in good faith, with full consideration of relevant matters or had been made arbitrarily or capriciously, the FTT was to apply the decision.

The apportionment was found to be rational. The surveyor had considered that leaseholders of flats made more use of common parts of blocks of flats, and that the landlord was responsible for the repair and maintenance of structural parts of the flats, unlike the leaseholders of houses. These were appropriate considerations when determining the apportionment of service charge.

In their leases, the leaseholders agreed proportions based on a sum of money, which the surveyor had the jurisdiction to vary. The UT agreed with the FTT that apportionment of service charge had been made as per the lease terms, and that the surveyor had not acted unfairly or unreasonably.

Advice and action for landlords

This decision follows the Supreme Court’s review of Aviva, where in both instances the jurisdiction of the FTT was in question.

The lease terms expressly permitted the landlord’s surveyor to vary the apportionments of service charge payable and, where the surveyor acts rationally and fairly, this right is not overridden by the provisions of the LTA 1985. In this case, the landlord’s surveyor had used a reasonable method of apportionment and the UT found that the FTT was right to find no reason to substitute it.