Yesterday the Supreme Court heard the case of Aviva Investors Ground Rent GP Ltd and another v Williams and others, an important case in relation to the mechanism of determining a leaseholder’s share of service charges under their lease.
It is not uncommon for a long residential lease to allow the landlord, or the landlord’s surveyor, to change the proportion of the service charge payable by the leaseholder. This type of provision has been the subject of a number of previous decisions, which have determined that any clause in a lease which seeks to exclude the Tribunal’s jurisdiction, under section 27A of the Landlord and Tenant Act 1985 to determine the amount and manner of service charges which are payable, will be void.
In the Aviva case, the leaseholders had to pay a fixed percentage “or such part as the Landlord may otherwise reasonably determine”. The Upper Tribunal determined that this entire part of the lease was void and therefore the parties were restricted to the fixed percentages contained in the leases. The Court of Appeal disagreed and determined that the Tribunal would retain the ability to determine an alternate reasonable percentage. The Court of Appeal also decided that it was possible for either a leaseholder or the landlord to refer such a matter to the Tribunal for determination.
The Supreme Court is now considering the position and it will be interesting to see whether they agree with the Court of Appeal’s determination as this will provide helpful clarity to both leaseholders and landlords alike.
"In my judgment the lease should be read as if it had provided for the fixed percentage “or such part as … may otherwise reasonably determine.” If further slight linguistic adjustment is needed to make grammatical sense, so be it. On that reading, there is a vacuum to be filled, and it is filled by the FTT. Accordingly, the function of making that determination is... transferred from the landlord to the FTT." Lord Justice Lewison
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