The Court of Appeal has given judgment in an important case concerning the effect of Landlord and Tenant Act 1985, s.27A(6) on service charge apportionment provisions in residential long leases.
Section 27A(6) provides that an agreement is void insofar as it purports to provide for a determination in a particular manner or on particular evidence of any question which may be the subject of an application to the First-tier Tribunal under s.27A(1).
It has been previously held that, where a lease does not fix the proportion payable by each leaseholder as a service charge, but instead leaves it to the landlord to determine the apportionment, then such a provision is void as a result of s.27A(6). The tribunal can then step in and determine what proportion each leaseholder should pay.
In this case, the leases provided for each lessee to pay an identified percentage “or such part as the Landlord may otherwise reasonably determine”.
The landlord argued that this meant that the landlord could propose a change from the fixed percentages, which would then be for the tribunal to rule on. The lessees argued that this part of the lease was struck out so that only the specified percentages could be relied on, but that if it was possible to propose different percentages this could be done by any lessee as well as by the landlord.
The Court of Appeal gave guidance as to how such clauses should be approached. All that was necessary to comply with s.27A(6) was to deprive the landlord of its role in making the determination that a new percentage had to apply. Either the landlord or any lessee could refer the question of a different percentage to the tribunal if it could not be agreed.
The full judgment can be found here.
James Sandham and Robert Brown acted on behalf of the respondents. They will be hosting a webinar to discuss this case and service charge apportionment on 22 January 2021 at 11.00am. For further details or to book a place to attend please contact: email@example.com.