Supreme Court Provides Clarity the on the Jurisdiction of the First Tier Tribunal

The Supreme Court has today handed down judgment in Aviva Investors Ground Rent GP Limited and another (Respondents) v Williams and others (Appellants) – UKSC 2021/0059.  

This case concerned how far Section 27A of the Landlord and Tenant Act 1985 goes in restraining what would otherwise be the parties’ freedom of contract with respect to service charge apportionment and re-allocation of agreed contribution proportions. 

 

What is Section 27A of the Landlord and Tenant Act 1985? 

Briefly, Section 27A provides that an Application may be made to the Tribunal for a determination whether a service charge or costs are payable, the amount which is payable, and to whom and when payment should be made.  

Section 27A(6) provides that:-   

 

“(6)An agreement by the tenant of a dwelling (other than a post-dispute arbitration agreement) 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 the subject of an application under subsection (1) or (3)”. 

 

What did the Appeal Concern? 

The question on the appeal was how far (if at all) Section 27A(6) restricts the landlord from the re-allocation of originally agreed contribution proportions, and also to decide what the revised apportionment should be.  

This is frequently seen in leases that provide for the tenant to pay a fixed proportion of common costs “or such part as the landlord may otherwise reasonably determine”. 

The primary concern of the Court was that a restrictive approach to Section 27A(6) could have undesirable consequences. One of these being that a landlord would never safely be able to incur costs without first seeking a decision of the First-tier Tribunal as to whether those could be charged to its tenants. This could lead to a flood of applications that would overwhelm the tribunal system. 

 

What did the Supreme Court decide? 

In this case, the Court was satisfied that the mechanism for the landlord to adjust the proportions of the leaseholders’ service charges did not immediately engage the jurisdiction of the First-tier Tribunal under Section 27A(6).  

The Tribunal was still able to review whether the adjustments were reasonable, as was required by the leases, and the Tribunal had determined that the apportionments were reasonable.  

 

Why is this important for Landlords? 

This is a welcome decision for Landlords and managing agents as reapportionment in accordance with the contractual machinery will not immediately engage the FTT and will narrow the scope for disputes about apportionment of service charges. 

A link to the full judgment can be found here: Aviva Investors Ground Rent GP Limited and another (Respondents) v Williams and others (Appellants) – UKSC 2021/0059. 

Should you have any queries please contact Andy Moore, Partner and Head of Leasehold and Anti-Social Behaviour (Social Housing) on andymoore@msbsolicitors.co.uk. 

 

Law is correct as at 8th February 2022 

 

Whilst every effort has been taken to ensure that the law in this article is correct, it is intended to give a general overview of the law for educational purposes. You are respectfully reminded that it is not intended to be a substitute for specific legal advice and should not be relied upon as legal advice. No liability is accepted for any error or omission contained herein.