Aviva Investors Ground Rent GP Ltd and another v Williams and others [2023] UKSC 6

Residential tenants challenged their landlord's contractual power to re-apportion service charges, arguing section 27A(6) of the Landlord and Tenant Act 1985 rendered such provisions void. The Supreme Court held that section 27A(6) only protects the tribunal's jurisdiction to review decisions for contractual and statutory legitimacy, not to replace landlords' discretionary management decisions.

Facts

The case concerned residential leases of units in a building in Southsea, Hampshire. The leases contained provisions allowing the landlord to apportion service charges between tenants at fixed percentages ‘or such part as the Landlord may otherwise reasonably determine’. The landlord demanded service charges based on an apportionment different from the numerically stated percentages, resulting in higher charges for some tenants including Mr Williams (lessee of flat 64).

Procedural History

The tenants challenged the re-apportionment before the First-tier Tribunal (FtT), which held the landlord’s power was not avoided by section 27A(6) and that the re-apportionment was reasonable. The Upper Tribunal held the entire re-apportionment provision void, leaving only fixed percentages. The Court of Appeal held the provision void only insofar as it gave the landlord sole power, but substituted jurisdiction to the FtT for either party to apply for re-apportionment.

Issues

The central issue was the proper construction of section 27A(6) of the Landlord and Tenant Act 1985: does it render void contractual provisions conferring discretionary management powers on landlords regarding service charges, thereby transferring such decision-making to the tribunal?

Judgment

Lord Briggs, delivering the unanimous judgment, held that section 27A(6) does not extend the FtT’s jurisdiction to make discretionary management decisions that would otherwise fall to the landlord. The provision is an anti-avoidance measure protecting the tribunal’s existing jurisdiction to review service charge demands for contractual and statutory legitimacy.

“It is not lightly to be assumed that an anti-avoidance provision of this kind is intended to operate so as actually to extend the jurisdiction which it is seeking to protect. Ordinarily it should be construed, if it sensibly can, as leaving the scope of the protected jurisdiction where it already is.”

Lord Briggs explained that the construction adopted in previous cases would produce bizarre and unintended results:

“If subsection (6) first renders void and then transfers to the FtT the landlord’s discretionary management powers, then it is hard to see how a landlord could ever safely incur relevant costs without first making an application to the FtT for clearance of proposed service charges under subsection (3).”

Overruling Previous Authority

The Court acknowledged, with Lord Briggs expressing ’embarrassment and contrition’, that this analysis could not be reconciled with Oliver v Sheffield City Council and related cases. Lord Briggs concluded:

“I have come to the conclusion that to allow subsection (6) to enlarge in that way the nature and type of questions before the FtT under section 27A(1) and (3) is to put the anti-avoidance cart before the jurisdictional horse.”

Implications

This decision clarifies that landlords retain their contractual discretionary management powers over service charges, subject only to review by the FtT for contractual and statutory legitimacy, including rationality review under Braganza principles. Section 27A(6) prevents contractual terms making landlord decisions ‘final and binding’ but does not transfer decision-making power to the tribunal. The decision provides greater certainty for landlords managing residential properties and corrects what was described as an unsustainable interpretation that would have overwhelmed the tribunal with administrative decisions.

Verdict: Appeal dismissed. The decision and reasoning of the First-tier Tribunal was restored, confirming that the landlord’s contractual power to re-apportion service charges was not rendered void by section 27A(6) of the Landlord and Tenant Act 1985, and the re-apportionment made by the landlord was reasonable.

Source: Aviva Investors Ground Rent GP Ltd and another v Williams and others [2023] UKSC 6