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Aviva Investors’ Ground Rents v Williams

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8th February 2023

Aviva Investors Ground Rent GP Ltd & anor v Williams & Ors [2023] UKSC 6

The Supreme Court handed down its judgment on 8 February 2023 in this important case concerning service charges payable under residential long leases.

Philip Rainey KC appeared pro bono for the leaseholders in this appeal to the Supreme Court, the judgment “…recording the court’s appreciation for the commitment of Mr Rainey KC, Mr Sandham and Mr Brown to conduct this appeal for the tenants pro bono… the fairness and quality of their skilled contribution was greatly appreciated.”

The appeal concerned service charges payable under residential long-leases and turned on the interpretation of an anti-avoidance provision in s.27A(6) of the Landlord and Tenant Act 1985.  S.27A(6) provides: “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 [to the First-tier Tribunal].”

The leases in this case provided for leaseholders to pay a fixed service charge percentage but further conferred a power on the landlord to vary the service charge percentages.  It was expressed as follows: “your share of the…costs is x% or such part as the Landlord may otherwise reasonably determine”.

The landlord exercised the reapportionment power.

Relying on an existing line of cases – Windermere Marina v Wild [2014] UKUT 163 (LC); Gater v Wellington [2014] UKUT 561 (LC) and Oliver v Sheffield CC [2017] EWCA Civ 225 – the leaseholders argued that, to give effect to s.27A(6), it was necessary that the provision allowing for reapportionment was to be struck down, because it provided for the landlord to make the determination – thus a “…determination in a particular manner”….

The FTT disagreed and (having reviewed for reasonableness) upheld the landlord’s reapportionment.

The Upper Tribunal agreed with the leaseholders and held that the reapportionment provision was void by reason of s.27A(6).

The Court of Appeal reversed the Upper Tribunal, but held that s.27A(6) did operate to avoid that part of the reapportionment clause which provided a role for the landlord.  The effect was twofold: that any lessee could require a reapportionment and that the tribunal would determine the apportionment for itself (not simply a review).

The Supreme Court disagreed with both the Court of Appeal and the Upper Tribunal and restored the decision and reasoning of the FTT.  The Supreme Court accepted that the role of the tribunals is in general a review of the landlord’s decision, both as to whether sums are contractually due and whether costs are reasonably incurred (1985 Act section 19).  Section 27A(6) was held not to cut across this principle.  Thus, it did not abrogate the landlord’s role in deciding whether to reapportion and what the reapportionment should be.  On the facts, it did not convert the landlord’s power to reapportion into a multilateral right for any lessee to seek a reapportionment from the tribunal.

The FTT’s role was to decide whether the landlord’s decision was within its contractual discretion and whether the outcome was reasonable.  To the extent that they decide otherwise, the Supreme Court held that Windermere, Gater and Oliver are wrongly decided.

The effect of the Supreme  Court’s decision is that that s.27A(6) will strike down clauses (still found in some leases) which say (for example) that the landlord’s decision is final and binding or can only be challenged if there is a manifest error.  But it does not have a wider effect and does not transfer landlord’s discretionary decision-making powers to the tribunal.

Philip Rainey KC appeared pro bono (with James Sandham and Robert Brown of Selborne) instructed by Janice Northover of Northover Litigation.

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