Oakfern Properties Ltd v Ruddy

A tenant remains a “tenant of a dwelling” for the service-charge provisions of the Landlord and Tenant Act 1985 even though the same lease also includes other dwellings, common parts or commercial property. The statutory protection does not require the tenant to occupy the dwelling personally.

Section 27A imposes no restriction requiring an applicant to be the person directly liable to the superior landlord. A subtenant bearing the charge indirectly may seek a tribunal determination against that landlord. Vexatious or abusive applications should be controlled through the tribunal’s procedural powers, rather than by implying a restriction into the section.

The freeholder of a building let its residential upper floors, comprising 24 flats and common parts, to a headlessee. Each flat was sublet. The respondent subtenant bore one twenty-fourth of the maintenance charge which the headlessee was required to pay to the freeholder.

The subtenant applied to the Leasehold Valuation Tribunal to challenge the reasonableness of charges for three years. The tribunal held that the maintenance charge was a service charge under section 18 of the Landlord and Tenant Act 1985 and that section 27A gave it jurisdiction. The Lands Tribunal upheld both conclusions.

The freeholder’s appeal raised whether a headlessee of several dwellings and common parts was a “tenant of a dwelling”, and whether a subtenant not directly liable to the freeholder could make the section 27A application.

1. Appeal dismissed. Jonathan Parker LJ, with whom Moses and Pill LJJ agreed, held that the headlessee was a “tenant of a dwelling” within section 18(1) of the Landlord and Tenant Act 1985. The maintenance charge was therefore capable of being a statutory service charge.

2. The definition of “dwelling” in section 38 includes a building or part of a building occupied or intended to be occupied as a separate dwelling. It does not require the tenant personally to occupy that dwelling and can therefore include a mesne landlord. A tenant of a separately identifiable dwelling does not cease to satisfy the definition merely because the same lease includes other dwellings, common parts or commercial property. Section 18 refers to a tenant of a dwelling, not to a tenant of a dwelling and nothing else.

3. The different wording in section 3, which refers to premises that “consist of or include” a dwelling, did not compel a narrower construction of section 18. The two provisions operate in different statutory contexts. Variations of expression within the statutory scheme did not justify displacing the ordinary meaning of section 18.

4. Horford Investments Ltd v Lambert [1976] 1 Ch 39 was distinguishable. Its conclusion that a tenancy of a block of flats fell outside Rent Act protection was materially influenced by the Rent Acts’ policy of protecting occupiers in their homes. The service-charge legislation instead provides a means of challenging unreasonable charges. The reasoning in Heron Maple House Ltd v Central Estates Ltd [2002] 1 EGLR 35 was applied.

5. Section 27A contains entirely general words and gives no justification for implying that only the person directly liable for the service charge may apply. A subtenant who bears the expense indirectly may challenge the charge against the superior landlord. Possible interference by strangers or abusive applicants is adequately controlled by the tribunal’s powers to regulate proceedings and strike out vexatious or abusive applications.

1. Court of Appeal (Civil Division): The freeholder’s appeal was dismissed. The court affirmed the decisions on both the service-charge and jurisdiction issues: [2006] EWCA Civ 1389.

2. Lands Tribunal: By a decision promulgated on 9 February 2006, His Honour Michael Rich QC upheld the Leasehold Valuation Tribunal on both live issues.

3. Leasehold Valuation Tribunal: By a decision promulgated on 15 July 2005, the tribunal held that the maintenance charge was a service charge under section 18 of the Landlord and Tenant Act 1985 and that section 27A gave it jurisdiction to determine the subtenant’s application.