Sheffield City Council v Oliver

When a residential lease permits recovery of a fair proportion of repair or improvement costs, it should be construed, where possible, to prevent the landlord recovering the same cost twice. Third-party contributions connected with the works must therefore be reflected in the fair apportionment, even though the landlord may have incurred the contractor’s liability in full. The rateable-value formula is a starting point, not necessarily the complete exercise. The tribunal may adjust it to secure a fair proportion or reasonable part of the costs. A lease provision giving the landlord or its officer responsibility for determining the proportion is void under section 27A(6) of the Landlord and Tenant Act 1985, whether or not the determination is final and binding. The appeal was dismissed because the Upper Tribunal’s apportionment fell within the range of fair outcomes.

Sheffield City Council charged Hazel St Clare Oliver, a long leaseholder, for refurbishment works to her maisonette and the surrounding estate. The Council had received funding from NPower under the Community Energy Savings Programme, including sums attributable to works at the property, but did not credit those sums against the service charge.

The Leasehold Valuation Tribunal largely upheld the recoverability of the works. On appeal, the Upper Tribunal allowed deductions for relevant CESP funding in its main decision, [2015] UKUT 0229 (LC), and quantified them in an addendum, [2015] UKUT 0494 (LC). The Council appealed. The central issues were whether the funding reduced costs incurred under the lease and whether the tribunal could determine a fair apportionment afresh.

1. Disposition. The appeal was dismissed. All three members of the Court agreed that the monetary outcome reached by the Upper Tribunal should stand.
2. Construction of the Lease. Briggs LJ held that reasonable parties could not sensibly have intended the service-charge provisions to permit double recovery. That principle applies to contributions from insurers, contractors, wrongdoers and other third parties, as well as CESP funding. Section 20A of the Landlord and Tenant Act 1985 did not imply that double recovery was otherwise permitted; it could operate as belt and braces protection where the lease was insufficient.
3. The preferred route was fair apportionment under paragraph 1 of Part III of the Schedule. The rateable-value comparison was a starting point, leaving room for adjustments necessary to achieve a fair proportion or reasonable part of the relevant costs. Briggs LJ rejected a special meaning of incurred: a landlord may incur a contractual liability to its contractor even if it later recoups money from a third party. The same result was achieved through fair apportionment. Lewison LJ preferred treating actual costs as those ultimately leaving the landlord out of pocket, while Longmore LJ preferred fair apportionment.
4. Statutory jurisdiction. The Court followed Windermere Marina Village Limited v Wild [2014] UKUT 0163(LC) and Gater v Wellington Real Estate Limited [2014] UKUT 0561(LC). Under section 27A(6), a lease term requiring a landlord, surveyor or officer to determine the fair proportion in a particular manner is void, whether or not it is expressed to be final and binding. The tribunal must determine the fair proportion itself and need not first find the landlord’s apportionment unfair. A fixed result produced by an agreed formula remains distinguishable under section 27A(4)(a).
5. The relevant CESP amount was deducted from the cladding charge. No deduction was made for the boiler or radiator valves because those costs had not been charged to Ms Oliver. No area bonus was deducted because its connection with the property was too remote. The 50 per cent deduction for the whole-house bonus was within the range of fair outcomes available to the Upper Tribunal, so the Court did not interfere.

• Court of Appeal (Civil Division): dismissed the Council’s appeal against the Upper Tribunal’s service-charge determination.
• Upper Tribunal (Lands Chamber): on Ms Oliver’s appeal from the Leasehold Valuation Tribunal, resolved the CESP-funding issue in her favour in the main decision, [2015] UKUT 0229 (LC), and quantified the deductions in the addendum, [2015] UKUT 0494 (LC).
• Leasehold Valuation Tribunal for the Northern Rent Assessment Panel: largely upheld the recoverability of the Council’s proposed refurbishment service charges, subject to one minor item.