Aviva Investors Ground Rent GP LTd & Anor v Williams & Ors

Section 27A(6) of the Landlord and Tenant Act 1985 invalidates only the part of a residential lease which assigns to the landlord or another third party the determination of a service-charge question within the tribunal’s jurisdiction. It does not necessarily remove the underlying contractual obligation or apportionment formula. The lease should be read, so far as necessary, with the decision-making role transferred to the First-tier Tribunal. The court must preserve a workable agreement and focus on substance rather than drafting form. Where a different reasonable percentage cannot be agreed, either party may refer the issue to the tribunal.

The appellants were landlords of flats in a mixed residential and commercial development. The leases specified percentages for insurance, building services and estate costs, but also allowed the landlord reasonably to determine a different percentage.

The First-tier Tribunal reached a decision which was reversed by the Upper Tribunal. The Upper Tribunal held that the alternative wording was void and that the tenants were bound by the fixed percentages: [2020] UKUT 0111 (LC). The central issue was whether section 27A(6) invalidated the whole alternative mechanism or only the landlord’s role in determining the percentage.

1. Disposition. Lewison LJ gave the judgment, with Males LJ and Rose LJ agreeing. The appeal was allowed and the decision of the First-tier Tribunal was restored.
2. Construction of section 27A(6). Section 27A(6) of the Landlord and Tenant Act 1985 is directed to preventing the landlord or another third party from determining a question which may be referred to the First-tier Tribunal. It does not require the court to remove more of the contractual machinery than is necessary. The underlying obligation to pay a reasonable proportion, or the agreed formula for calculating it, may remain operative. The relevant authorities included Windermere Marina Village Ltd v Wild [2014] UKUT 163 (LC), Gater v Wellington Real Estate Ltd [2014] UKUT 561 (LC), Oliver v Sheffield City Council [2017] EWCA Civ 225 and Fairman v Cinnamon (Plantation Wharf) Ltd [2018] UKUT 421 (LC).
3. Method of severance. The court adopted a balanced approach to statutory anti-avoidance provisions. The offending part should be neutralised while preserving a workable agreement. Common-law blue-pencil principles were not controlling. The proper focus was the effect and enforceability of the provision, rather than its language or form. The approach was supported by Tindall Cobham 1 Ltd v Adda Hotels [2014] EWCA Civ 1215 and Sutherland v Network Appliance Ltd [2001] IRLR 12.
4. Application. In the present leases, only the provision making the landlord the decision-maker was invalidated. The leases were therefore read as providing for the fixed percentage or such other reasonable percentage as the First-tier Tribunal might determine. If the parties could not agree, either the landlord or the lessee could refer the question to the tribunal. The separate variation procedure under section 35 of the Landlord and Tenant Act 1987 did not alter that conclusion.

• Court of Appeal (Civil Division): Allowed the appeal and restored the First-tier Tribunal’s decision.
• Upper Tribunal (Land Chamber): Reversed the First-tier Tribunal and held that the alternative landlord-determined wording was void, leaving the fixed percentages operative: [2020] UKUT 0111 (LC).
• First-tier Tribunal: Its decision was restored by the Court of Appeal.