Aviva Investors Ground Rent GP Ltd and another v Williams and others

Section 27A(6) of the Landlord and Tenant Act 1985 protects the tribunal’s jurisdiction to determine whether residential service charges are contractually and statutorily payable. It does not enlarge that jurisdiction by transferring landlords’ discretionary management functions to the tribunal.

A lease may therefore authorise a landlord to make reasonable decisions affecting service charges, including decisions about apportionment. The tribunal reviews the contractual and statutory legitimacy of such decisions rather than remaking them. A contractual term is ineffective only so far as it prescribes how the tribunal must determine a question already within its jurisdiction, as where it makes another person’s decision final and binding.

Residential leases prescribed fixed percentages for each tenant’s contribution to insurance, building-services and estate-services costs, while permitting the landlords reasonably to determine a different apportionment. The landlords demanded service charges based on revised percentages. The tenants contended that the re-apportionment power was void under section 27A(6) of the Landlord and Tenant Act 1985, alternatively that its exercise was unreasonable.

The First-tier Tribunal upheld the power and found the re-apportionment reasonable. The Upper Tribunal held the entire re-apportionment provision void. The Court of Appeal, in [2021] EWCA Civ 27, held that the power was void only so far as it belonged exclusively to the landlord and substituted a power for either party to seek re-apportionment by the tribunal.

The Supreme Court considered whether section 27A(6) invalidated a contractual power enabling a landlord reasonably to vary the allocation of service charges.

1. The tenants’ appeal was dismissed unanimously. Lord Briggs, with whom Lord Reed, Lord Kitchin, Lord Sales and Lord Richards agreed, held that section 27A(6) of the Landlord and Tenant Act 1985 did not invalidate the landlords’ re-apportionment power. The decision and reasoning of the First-tier Tribunal were restored.

2. Section 27A(1) and (3) confer jurisdiction to determine the contractual and statutory legitimacy of actual or prospective service charges. They do not confer an original management jurisdiction enabling the tribunal to make decisions which the lease entrusts, expressly or by necessary implication, to the landlord. Such decisions include what work to undertake, whom to employ, the price to accept and how to apportion costs. The tribunal may review a decision for compliance with the lease, the statutory service-charge regime and, where appropriate, rationality under Braganza v BP Shipping Ltd [2015] UKSC 17.

3. Section 27A(6) is an anti-avoidance provision. It protects the jurisdiction already conferred by section 27A(1) and (3), but does not enlarge it. Construing it as transferring landlords’ discretionary functions to the tribunal would impose an unintended administrative burden, create uncertainty before costs were incurred and radically alter contractual bargains.

4. A lease term must be ignored so far as it directs that a question already within the tribunal’s jurisdiction be determined in a particular manner or on particular evidence. This includes a provision making the decision of a landlord or another person final and binding, and a pre-dispute arbitration clause which disables recourse to the tribunal. The tribunal may then determine the tenant’s application without blue-pencilling or reconstructing the lease.

5. Oliver v Sheffield City Council [2017] EWCA Civ 225, Windermere Marina Village Ltd v Wild [2014] UKUT 163 (LC) and Gater v Wellington Real Estate Ltd [2014] UKUT 561 (LC) were wrongly decided to the extent that they treated a contractual power to decide a discretionary service-charge matter as displaced by section 27A(6), leaving the tribunal free to remake the decision.

6. The leases authorised the landlords both to trigger re-apportionment and reasonably to decide the revised proportions. The original management questions were not questions for the tribunal under section 27A(6). Its question was whether the re-apportionment was contractually and statutorily legitimate. Since the First-tier Tribunal found that the landlords acted reasonably and no other statutory breach was alleged, the re-apportionment was effective.

1. United Kingdom Supreme Court: Dismissed the tenants’ appeal and restored the decision and reasoning of the First-tier Tribunal.

2. Court of Appeal: In [2021] EWCA Civ 27; [2021] 1 WLR 2061, held that the provision was void so far as only the landlord could exercise the re-apportionment power, but that either party could apply to the First-tier Tribunal for re-apportionment.

3. Upper Tribunal (Lands Chamber): Held the whole re-apportionment provision void, leaving the fixed percentages unchanged unless the parties agreed otherwise.

4. First-tier Tribunal (Property Chamber): Held that section 27A(6) of the Landlord and Tenant Act 1985 did not invalidate the landlords’ power because tenants could challenge its reasonableness. It found the re-apportionment reasonable and upheld it.