Firstport Property Services Limited v Various Leaseholders of Switch House

An order under section 20C is not a routine consequence of leaseholders achieving some success in service-charge proceedings. The tribunal must decide what is just and equitable, while giving proper weight to the landlord's contractual right to recover its costs through the service charge.

The discretion cannot be used to punish a landlord or management company for a lease breach unconnected with the issues in the proceedings. A breach causing no proven loss was irrelevant to the reasonableness dispute and could not justify the order. A trivial reduction in the challenged charges, without more, was also insufficient.

An order may benefit only tenants specified in the application, unless non-party tenants have authorised or consented to an application on their behalf.

Fourteen leaseholders applied to the First-tier Tribunal for a determination of the reasonableness and payability of major-works service charges. Their principal challenge failed, although the Tribunal reduced the charges by £3,161.85, including a 50% reduction of a £5,520 RopeTech item.

The First-tier Tribunal nevertheless made an order under section 20C of the Landlord and Tenant Act 1985. It relied on the leaseholder applicants' limited success and on the management company's failure to keep the reserve fund in a separate trust account as required by the leases. It later stated that the order benefited all leaseholders, rather than only the 14 applicants.

The management company appealed against the section 20C order. The issues were whether the order could extend to non-applicant leaseholders and whether the stated grounds could properly justify it.

1. Appeal allowed. The order under section 20C of the Landlord and Tenant Act 1985 was set aside.

2. The First-tier Tribunal could not make the order for the benefit of every leaseholder. Section 20C(1) permits an order only for a tenant or other person specified in the application. Applying Plantation Wharf Management Ltd v Fairman [2020] L. & T.R. 7, non-party leaseholders required consent or authority for an application to be made on their behalf. The respondents conceded that ground.

3. A section 20C order is discretionary. The Upper Tribunal will not interfere absent an error of law or irrationality. It is not made as a matter of course merely because leaseholders have succeeded to some extent. The tribunal must consider whether it is just and equitable to interfere with the contractual entitlement to recover costs through the service charge.

4. The failure to establish a separate reserve-fund account was wholly irrelevant to the reasonableness and payability of the service charges. Section 20C was not a means of punishing that separate breach of covenant. In any event, there was no evidence that it had caused the leaseholders loss, so using the order for that purpose was disproportionate.

5. The remaining RopeTech reduction was trivial in relation to the major-works charge and could not alone justify the section 20C order. The further matters advanced by the leaseholders did not justify preserving the order because they were not relevant to the reasonableness of the service charge. The order was therefore set aside in full.

• Upper Tribunal (Lands Chamber): Allowed the management company's appeal and set aside the section 20C order: [2023] UKUT 219 (LC).

• First-tier Tribunal (Property Chamber): Reduced the disputed service charges by £3,161.85 and made an order under section 20C of the Landlord and Tenant Act 1985, later stating that it benefited all leaseholders.