Dr Lellis Francis Braganza v The Riverside Group Limited

Section 27A(6) of the Landlord and Tenant Act 1985 does not make the tribunal the primary decision-maker for discretionary management decisions which the lease leaves to the landlord. Where a lease gives the landlord or its surveyor a discretionary power to apportion service-charge expenditure, the tribunal may review the decision for rationality but must not substitute its own apportionment.

Rationality requires good faith, absence of arbitrariness or caprice, a logical connection between the evidence and the reasons, and consideration of relevant matters while disregarding irrelevant ones. An apportionment based on the practical benefits received by different leaseholders may satisfy that standard.

The appellant leaseholder challenged service charges paid to the respondent landlord. The lease required payment of a specified proportion of the annual service provision and gave the landlord’s professionally qualified surveyor power to increase or decrease that proportion where necessary or equitable.

The First-tier Tribunal concluded that the surveyor’s method, which apportioned expenditure according to the practical benefits received by flats and houses, was fair and rational. It later reviewed its decision and gave additional reasons after the Court of Appeal’s decision in Aviva Ground Rent Investors GP Ltd v Williams. The central issue was the effect of the Supreme Court’s subsequent decision on the tribunal’s jurisdiction under section 27A(6) and on the validity of the surveyor’s apportionment.

1. Appeal dismissed. The FTT’s decision that the service charges were payable in full was upheld. An appeal lies against the decision, not against its reasons.
2. Following the Supreme Court’s guidance in Aviva Ground Rent Investors GP Ltd v Williams, section 27A(6) prevents contractual exclusion of the FTT’s jurisdiction over questions of contractual entitlement and statutory regulation. It does not expand that jurisdiction so as to make the FTT the primary decision-maker for discretionary management decisions which the landlord is contractually entitled to make.
3. Where such a decision is challenged, the FTT may at most review it for rationality. The relevant inquiry is whether the decision was made in good faith, without arbitrariness or caprice, with relevant matters taken into account and irrelevant matters disregarded, and whether it was a decision that no reasonable landlord could have made. The FTT must not substitute an alternative apportionment merely because another method is reasonable.
4. The surveyor’s apportionment was rational. It took account of the practical benefits obtained by different leaseholders, including the different use of communal areas and the different repair obligations relating to flats and houses. The lease permitted the surveyor to determine how the quantified specified proportion was to be ascertained, including by allocating different heads of expenditure to different properties.
5. The challenge under section 19 was misconceived because it confused the contractual mechanism for ascertaining the service charge with the statutory restrictions on recoverable costs. The section 20B argument likewise could not succeed because the apportionment was not irrational. The application for reimbursement of tribunal fees was refused.

• First-tier Tribunal (Property Chamber): determined on 30 November 2021 that the service charges were payable, and re-issued its decision with additional reasoning on 12 April 2022.
• Upper Tribunal (Lands Chamber): dismissed the appeal and refused reimbursement of tribunal fees.