Keith Howard Barton v Platform Housing Limited

A charge payable for services is a service charge under section 18(1) of the Landlord and Tenant Act 1985 only if the whole or part of it varies, or may vary, according to the relevant costs. Annual variation is insufficient. A charge fixed for each accounting period, without reconciliation or adjustment according to actual expenditure, falls outside the statutory definition, even if the landlord considers estimated costs when setting it. Section 19(2) applies only to charges already within section 18(1). The same analysis applies to a heating and hot-water charge not contractually related to the landlord’s costs.

The appellant was an assured periodic tenant of a flat let by the respondent, a registered provider of social housing. His tenancy agreement required monthly payments comprising net rent, a service charge, and a separate heating and hot-water charge. The service charge was set by the landlord, varied annually by notice, and fixed for the following year. The agreement contained no formula linking the charge to relevant costs and no end-of-year reconciliation or adjustment.

The First-tier Tribunal (Property Chamber) struck out the appellant’s application under section 27A of the Landlord and Tenant Act 1985, holding that the charge was not a service charge within section 18(1). The appeal concerned whether annual variation, estimated costs, or section 19(2) brought the charge within that definition.

1. Appeal dismissed. The First-tier Tribunal had no jurisdiction under section 27A of the Landlord and Tenant Act 1985 because the charge was not a service charge within section 18(1).
2. The Upper Tribunal was not strictly bound by Home Group Ltd v Lewis [2008] EWLands LRX/176/2006, but would depart from a settled decision at the same level only if entirely convinced that it was wrong.
3. Under section 18(1)(b), the charge must vary or be capable of varying according to the relevant costs. It is insufficient that the landlord may vary the charge annually or in practice considers estimated costs when selecting the new figure, where the tenancy agreement imposes no such requirement.
4. The reasoning in Home Group Ltd v Lewis was applied. Chand v Calmore Area Housing Association Ltd [2008] EWLands LRX/170/2007 had adopted the same reasoning. Re: Southern Housing Group Ltd [2010] UKUT 237 (LC) was distinguishable because the agreements there linked charges to actual expenditure, permitted adjustment during the year, and provided for surplus or shortfall to be reflected in later charges.
5. Section 19(2) applies only to service charges within section 18(1). Its provision for adjustment after costs are incurred confirms that periodic reconciliation is an essential feature of such charges.
6. The separate heating and hot-water charge was also outside section 18(1), because the tenancy agreement did not require it to relate to the respondent’s costs.

• First-tier Tribunal (Property Chamber): struck out the application under section 27A of the Landlord and Tenant Act 1985 because the charge was not a statutory service charge.
• Upper Tribunal (Lands Chamber): dismissed the appeal and upheld the FTT’s conclusion that it had no jurisdiction.