CA-2024-001597 - [2025] EWCA Civ 1308

It is now possible to go back to the FTT decision and consider if they erred. They cited a passage from Woodfall to the effect that “in considering whether the landlord’s decision is a reasonable one, the Tribunal must afford him a margin of appreciation” and a passage from Regent Management Ltd v Jones [2010] UKUT 369 (LC) as follows:

“The test is whether the service charge that was made was a reasonable one; not whether there were other possible ways of charging that might have been thought better or more reasonable. There may be several different ways of dealing with a particular problem of management. All of them may be perfectly reasonable. Each may have its own advantages and disadvantages. Some people may favour one set of advantages and disadvantages, others another. The LVT may have its own view. If the choice had been left to the LVT it might not have chosen what the management company chose but that does not necessarily make what the management company chose unreasonable.”

They then gave their conclusion as follows (at [28] of their decision):

“In the present case the landlord appears to have had two options from 2013 onwards: to continue to charge the gym expenses to the tenants as before or to bear part of the charges itself to reflect the shared use of the gym between the residents and the gym tenant. The Respondent landlord chose the first option which it was entitled under the terms of the lease to do. That choice, although unpalatable to the residential tenants cannot therefore be said to be unreasonable. It was not a decision of the type where it could be said that no reasonable landlord in a similar position could ever have made it.”

In the UT Decision the Judge first concluded that the landlord’s decision must be objectively reasonable (at [105]) and continued:

“106

Accordingly if the FTT intended to apply a Braganza rationality test it was wrong.

107

If the FTT did indeed intend to apply a test of objective reasonableness then in my judgment it reached the wrong outcome. It is manifestly unfair, and therefore not objectively reasonable, for the residential leaseholders to pay the whole of the gym costs after 2020 when they no longer have exclusive use of the gym. The landlord in 2013 decided to grant the gym lease in extraordinarily generous terms, and the respondent is now seeking to charge that generosity to the residential tenants. I cannot understand how that is not unfair.”

As can be seen the FTT, which no doubt had the benefit of much less citation of authorities than we did, did not in fact direct themselves in terms of whether the test they should apply was one of Braganza rationality or one of objective reasonableness; but they did ask themselves whether the decision was one that no reasonable landlord could have made. For the reasons I have sought to give, that seems to me the correct test, and I do not think they erred in asking that question.

That then leaves the question whether the conclusion that they reached when applying this test was one that was open to them. I think it was. This is a question of fact, or perhaps more accurately a question of evaluative assessment of the facts. There are two reasons why such assessments by the FTT are to be given a considerable degree of deference. First, an appeal only lies to the UT on a point of law: see s. 11(1) of the Tribunals, Courts and Enforcement Act 2007. And second, the FTT is a specialist tribunal, and considerable deference is to be given to the assessment of such a tribunal. These principles are well-established and very familiar: see for example Ullah v Secretary of State for the Home Department [2024] EWCA Civ 201, [2024] 1 WLR 4055 at [26] per Green LJ. In essence, even if the UT would not have made the same assessment itself, it is bound to respect the factual assessment of the FTT unless it can be said that the true and only reasonable conclusion contradicts its determination.

I do not think that can be said here. Since this very much depends on the rather unusual facts, and does not involve any question of principle, I can give my reasons quite briefly. It is not difficult to understand why the Leaseholders considered it unreasonable for them to be asked to pick up the entirety of the gym costs: Mr Walsh relied both on the fact that they no longer had unrestricted access to the gym, and to the fact that the use by Mr White and his clients would lead to costs such as heating and lighting, and greater wear and tear on the gym and its equipment, all of which was being charged to the residential leaseholders. Nor is it difficult to see why the Judge thought that unfair. But that is not the question. The question is whether the FTT could properly have taken the view that a reasonable landlord could charge the costs to the leaseholders.

I think the FTT was entitled to take that view. The terms of the Gym Lease might well be thought unusual or generous (as both the FTT and UT said) but the Gym Tenant was not intended to have exclusive use of the gym: as the Gym Lease makes clear, it was expressly made subject to the rights of the leaseholders. There may be a question whether the way in which Mr White is now apparently restricting their use of the gym is in accordance with their rights, but that is a question between them and him and cannot be resolved in these proceedings, to which he is not a party. On any view however the arrangement between the Landlord and the Gym Tenant was very unlike an exclusive letting of the gym; it was in effect an agreement that the Gym Tenant could share use of the gym on terms that he provided certain services to the leaseholders, and also paid a relatively modest rent which was treated by the Landlord as a contribution to the running costs of the gym. The Landlord was obliged by the terms of the Flat Leases to maintain the gym as part of the Common Parts, the costs of which would be passed on to the leaseholders; and one can see that it might have been thought both reasonable and in the interests of leaseholders to have the Gym Tenant contributing to the gym costs in this way.

If so, the fact that in practice no rent is currently being received, and that the costs of maintenance and repair are much more significant than might have been anticipated, does not necessarily change the principle. So far as Abacus is concerned, it is still obliged (both under the Flat Leases and the Gym Lease) to incur costs on maintaining the gym and renewing equipment, something which is or ought to be for the benefit of the leaseholders as well as Mr White and his clients. If Abacus cannot recover such costs through the service charge it will have to bear them itself, although it would derive no benefit from them. It is true, as Mr Walsh submitted, that there is no general principle that a landlord will always recover 100% of his expenditure through service charges (see eg Campbell v Daejan Properties Ltd [2012] EWCA Civ 1503 at [56] per Jackson LJ). But if Abacus is unable to pass on maintenance costs, that will tend to incline it to spend the very minimum that it can on the gym. It is not obvious that that would be in the interests of the leaseholders.

In those circumstances I think the FTT could properly take the view that the decision to charge the gym costs to the leaseholders was “not a decision of the type where it could be said that no reasonable landlord in a similar position could ever have made it.”

On that basis the FTT did not err in law, and the UT was not entitled to substitute its own view of the reasonableness or fairness of the Landlord’s decision.