[2024] UKUT 41 (LC)

Apsley House is a five storey building containing 70 social housing flats. It is the only social housing block in a development known as Dickens Yard which was completed in about 2013 and comprises a number of blocks. I was told that the original developer still owns the freehold and provides services to the other blocks (I assume in its capacity as landlord), but Apsley House is held on a long lease by Peabody, and before it by Catalyst.

All 70 flats in Apsley House are let to tenants over the age of 55 on assured tenancies under the Housing Act 1988. The tenants do not have access to the fitness suite, spa, underground car park and 24 hour concierge service provided by the freeholder to the occupiers of the flats in the other buildings at Dickens Yard.

Flat 62 is on the fifth floor. It was let to Miss Welstead by a written agreement, initially for a trial period of 12 months from 13 May 2013 but continuing thereafter as an assured tenancy under which rent is payable weekly. In the agreement the landlord is referred to as “the Association”.

The weekly payments under the tenancy agreement are identified under clause 1(1) as comprising two sums, one referred to as the “net rent” and the other as the “fixed service charge”. Together these two sums are referred to in the agreement as the “rent”.

The agreement records at clause 3(b) that sections 13 and 14 of the 1988 Act apply to any increase in the rent under the tenancy. I will refer to those provisions shortly.

Clause 4(a) explains that the rent includes the fixed service charge. The charge is for services listed in a schedule attached to the agreement and it is described as being “fixed for a period of 12 months irrespective of the Association’s costs of providing these services”. The landlord is given power to add to, remove, reduce or vary the services provided, but only “where there is a reason” and only after consulting the tenants and taking their views into account.

Although the tenancy agreement does not explain what the “net rent” means, it is apparent after considering the terms relating to the fixed service charge that the net rent is the payment to be made by the tenant in return for the occupation of the flat and the enjoyment of all of the other rights which go with occupation of the flat, except those which are listed in the service charge schedule which are covered by the service charge.

The service charge schedule attached to the agreement shows the charges for the year 2012/13. They are divided into two categories, which distinguish between those “eligible for housing benefit” and those “ineligible for housing benefit”. The only service in the second category is the provision of heating and hot water which I was told is not individually metered but is provided at the same rate for all two bedroom flats in the building. The charges in the first category (those eligible for housing benefit) include the costs of cleaning, communal lighting, a door entry system, TV aerial, fire safety and CCTV maintenance, communal water, depreciation and a management charge, but the largest item making up more than half of the total in 2013 (£18.63 out of a total of £30.72) was identified as “superior landlords costs”. The agreement does not explain what these costs are for.

The uninformative description in the tenancy agreement of the greater part of the services for which the fixed service charge is payable creates a difficulty. Although the landlord is entitled to add additional services to those provided at the start of the agreement (provided it consults the tenants and takes their views into account), and to increase the fixed service charge annually (subject to the tenant’s right to refer the total rent to the FTT under section 14), the landlord is not entitled to add a new charge for a service which was already being provided at the start of the agreement but for which no separate charge has previously been made. As I said of a similar arrangement in Middleton v Karbon Homes Ltd [2023] UKUT 206 (LC) at [23], (although in that case the service charges were variable rather than fixed):

“Any costs which were being incurred by the landlord from the commencement of each tenancy and for which there was no corresponding charge in the first service charge schedule, such as repairs to the fabric of the building, were not services for which the landlord was entitled to charge. Payment for those services must be taken to have been included in the rent.”

Describing the greater part of the services as “superior landlords costs” leaves both parties, but particularly the tenants, in the dark about what those services are and what services are covered by the net rent. As will be seen, however, that lack of transparency may also come back to bite the landlord, as it did in this case before the FTT.