[2024] UKUT 41 (LC)

On 18 February 2022 Catalyst wrote to Miss Welstead, informing her that with effect from 4 April 2022 her total rent would increase from £171.03 to £191.78, which included an increase in the fixed service charge from £43.03 to £58.53.

The letter explained that the amount which Catalyst was entitled to increase the “net rent” was limited by government regulation by an amount equal to the rate of consumer price inflation plus 1%. In contrast, the notice stated that any service charge may increase or decrease depending on the cost of the services provided. The “net rent” element of the rent was therefore proposed to increase by 4.1% to £133.25 per week. The fixed service charge element was to increase from £34.45 to £45.06 per week for what was described as the “service charge” (an increase of just under 31%) while the “personal service charge” was to increase from £8.58 to £13.47 (an increase of 57%). It later emerged that the “personal service charge” was intended to cover what the tenancy agreement refers to as “individual heating and hot water”, i.e. that part of the service charge ineligible for housing benefit.

The letter appears to have been accompanied by two other documents, although neither of them is referred to in the text. The first was a service charge statement for the year from April 2022. It provided a slightly more detailed breakdown of the proposed new fixed service charge, again dividing it into two categories for “services” and “personal services”. The statement includes a comparison of the proposed charges with the charges for the previous year from which the rate of increase can be calculated.

The “services” section of the statement contained seven items plus an administration fee of 15% (17.5% in the previous year). At least one of the items, a separate charge for the lift, had not been included in the original schedule of services contained in the tenancy agreement. Others had been renamed or amalgamated. The largest amount, at £30.88 (up from £21.74 the previous year), was described as “managing agent block”. This represented more than 68% of the total service charge and an increase of 42% on the same item in the previous year. The statement provided no information about the nature of the services being paid for under the “managing agent block” label.

The second “personal service” charge of £13.47 was shown in the statement to comprise a charge of £11.71 for “personal gas” (it was later explained that this is the charge for heating and hot water) plus an “administration fee” of £1.76. The table showed that no administration fee had been added to the cost of heating and hot water in the previous year and no such charge is shown in the service charge schedule attached to the tenancy agreement.

The other document which was included with the letter of 18 February 2022 was a statutory notice in the prescribed form proposing a new rent for an assured periodic tenancy under section 13(2), Housing Act 1988. The notice stated that the landlord proposed that the rent should increase from £171.03 per week to £191.78 per week with effect from 4 April 2022. The fixed service charge included in the rent was separately identified as increasing from £43.03 to £58.53 per week.