[2025] UKUT 369 (LC)

The FTT struck out Mr Barton’s application to it because it considered that it was bound by the decisions of the Lands Tribunal and of this Tribunal referred to in paragraph 3 above to hold that the sums payable by Mr Barton for services are not “service charges” as defined by section 18(1) of the 1985 Act. The FTT’s jurisdiction under section 27A, 1985 Act is to determine “whether a service charge is payable” and, if it is, to determine the amount which is payable and other relevant details. If a sum is not a service charge, as defined by section 18, the FTT currently has no power to consider it.

Home Group v Lewis concerned payment provisions in the standard form of tenancy agreement employed by his landlord, a registered social housing provider. It expressly provided for the tenant to have the right to apply to a rent assessment committee under section 13, Housing Act 1988, for a determination of any rent increase, which Mr Barton’s tenancy does not. But, just like Mr Barton’s tenancy, it provided for rent and service charge to be increased annually by a notice given by the landlord and placed no restrictions on the matters which could be taken into account in determining the amount of the new charges:

“1.3

In this Agreement the term ‘Rent’ refers to the sum of the net rent, and service charge and water charge set out above or as varied from time to time, in accordance with this Agreement. The payment of monthly rent is due in advance on the 1st day of each month.

1.4a During the first year of this tenancy the Association may increase or decrease the Rent payable only once. The Association will give the Tenant no less than one calendar month’s notice in writing stating the new Rent.

1.4b After the first year, the association will increase or decrease the Rent once a year by giving the tenant no less than one calendar month’s notice, in writing, of the increase or decrease. The notice shall specify the Rent and the included Service Charge proposed.”

Home Group, the landlord, based the annual service charge on its estimated expenditure in the forthcoming year. Mr Lewis, the tenant, applied to the LVT (the predecessor of the FTT) under section 27A, 1985 Act, for a determination of the amount payable by him. The LVT was satisfied that it had jurisdiction and that the charges were a “service charge” within the meaning of section 18(1), but Home Group was granted permission to appeal that issue to the Lands Tribunal (the predecessor of this Tribunal).

The Lands Tribunal (HHJ Huskinson) allowed the appeal. The substance of his reasoning is at [19], as follows:

“21.

There is nothing in the tenancy agreements indicating that any altered rent is to be calculated in any particular manner, or linking an alteration in rent (including service charge) with an alteration in the costs of providing any relevant services. Accordingly, it seems to me that section 18(1)(b) is not satisfied. It is true that it can be said that the Appellant in deciding whether to serve a notice of increase and, if so, how much that increase should be may well inform itself (as indeed it accepts it does) by reference to the estimated costs of providing services in the forthcoming year. However the ability in someone to serve a notice increasing the rent, if it chooses to do so, and to calculate that proposed new rent taking into account increases in the costs of services does not enable it in my judgment to be said that the rent (including service charge) is a payment “the whole or part of which varies or may vary according to the relevant costs”. The sum payable does not vary in accordance with the relevant costs. Nor in my judgment can it be said that it “may vary” in accordance with those costs. There is no direct relationship between the amount of the costs as a cause and the amount of the service charge as a consequence. Interposed between the amount of the costs and the amount of the service charge is the independent decision of the landlord (here the Appellant) or of the Rent Assessment Committee as to how much the new rent/service charge should be. Of course it can be said that the Appellant and that Rent Assessment Committee may take into account the reasonably estimated amount of the service costs in the forthcoming year, but that in my judgment is at least one remove from a situation where a rent varies or may vary according to the relevant costs.”

The Lands Tribunal considered a second point, at [22], turning on the express term of the Home Group tenancy permitting the tenant to refer any rent increase to a rent assessment panel under section 13 of the Housing Act 1988. It suggested that section 14(4) of the 1988 Act (which concerns the treatment of sums payable for services when a new rent is assessed by the panel) would be rendered meaningless if an assured tenant also had the right to apply to the LVT for a determination of service charges. That point does not arise in this case, because Mr Barton has no right to refer the rent increase to a tribunal under section 13, 1988 Act. It also appears not to be a good point (as it overlooks the need to take account of the payment of fixed service charges when a rent is determined under section 14), but it is not necessary to consider it in any detail for the purpose of this appeal.

Home Group v Lewis was considered and applied by the Lands Tribunal (HHJ Reid QC) in Chand v Calmore Area Housing Association. The tenancy agreement under consideration was in substantially the same form as in the earlier case and the Lands Tribunal found once again that it did not provide for the payment of a “service charge” within the meaning of section 18(1), 1985 Act. The reasoning of Judge Huskinson was adopted and applied. The critical consideration was that there was nothing in the tenancy agreement linking an alteration in rent (including service charge) with an alteration in the costs of providing any relevant services: “[i]nterposed between the amount of the costs and the amount of the service charge is the independent decision of the landlord […] as to how much the new rent/service charge should be”.

The two decisions of the Lands Tribunal were considered by this Tribunal (George Bartlett QC, President) in Re Southern Group Housing Ltd. The tenancy agreements under consideration in that appeal provided for the annual service charge to be specified by the landlord in a notice, but they differed from the forms of agreement which had been considered by the Lands Tribunal in that they included a specific provision limiting the amount the landlords could charge for services to their actual expenditure. They also enabled the landlords to adjust the amount payable in the course of the year if there was a material change in the cost of providing the services. If higher or lower costs were incurred than had been anticipated, the surplus or shortfall was to be subtracted or added to the charge for the following year. The Tribunal found that the service charges were within the scope of section 18(1), 1985 Act, because they “may very according to the relevant costs” of providing services. The earlier cases were distinguished by the Tribunal, at [17], without suggesting that they were wrongly decided:

“17.

The difference between the provisions of the tenancy agreements in Home Group and Chand v Calmore Area Housing Ltd and those of the leases in the present cases is that in the former there was nothing in the agreements indicating that any altered rent was to be calculated in any particular manner, or linking an alteration in rent (including service charge) with an alteration in the costs of providing any relevant services; whereas in each of the present cases there is provision enabling the landlord to vary the service charge but imposing a limit to any increase by reference to the costs of providing the services.”