[2025] UKUT 56 (LC)

The first issue raises separate questions for different categories of tenants. The agreements may be divided into two main categories, with a third residual category for all those which do not fit into the first or second. The first category contains tenancy agreements which are known to include the printed list with its reference to “Management Fee”. The second category comprises agreements which include the screenshot with the service charge tab visible, including the reference to “PSCTP”. The residual category contains the remaining agreements, including some to which a blank schedule or a printout open at the wrong page was attached, and others where insufficient evidence has been provided of the terms of the agreement to know whether it included a schedule or what it might have said.

On behalf of NHG, Ms Conlan submitted that the FTT had taken too narrow a view of the expression “Management Fee” in the printed list of services. The natural meaning of “management fee” was broad enough to encompass the disputed charges. “Management” covered a broad range of tasks including, according to the OED: “Organisation, supervision, or direction; the application of skill or care in the manipulation, use, treatment, or control (of a thing or person), or in the conduct of something.” It was not, she suggested, limited to administrative matters but could comfortably include physical tasks, such as maintenance. The breadth of the intended meaning would depend on the context.

The relevant context included the labels attached to other services in the printed list. These included a specific reference to a “10% Admin Charge”. The FTT had interpreted “Management Fee” as equivalent to a charge for administration, but the list already included such a charge so the management fee must have been intended to cover something else. That something else could be inferred, Ms Conlan suggested, from the wider context of the agreements and from “business efficacy”.

The wider context included, Ms Conlan suggested, the fact that the flats are located on a large mixed-use estate. The reference to the disputed charges in NHG’s annual accounts as “s.106 charges” reflected that the buildings were part of an estate constructed pursuant to a planning obligation requiring a proportion of affordable or social housing. The blocks occupied under assured tenancies were part of the same development as the adjoining private blocks and benefitted from shared space and estate services provided by the freeholder. That context, Ms Conlan submitted, was reflected in the headleases and tenancy agreements and would lead to an expectation that services would be provided to the whole Estate which would have to be paid for.

In that wider context a reasonable person would understand the reference to a “Management Fee” as covering expenses of NHG which went beyond administration and the other matters referred to in the list. Looking around the Estate a reasonable person would understand that those expenses were providing for the maintenance of the buildings and common areas. The alternative, she suggested, was that NHG would not be obliged to provide or procure the services which the Management Fee had been intended by it to cover.

Looking at the question first as one of contractual interpretation, I do not accept that Ms Conlan’s submissions lead to the conclusion that the cost of services provided by the freeholder are recoverable through the service charge.

A useful starting point is an observation of Lewison LJ in City of London v Leaseholders of Great Arthur House [2021] EWCA Civ 431, at [38], that in a lease or tenancy which provides for the tenant to pay for services provided by the landlord, "there is no presumption that the cost of all works that the landlord is obliged to carry out can be passed on to the Lessees". That was said in the context of a long lease granted under the statutory right to buy, but it is even more apposite in the case of an assured tenancy under which the tenant pays a weekly rent, part of which is a service charge and the remainder is for the right to occupy the premises. Whether the tenant is obliged to pay separately for a particular service, or whether the receipt of that service is simply one of the rights covered by the balance of the weekly rent, depends on the meaning of the agreement which the parties have entered into.

I agree with Ms Conlan’s submission that the rest of the printed schedule is of assistance in understanding what, if anything, the parties must have meant when they agreed that the services to be provided and paid for were to include something referred to as “Management Fee”. But I disagree with the conclusion she asks me to draw from the other services on the list. The list includes routine services: internal cleaning, window cleaning, lighting and pest control. It refers to specific fittings and installations: floor coverings, alarm equipment, a communal TV system and an entry phone; I assume these were present in the buildings when the agreement was entered into and are in the list because they are intended to be maintained at the tenants’ expense. It also includes what sound like more substantial matters: roof terrace replacement, daily building fabric; and two funds likely to be earmarked to meet the cost of future expenditure. Finally, it includes four items at the end, audit fee, management fee, basement fee and 10% admin charge.

The variety of these services makes it difficult to accept Ms Conlan’s submission that “Management Fee” is capable of being understood as a broad category of expenditure encompassing building repairs and estate-wide services. The agreements include obligations on the landlord to repair the structure and exterior of the building, to repair the common parts, to take reasonable care to keep the lighting and entryphone systems in working order, and to keep the common parts in a good state of decoration. But the list of services does not cross refer to these obligations. The items on the list are not restricted to the interior of the building (except in the case of lighting and cleaning), or to routine or recurring tasks. They include both works and administration. Three items are referred to as a “fee”, two of which sound like a payment for the delivery of a service, as opposed to works (audit fee and management fee) but the third (basement fee) is less obvious.

Reading the list as a whole, and the agreement of which it is part, no consistent impression is created; the impression is instead of a fairly random collection of activities or installations which is hard to categorise or explain. The normal meaning of a management fee is that it is a charge for the services of a manager in arranging services, rather than a charge for the services which the manager has arranged. I do not think a reasonable person would be alerted to the possibility that by the inclusion of a management fee in the schedule the landlord was agreeing to procure and the tenant to pay for a mixed bag of services to the Estate as a whole including the supply of electricity to common parts, maintenance of some parts of the building or cleaning and lighting of common areas, roads and service installations of the Estate. A reasonable person would not, without assistance, be able to understand what was covered by the management fee or in what way it was different from the 10% Admin Charge. They might assume that it was not intended to cover the cost of an audit, and they would appreciate that there was a charge for administration to be paid on top, but quite how management and administration were divided between the two categories would be unclear.

Nor do I consider that the wider background or context of the Estate would enable a reasonable person to understand that the management fee was intended to cover the cost of services provided by the freeholder. The relevant background against which the agreement must be interpreted is restricted to the background known to both parties. Any special knowledge which might have been available to PCHA about planning obligations and ownership of the Estate would be relevant to the interpretation of the agreements only if it had been shared with the tenants at the time they entered into their tenancy agreements. None of the tenancy agreements refer to the Estate, or include a plan of it, nor do they refer to the existence or identity of the freeholder. There is no suggestion in the documents themselves that anyone other than NHG will be providing services, and no suggestion that the tenant will be contributing to costs incurred in the provision of services outside the building.

But even if a particular tenant had been well informed and had been aware that someone other than NHG would be responsible for the upkeep of the Estate and the structure of the buildings, I do not consider that they would therefore have understood that they would be required to contribute to the variable cost of providing those services through their own service charge. They simply wouldn’t know that that was what the Management Fee was intended to relate to or which services were covered by the service charge and which services were provided in return for the rent.

There is no evidence that PCHA itself intended to recoup the charges it was obliged to pay to the freeholder under the terms of its own Lease by allocating them to the category of Management Fee in the schedule of services. There are other items in the schedule to which specific costs of services said to have been provided by Rendall & Rittner might have been allocated, including internal lights, pest control, entry phone, daily building fabric, and the management component of the freeholder’s charge. But, as I understand the evidence, since at least 2016 those categories have been reserved for costs incurred by NHG and its predecessors.

In Cardiff Community Housing Association Ltd v Kahar a tenancy in the landlord’s standard form had been granted in 2006 in return for a weekly rent and a service charge specified in the agreement as £14.60 but variable on notice. The part of the tenancy agreement where it was intended a list of the services covered by the charge should be included had been left blank, but in 2014 when the tenancy was assigned, the new tenant was given a list of services. The list was not referred to in the original tenancy agreement or in the deed of assignment. The Tribunal held that the original tenant had been liable to pay for the services provided by the Housing Association because that was what the parties had agreed in the document and because the gap left in the agreement by the absence of a list could be filled by evidence of the services on which the original charge had been based:

“20.

[…] the building was new in 2006, so it may not have been possible to point to services already being provided to other tenants of flats in the building when the tenancy was granted. What is clear, however is that an assessment had been made of the charge which was to be levied and, as the landlord is a housing association, it can fairly be inferred that the figure of £14.60 was based on an estimate of the costs of providing specific services. At the commencement of the tenancy there must, therefore, have been a list of services which it was intended should be provided and paid for by the tenant. At any time between July 2006 and July 2014 details of the services to which the charge related could have been requested. The evidence does not disclose whether any such request was made, nor whether the service charge schedule said by Miss Evans to have been annexed to the deed of assignment, had been provided to the original tenant in 2006 or subsequently. What is indisputable, however, is that services were costed, delivered and paid for during the period of 8 years before the assignment of the tenancy to Ms Kahar. The nature of those services was therefore capable of being ascertained, and there is no reason to doubt that they were the same services as were dealt with in the appellant’s evidence to the LVT.

Ms Conlan submitted that any ambiguity in what the parties had meant by Management Fee in the printed list could be filled by the course of dealing between them since 2010. I do not agree. Unlike in the Cardiff case, there is no ambiguity in what the parties agreed in the first category of agreements. They agreed the tenant would pay a management fee. The agreement to pay a management fee cannot be varied to include a charge for the supply of electricity, or insurance or staff costs or maintenance of access or cctv equipment, simply because NHG and its predecessors may later have included charges for those items under a variety of different labels in their annual accounts. Had it been the case that a tenant was provided each year with a list of the services covered by the management charge, with an explanation that that was the heading under which the charge was being made, and had the tenant then paid the charge with the benefit of that knowledge, then it might have been argued that their course of dealings was evidence that the parties had always intended that the management fee was to cover those services. But there is no evidence of that sort. On the contrary, the evidence of dealings after 2016 shows that the charge was described in obscure and uninformative language.

I therefore agree with the FTT that those tenants whose agreements include the printed schedule of services are not obliged to contribute to the costs of services provided by the freeholder as a “management fee”. That does not mean that NHG is entitled to discontinue the provision of the services which it believed were covered by the management fee. The agreements impose specific obligations on NHG, and others are imposed by statute, none of which depend on a reference in the list of services.