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Cite as: [2014] UKUT 163 (LC)

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UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2014] UKUT 163 (LC)

UTLC Case Number: LRX/16/2013

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

LANDLORD AND TENANT – service charges – tenant to pay fair proportion of landlord’s expenditure – fair proportion to be determined by landlord’s surveyor – surveyor’s determination to be final and binding – whether apportionment void – whether first-tier tribunal having jurisdiction to substitute different apportionment - Landlord and Tenant Act 1985 ss. 18, 19, 27 – appeal dismissed

IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE

LEASEHOLD VALUATION TRIBUNAL FOR THE

NORTHERN RENT ASSESSMENT PANEL

BETWEEN:

WINDERMERE MARINA VILLAGE LIMITED Appellant

and

(1) IAN WILD

(2) GILLIAN LESLEY BARTON

and others

Respondents

Re: Flat 39 and Boathouse,

Windermere Marina Village,

Bowness on Windermere

Before Martin Rodger QC, Deputy President

Sitting at Manchester

11 April 2014

David Gilchrist instructed by Harrison Drury & Co solicitors, for the Appellant

Eleanor d’Arcy instructed by Aaron & Partners LLP, for the Respondents

The following cases are referred to in this decision:

Campbell v Edwards [1976] 1 WLR 403

Schilling v Canary Riverside Development Properties Limited [2005] LRX/26/2005, BAILII: [2005] EWLands LRX_26_2005

Levitt v London Borough of Camden [2011] UKUT 336 (LC)

London Borough of Brent v Shulem B Association Limited [2011] EWHC 1663 (Ch)

Gilje v Charlgrove [2000] 3 EGLR 89

Longmint v Marcus [2004] 3 EGLR 171

Joseph v Joseph [1967] Ch 78

DECISION

1. The lease of a dwelling provides for the tenant to pay a fair apportionment of the cost of services, such apportionment “to be determined by the surveyor for the time being of the Lessor whose determination shall be final and binding”. Section 27A(6) of the Landlord and Tenant Act 1985 (“the 1985 Act”) renders void an agreement by the tenant of a dwelling (other than a post-dispute arbitration agreement) in so far as it purports to provide for a determination in a particular manner or on particular evidence of any question which may be the subject of an application under sub-sections (1) or (3) of section 27A of the 1985 Act. Such questions include the amount of the service charge payable by the tenant. The principal issue in this appeal is whether section 27A(6) renders void the agreement in the lease that the landlord’s surveyor’s decision on the apportionment of the service charge is to be final and binding.

2. The appeal is against a decision of a Leasehold Valuation Tribunal of the Northern Rent Assessment Panel (“the LVT”) dated 14 November 2012 in which it substituted its own apportionment of the cost of services payable by the tenants of 26 dwellings at the Windermere Marina Village (“the Marina”) for a previous apportionment determined by a surveyor appointed by the appellant, which owns the freehold interest in the Marina.

3. Permission to appeal the LVT’s decision was granted by the Tribunal on the grounds that the issue identified in paragraph 1 above was a point of principle potentially of wide application. The appeal was directed to be dealt with as a review with a view to a rehearing, but after receiving legal submissions from Mr Gilchrist for the appellant and Miss d’Arcy for the respondents at the review stage of the appeal I was satisfied that no rehearing was required.

The facts

4. The Marina is a mixed development on the banks of Windermere at Bowness, comprising moorings for 350 boats alongside a series of jetties, together with a variety of flats, boathouse apartments, holiday cottages, houses, a marina centre with offices for boat sales, a boatyard, car parking and other facilities. The lead respondents are tenants of flat 39, referred to as a “boathouse apartment” because in addition to living accommodation at first floor level the property overhangs the water of the Marina and encloses a mooring for a small boat.

5. On 6 September 2011 the respondents commenced proceedings before the LVT under section 27A of the 1985 Act, seeking a determination of their liability to pay service charges for grounds maintenance and security in the years from 2008 to 2011. The respondents were subsequently joined in their application by the tenants of a further 24 dwellings on the Marina. The appellant later made a cross-application of its own seeking a final determination of the respondents’ liability in respect of all service charges in the same years.

6. The lease of the respondents’ boathouse apartment was granted by the appellant on 29 July 1965 for a term of 99 years from 1 July 1962. At that time the 18 boathouse apartments were the only dwellings which had yet been developed on the Marina and the other houses, flats and cottages were built much later. The respondents’ lease is in the standard form used for all the original boathouse apartments. It granted them rights of way along a roadway leading from the demised premises to the main road together with the right to use a car park on adjoining land. A schedule to the lease contained tenants’ covenants of which the only one of significance for the purpose of this appeal is at paragraph (2), by which the tenants agreed:

“To pay a fair proportion (to be determined by the Surveyor for the time being of the Lessors whose determination shall be final and binding) of the expense of all communal services including the re-constructing, repairing, maintaining, re-building, cleansing and dredging of all Estate walls, fences, sewers, drains, roads, car parks, waterways and piers and other things the use or enjoyment of which is or shall be common to the demised premises and other premises PROVIDED ALWAYS that the Lessees shall be under no obligation hereby to pay any contribution towards the cost of making good any damage thereto caused in the course of any future development work of the Lessors”

7. I make the following comments about the tenants’ covenant at this stage. It is apparent from the proviso to paragraph (2) that future development work on the Marina was anticipated at the time the lease was entered into. It was also obviously appreciated that there might in future come to be additional premises on the Marina making use of the communal services. It must also therefore have been expected that the proportion of the expenses of communal services which it would be fair for the tenants of the demised premises to pay might vary over time as the future development of the Marina evolved. The task of determining that fair apportionment was entrusted by the parties to the Lessors’ surveyor for the time being, and it was specifically agreed that the surveyor’s determination would be final and binding.

8. Not all of the dwellings on the Marina are let on long leases, but those which are include service charge provisions under which the contribution payable by the lessees is also a fair proportion, determined by the appellant’s surveyor whose decision is final and binding, of the appellant’s total expenditure on communal services. Other dwellings are operated by the appellant on a time share basis or as holiday cottages, and neither these dwellings nor the boat moorings (which are also operated by the appellant as part of its own business) are expected to pay a service charge.

9. Until 2007 the only expenses which the appellant sought to collect from the tenants of the boathouse apartments related to the provision of drainage and sewerage services, and these were minimal. Latterly, however, the growth of the Marina created a need for further services including additional lighting, landscape maintenance and security arrangements. In 2007, with a view to recouping a proportion of these additional expenses from the respondents under paragraph (2) of the schedule to their leases, and from the other long leaseholders on the Marina, the appellant engaged a chartered surveyor, Mr D Pogson FRICS, to consider for the first time what would be a fair apportionment of the costs of communal services among the various users of the Marina who benefitted from them. It was the appellant’s intention that the long leaseholders they would be expected to contribute towards the expense of providing the services in the proportions determined by Mr Pogson; to the extent that the services benefitted the users of the commercial premises, holiday cottages or boat moorings, it was intended that the expense would fall on the appellant itself.

10. Mr Pogson produced a thorough and impressive report in which he exhaustively explained the methodology he had adopted in apportioning liability for costs between the relevant interests on the Marina. That methodology was guided by the RICS Code of Practice on Residential Service Charges. As Mr Pogson noted in his report, the Marina is a large and complex property which created challenges for his assessment, but the LVT nonetheless congratulated him on “his professionalism and diligence” in undertaking the task he had been asked to perform.

11. Despite the difficulty of the task Mr Pogson produced a comprehensive apportionment of expenditure amongst the various users. The details of the apportionment are not material at this stage, but the most contentious aspect of the assessment concerned security and grounds maintenance. Mr Pogson decided that the comparative benefit which the moorings and the boathouse apartments derived from the provision of ground maintenance and security services was in a ratio of 1:4. The practical effect of that assessment was that the charges payable by the owners of each of the boathouse apartments would be four times as great as the contribution which the appellant was required to make as owner of each of the moorings.

12. The respondents did not regard Mr Pogson’s determination as a fair apportionment of the charges for grounds maintenance and security. As far as the respondents are concerned, for example, the provision of night-time security patrols on the Marina is for the benefit of the owners of boats moored alongside the jetties, and is not significantly of benefit to the residents of the boathouse apartments or other dwellings. They argued that all users of the Marina benefited at least equally from the provision of the services and that they and the appellant should therefore contribute equally to their cost. The respondents applied to the LVT for a determination of the extent of their liability to contribute specifically to security and grounds maintenance, and also to contribute to the fees payable to Mr Pogson for his determination which the appellant had sought to add to the service charge payable for 2008.

The LVT’s decision

13. The LVT’s dealt at length in its decision with the scope of paragraph (2) of the Schedule to the lease. It concluded that the tenants were liable to contribute to services provided to areas of the Marina which had been developed since the grant of their leases. They were not required to contribute towards the costs incurred by the appellants in engaging Mr Pogson to carry out the apportionment of expenditure, because those costs did not fall within paragraph (2) of the Schedule. At paragraph 97 of its decision the LVT began to address the question whether the contentious charges had been fairly apportioned which “appeared to be at the heart of the dispute.”

14. The LVT had heard evidence from Mr Pogson himself, and from Mr Gale-Hasleham, a chartered surveyor specialising in leisure property who had prepared an alternative scheme of apportionment which the respondents argued should be preferred to Mr Pogson’s. The two surveyors agreed that the RICS Code provided a fair set of principles for the apportionment of charges, but, as the LVT acknowledged in paragraph 101 of its decision “the Code of Practice would allow a number of possible ways of constructing a fair apportionment”. Mr Gale-Hasleham’s method was based on the proposition that each unit on the Marina should make an equal contribution.

15. At paragraphs 97 to 119 of its decision the LVT considered the different approaches contended for by Mr Pogson and Mr Gale-Hasleham in a little detail before concluding that:

“For the years in question a fair and reasonable apportionment of the costs of security and ground maintenance of the Estate as a whole should be the basis of a ratio of 1:1 between the house owners and the moorings.”

16. At the hearing before the LVT the appellants did not question the tribunal’s jurisdiction to consider a challenge to the fairness of Mr Pogson’s apportionment. It was assumed that the LVT could determine not only whether the charges for security and ground maintenance had been reasonably incurred and whether the services provided were of a reasonable standard, but also whether the apportionment of those charges by the appellant’s surveyor was fair. The LVT did not therefore have to consider the issue of principle which is raised for the first time in this appeal.

17. At the conclusion of its decision the LVT said that it had considered whether it was just and equitable to make an order under section 20C of the 1985 Act, as requested by the respondents, so that no part of the costs incurred by the appellant in the proceedings could be recovered through the service charge payable by the respondents, and had decided that it was just and equitable in the circumstances of the case for such an order to be made.

The issues in the appeal

18. The following issues are canvassed in the skeleton arguments prepared by counsel:

(1) Whether the LVT had jurisdiction to adjust the apportionment of the service charge determined by Mr Pogson.

(2) If the LVT did have jurisdiction, whether it was entitled to substitute its own view of what the fair apportionment between house owners and the owners of moorings should be, without first finding that the apportionment determined by Mr Pogson was not a fair apportionment.

(3) Whether there was sufficient evidence to support the conclusion of the LVT that an equal apportionment between boat moorings and houses was fair, or alternatively, whether it had provided sufficient reasons for its decision.

(4) Whether the LVT had given sufficient reasons for its decision to make an order under section 20C of the 1985 Act.

Relevant statutory provisions

19. The outcome of this appeal turns on the effect of section 27A of the 1985 Act, which at the time of the LVT’s decision, provided as follows:

“27A Liability to pay service charges: jurisdiction

(1) An application may be made to a leasehold valuation tribunal for a determination whether a service charge is payable and, if it is, as to—

(a) the person by whom it is payable,

(b) the person to whom it is payable,

(d) the date at or by which it is payable, and

(e) the manner in which it is payable.

(2) Subsection (1) applies whether or not any payment has been made.

(3) An application may also be made to a leasehold valuation tribunal for a determination whether, if costs were incurred for services, repairs, maintenance, improvements, insurance or management of any specified description, a service charge would be payable for the costs and, if it would, as to—

(a) the person by whom it would be payable,

(b) the person to whom it would be payable,

(d) the date at or by which it would be payable, and

(e) the manner in which it would be payable.

(4) No application under subsection (1) or (3) may be made in respect of a matter which—

(a) has been agreed or admitted by the tenant,

(b) has been, or is to be, referred to arbitration pursuant to a post-dispute arbitration agreement to which the tenant is a party,

(d) has been the subject of determination by an arbitral tribunal pursuant to a post-dispute arbitration agreement.

(5) But the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment.

(6) An agreement by the tenant of a dwelling (other than a post-dispute arbitration agreement) is void in so far as it purports to provide for a determination—

(a) in a particular manner, or

(b) on particular evidence,

of any question which may be the subject of an application under subsection (1) or (3).

(7) The jurisdiction conferred on a leasehold valuation tribunal in respect of any matter by virtue of this section is in addition to any jurisdiction of a court in respect of the matter.”

The first issue: What effect did section 27A(6) of the 1985 Act have on the agreement that the apportionment of charges by the appellant’s surveyor was to be final and binding?

20. There is no doubt that the general law of contract will give effect to an agreement that the price payable by one party to another for goods, services or property is to be such price as may be determined by a third party. Mr Gilchrist referred to the decision of the Court of Appeal in Campbell v Edwards [1976] 1 WLR 403, in which Lord Denning MR said (at 407G):

“It is simply the law of contract. If two persons agree that the price of property should be fixed by a valuer on whom they agree, and he gives that valuation honestly and in good faith, they are bound by it. Even if he has made a mistake they are still bound by it. The reason is because they have agreed to be bound by it. If there were fraud or collusion, of course, it would be very different. Fraud or collusion unravels everything.”

21. Nor is there any doubt that, in the general law, an agreement may validly be made that some important matter arising for determination under a contract, such as the price payable, or the adequacy of performance, may be the subject of a binding determination to be made by a third party appointed by one of the parties to the contract. It is not uncommon, for example, for the parties to a lease to agree that the amount of a service charge payable by the tenant should be certified by the landlord’s surveyor or managing agent. Such an agreement will be effective and the certificate will give rise to a liability to pay the service charge, provided the person giving the certificate is the person identified in the agreement or otherwise satisfies the criteria agreed on by the parties for the performance of that task.

22. Section 19 of the 1985 Act interferes with contractual agreements relating to service charges i.e. charges payable by tenants of dwellings as part of or in addition to their rent which are payable directly or indirectly for services, repairs, maintenance, improvements or insurance or the landlord’s costs of management, where the charge payable varies or may vary according to the costs incurred by or on behalf of the landlord. Section 19(1) limits the relevant costs which may be taken into account in determining the amount of a service charge. Such costs may only be taken into account to the extent that they are reasonably incurred, and where they are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard. Section 19(2) imposes a separate limit on payments on account of future expenditure: where a service charge is payable before relevant costs are incurred no greater amount than is reasonable is payable.

23. Section 19 does not oust or avoid the contractual service charge arrangements agreed between the parties. Where the amount of a service charge is to be ascertained by the certificate of an accountant or surveyor, and where the provision of such a certificate is a condition of the tenant’s liability to pay the service charge, nothing in section 19 removes the need for a certificate to be provided. Section 19 supplements the parties’ contract by limiting the sums which may be taken into account in determining the amount of the service charge, as do other provisions of the 1985 Act including sections 20, 20ZA, 20B and 20C.

24. Because section 19 operates only by limiting the sums which may be taken into account in determining the amount of a service charge, it has no effect on an agreement relating to the apportionment of service charges amongst different users of a service. In Schilling v Canary Riverside Development Properties Limited [2005] LRX/26/2005 the Lands Tribunal (His Honour Judge Michael Rich QC) considered a challenge under section 19(1)(a) of the 1985 Act to the tenants’ liability to pay fixed proportions of the expenses incurred by their landlord in relation to the provision of certain services (0.33% of Estate expenditure and 0.909091% of Car Park Expenditure). At paragraph 19 of its decision the Lands Tribunal gave the following reasons for dismissing the tenants’ contention that the share of the expenditure allocated to them was unfair:

“The complaint was in each case as to the mode by which the share to be paid was calculated in accordance with the terms of the leases. Any submission which [counsel for the tenants] could make depended upon construing the limitation of recoverable service charges under section 19(1)(a) of the Act of 1985 as requiring the reasonable apportionment of costs which had been reasonable incurred. In the applicants’ statement of case it was asserted that “a service charge must be reasonable under section 19 of the 1985 Act.” That is not what the section provides. Costs are to be taken into account “only to the extent that they are reasonably incurred”, but if reasonably incurred they fall to be apportioned in accordance with the terms of the lease, except if excluded by a failure to consult or otherwise under for example sections 20B and 20C. The foundation of the appellants’ challenge therefore falls away and their appeal on this ground can be dismissed without the need for detailed analysis of the reasons for their, I accept, genuine sense of grievance.”

25. The decision in Schilling demonstrates that section 19(1) provides no relief to a tenant who has agreed a fixed apportionment of service charges, even if viewed objectively that apportionment is unfair or unreasonable. The same is true of section 19(2) in relation to service charges payable on account. Neither statutory provision has anything to do with apportionment.

26. The question of principle raised by this appeal does not arise under section 19 of the 1985 Act, and (at the level of principle) has nothing to do with whether the particular service charges sought to be collected by the appellant from the respondents are fair or reasonable. Nor has this appeal anything to do with leases under which the apportionment of service charge expenditure between different parties is in accordance with a fixed proportion or percentage (as in Schilling) or an agreed formula (such as by reference to floor area, bed spaces or rateable value).

27. The issue of principle is concerned only with cases where the parties have not agreed the apportionment of liability at the commencement of their lease, but have left the question of apportionment to be determined by a third party at a later date. The issue is also likely to be relevant to leases under which more than one method of apportioning charges is identified, but where the choice of which method is to be adopted, either generally or in relation to particular categories of expenditure, is left to the landlord or to a third party. Arrangements of that type are quite commonly encountered (often in local authority leases). An example can be found in a relatively recent decision of the Tribunal (Her Honour Judge Walden-Smith) in Levitt v London Borough of Camden [2011] UKUT 336 (LC).

28. In Levitt the Tribunal had to consider the reasonableness of a service charge sought to be collected by the landlord, Camden, for the renewal of a communal heating system in flats on its Brunswick Centre Estate. The leases of the flats required each tenant to pay the “Specified Proportion” of the expenses incurred by the landlord in connection with the boilers, heating and hot water apparatus in the building. The Specified Proportion was to be calculated by one of three alternative methods described in the fourth schedule to the lease. The first was by reference to the rateable value or floor area of the flats in proportion to the rateable value or floor area of the Centre as a whole; the second (which applied to certain items of expenditure only) was “a fair and reasonable proportion … such proportion to be determined by the Landlord’s Finance Officer whose decision shall be final and binding”; the third and final method was to be “such other method as the Landlord shall specify acting fairly and reasonably in the circumstances.” The menu of options was therefore very wide indeed, being limited only by what was fair and reasonable in the circumstances.

29. The heating system at the Brunswick Centre had been unreliable for many years and, as a result, the appellants had already installed their own independent heating system in their flat (with Camden’s consent) some time before the communal system was replaced. The appellants argued that it was unreasonable for them to be expected to pay for the installation of new heating systems in other flats when they had already paid for their own independent system, entirely at their own expense. They argued that Camden should have used its power of apportionment under the lease to adopt a fair and reasonable proportion which left the appellants free of any liability for the new communal heating system. At paragraph 28 of its decision the Tribunal decided that the Council was entitled to apportion the costs by whichever of the three methods it chose and was not required “to adopt the most reasonable approach for calculating the service charge in any given case.” When considering whether the service charge itself was reasonable the Tribunal said this, at paragraph 36:

“It was not, in my judgment, unreasonable in the circumstances of this matter for the appellants to be responsible for their proportion of the Service Cost, as apportioned in accordance with paragraph 4 of the Fourth Schedule. Section 19 does not permit the tribunal to ascertain what is a reasonable apportionment of the relevant costs. “Costs are to be taken into account “only to the extent that they are reasonably incurred”, but if reasonably incurred they fall to be apportioned in accordance with the terms of the lease, except if excluded by a failure to consult or otherwise under for example ss. 20B and 20C” per HH Judge Rich QC sitting in the Lands Tribunal in Schilling ….”

30. In Levitt the Tribunal relied on Schilling in support of the same conclusion that section 19 of the 1985 Act “does not permit the tribunal to ascertain what is a reasonable apportionment of the relevant costs.” But the provision for apportionment in Levitt was rather different from that in Schilling because Camden had a choice over the method of apportionment which it would adopt in relation to any particular category of expenditure. Despite this difference no reference was made in Levitt (which was decided by the Tribunal on the basis of written representations only) to the potential significance of section 27A(6) of the 1985 Act on the exercise of that choice.

31. The question raised by this appeal is whether section 27A(6) of the 1985 Act renders void an agreement that the apportionment of service charges shall be in accordance with a determination of a third party whose decision is to be final and binding.

32. Neither counsel was able to point to a case in which that question had been considered. It was referred to by Morgan J in London Borough of Brent v Shulem B Association Limited [2011] EWHC 1663 (Ch) in which the point did not arise for decision. Morgan J was considering the service charges provisions of a lease as a prelude to answering a number of questions arising under section 20B of the 1985 Act, and at paragraph 39 of his decision he made a number of general points about the structure and effect of those provisions, including the following:

“The third point is that the lessor is entitled to charge “a rateable or due proportion” of the expenses of the specified matters. The fourth point is that the amount of the proportion, in the case of a difference, is to be settled by the surveyor of the lessor, whose decision is stated to be final. It may be that this reference to the finality of the surveyor’s decision is no longer contractually effective in view of section 27A(6). I did not hear specific argument on that point. However, for the purpose of construing clause 2(6) I do not think it is material to take in account the possible operation of the later statutory provision.”

Morgan J had drawn attention, for the first time as far as I am aware, to the potential impact of section 27A(6) on this relatively common form of service charge clause. He made clear that the statutory avoidance of agreements falling within the sub-section does not effect the proper construction of the agreement itself. The meaning of the agreement must be determined on normal principles of construction; only after deciding what a particular provision means would one go on, in an appropriate case, to consider whether it was rendered void by section 27A(6).

33. On behalf of the appellant Mr Gilchrist submitted that section 27A(6) has no impact on the agreement in this case. The proportions in which users of the Marina were to contribute to the cost of services were to be determined in the manner set out in paragraph (2) of the Schedule to the lease and both parties were bound by the determination of the appellant’s surveyor as a matter of contract providing that the determination was made honestly and in good faith. He relied on Schilling for the proposition (which was not disputed by Miss d’Arcy for the respondents) that the LVT did not have power under section 19 of the 1985 Act to disturb the contractual apportionment. Section 19 was concerned with the incurring of costs and not with apportionment. If the costs were reasonably incurred (as the LVT had held them to be in this case) they fell to be apportioned according to the terms of the lease.

34. Mr Gilchrist submitted that section 27A(6) was a provision about jurisdiction (as its cross heading indicated) and operated to avoid any agreement preventing a tenant from bringing any application in respect of the questions in sub-sections (1) and (3) of section 27A. Sub-section (6) was directed towards agreements which oust the Tribunal’s jurisdiction under sub-sections (1) and (3). It did not prevent the parties from agreeing that a third party would determine a discrete issue, such as apportionment, because such an agreement did not preclude an application being made under sub-sections (1) or (3). Six specific questions were identified in sub-section, beginning with “whether a service charge is payable” and proceeding through the items in the list at (a) to (e). None of those questions was directed towards apportionment and Mr Gilchrist suggested that the particular mischief with which sub-section (6) was concerned was an agreement that a certified account of the service charge was to be conclusive of the amount payable. The consequence of these submissions was that the LVT had had no jurisdiction to determine whether the apportionment determined by Mr Pogson was fair, because the parties had agreed that it was to be final and binding, because that agreement was not avoided by section 27A(6), and because it was no part of the respondents’ case that Mr Pogson had acted in bad faith, capriciously or irrationally or in any other way which would have rendered his decision of no contractual effect.

35. For the respondents Miss d’Arcy submitted that the LVT did have jurisdiction to adjust the service charge apportionments determined by Mr Pogson because paragraph (2) of the schedule to the lease purported to make his determination “final and binding”. The jurisdiction of the LVT under section 27A(1)(a) was to determine “the amount which is payable” as a service charge. One element of that determination was the proportions in which the total expenditure incurred by a landlord was to be apportioned amongst those who were to contribute towards it. The lease purported to provide for that element of the element of the ascertainment of the amount payable to be determined “in a particular manner” namely by a binding decision of the appellant’s surveyor. In those circumstances section 27A(6) rendered the words in brackets in paragraph (2) of the schedule void and deprived the appellant’s surveyor of any role in the process.

36. It is first necessary to consider the breadth of the jurisdiction conferred by section 27A(1). A tenant may apply to the first-tier tribunal for a determination whether a service charge is payable and, if it is, may request the answer to five questions going to liability: by whom the charge is payable, to whom, when and in what manner and (usually of the greatest importance) how much is payable. The primary question, whether a service charge is payable at all, is plainly capable of engaging issues concerning the proper interpretation of the lease and whether any contractual conditions of liability have been satisfied, including whether any necessary certificate has been provided. It will sometimes engage issues of compliance with statutory conditions of liability (including the stipulations as to the form and content of demands provided by section … of the 1985 Act). In two decisions of the Lands Tribunal before the insertion of section 27A into the 1985 Act with effect (in England) from 30 September 2003 (Gilje v Charlgrove [2000] 3 EGLR 89, and Longmint v Marcus [2004] 3 EGLR 171) it was confirmed that leasehold valuation tribunals had jurisdiction to determine questions of construction of leases on which issues under section 19 of the 1985 Act depended. Section 27A put the existence of that jurisdiction beyond doubt at the same time as widening it considerably.

37. The same breadth of jurisdiction is apparent in relation to the more detailed questions referred to in sub-paragraphs (a) to (e) of section 27A(1). Most involve consideration of the effect of the parties’ agreement and of the general law, rather than any issue arising out of the provisions of the 1985 Act itself. Only in determining “the amount payable” is it likely that the statutory safeguards for tenants in other parts of the 1985 Act will be important. There is therefore nothing to suggest that the jurisdiction of the first-tier tribunal under section 27A(1) is confined to matters of quantification.

38. It is perfectly possible to contemplate an application to the first-tier tribunal under section 27A(1) where the only question in issue concerns the proper method of apportionment of a sum which is agreed to have been incurred reasonably on services provided to a reasonable standard and which otherwise to fall within a tenant’s contractual liability. An issue might arise about the correct classification of a particular item of expenditure where different proportions were payable for different items; or the method of apportionment itself might be open to different interpretations. In this case, as the LVT said in paragraph 97 of its decision, “the heart of the dispute” is relates to the apportionment. It was not submitted by Mr Gilchrist that an issue of apportionment could never be the subject of a determination under section 27A(1), and such a submission would be unsustainable.

39. Having identified that section 27A(1) is not confined to issues of quantification, and may include issues of apportionment, it is then necessary to consider section 27A(4). This has the effect that no application may be made under section 27A(1) or (3) in respect of a matter which has been agreed or admitted, or which is to be, or has already been, the subject of a determination either by the court or by arbitration pursuant to a post dispute arbitration provision. Where the amount which is payable as a service charge, or some component or issue relating to that amount, has been agreed, it may not subsequently be referred to a first-tier tribunal for determination. In the same way, where the parties have agreed in their lease how service charges are to be apportioned (for example, in fixed proportions or percentages, or in proportions referable to floor area or rateable value) section 27A(4) will preclude an application under section 27A(1) in respect of that matter. If there was doubt about what the agreement meant, or how it applied to a particular set of facts, that doubt could be resolve on an application to the first-tier tribunal, but the agreement itself could not be challenged.

40. The prohibition in section 27A(4) on re-opening matters which have been agreed must, however, be considered in the light of section 27A(6). This renders void any agreement by the tenant in so far as it “purports” to provide for the determination of any question which could be the subject of an application under sub-section (1) or (3) “in a particular manner” or “on particular evidence”. The purpose of the provision is clearly to avoid agreements excluding the jurisdiction of the first-tier tribunal on questions which could otherwise be referred to it for determination.

41. In a statutory anti-avoidance provision such as section 27A(6) an agreement will “purport to” provide for an outcome if it has the effect of providing for that outcome. In Joseph v Joseph [1967] Ch 78 the Court of Appeal held that in section 38(1), Landlord and Tenant Act 1954 the expression “purports to preclude the tenant from making an application or request” for a new tenancy means “has the effect of precluding the tenant” so that an agreement for the tenant to surrender their tenancy at a future date was void. The same broad approach is appropriate in the case of section 27A(6) so that the question in the case of any particular agreement by a tenant is whether it has the effect of providing for the determination of any question which could be the subject of an application under sub-section (1) or (3) “in a particular manner” or “on particular evidence”.

42. The question referred to the LVT in this case was what proportion of the expenses incurred by the appellant was to be paid by the respondents. By paragraph (2) of the Schedule to their leases the respondents had already agreed that the answer to that question was that they were to pay such proportion as was determined by the appellant’s surveyor, whose decision was to be final and binding. In my judgment that agreement was void because it had the effect of providing for the manner in which an issue capable of determination under section 27A(1) was to be determined, namely by a binding decision of the appellant’s surveyor. I cannot accept Mr Gilchrist’s submission that the apportionment of service charges is not a question which arises under sub-section (1) or that sub-section (6) is directed only at provisions which purport to make a determination of the relevant expenditure by the landlord’s surveyor or accountant determinative. The fact that sub-section (4) specifically excludes from the scope of sub-section (1) an application in respect of a matter which has been the subject of a post-dispute arbitration agreement demonstrates that dispute resolution provisions in general are not afforded any protected status.

43. Neither Schilling nor Levitt creates any obstacle to this conclusion. The apportionment in Schilling was agreed and there was nothing which could be the subject of an application under section 27A(1). Section 27A was not referred to in paragraph 19 of the Lands Tribunal’s decision, which focussed on section 19, but an equally complete answer to the tenant’s complaint that the apportionment of service charges was unfair would have been that the apportionment was as agreed under the lease and, by virtue of section 27A(4)(a), could not be the subject of an application under section 27A(1). In Levitt the Tribunal did not consider the effect of section 27A(6) but its decision, that it was fair and reasonable for the tenants to be expected to contribute to the replacement of the communal heating system on an apportionment referable to floor area despite having installed their own system, would have been the same even if it had not take Camden’s own preferred method of apportionment as the starting point.

44. It follows that I accept the submission of Miss d’Arcy on the first issue and find that the LVT entitled to consider what was the fair proportion of the expenses payable by the respondents, because the contractual mechanism for identifying that fair proportion was rendered void by section 27A(6) of the1985 Act.

45. Before leaving this issue I would add a further comment. The apportionment of service charges can be a complex matter in a building with a variety of modes of occupation (business, leisure, residential) or as between different buildings on a large estate. Different contributions may be appropriate to different users and there may be more than one fair or reasonable method which may be adopted. This case is a good example of that. If the first-tier tribunal is asked to substitute its own view of a proper apportionment because it is said that a contractual provision has been rendered void by section 27A(6) of the 1985 Act, it should bear in mind both the possibility of competing interests amongst different occupiers, and the fact that a determination under section 27A(1) binds only those who are party to it. The tribunal may therefore need to consider, at the case management stage, whether it is appropriate for notice of the proceedings to be given to any third party who may wish to make representations (as is already provided for by regulations where an application is made under section 35, Landlord and Tenant Act 1987 to vary the long lease of a flat on the grounds that it fails to make satisfactory provision with respect to the computation of service charges (sections 35(2)(f) and 35(4)).

The second issue: Was the LVT’s jurisdiction restricted to deciding whether Mr Pogson’s determination produced a fair apportionment?

46. It was common ground between counsel that if, as I have found, section 27A renders void part of paragraph (2) of the Schedule to the lease, that part was the whole of the words: “(to be determined by the Surveyor for the time being of the Lessors whose determination shall be final and binding)”. I agree. The effect of sub-section (6) is to strike out so much of an agreement as provides for the manner in which a question capable of consideration under sub-section (1) is to be determined. The manner of determination of a fair apportionment agreed in this case is by the determination of the appellant’s surveyor. The manner of determination is not limited to the parties’ agreement that the surveyor’s view of what is fair is to be final and binding.

47. Mr Gilchrist nonetheless submitted that the LVT should have approached the issue of a fair apportionment by asking itself whether the apportionment settled on by Mr Pogson was fair. If it was, he submitted, then there was nothing left for the LVT to consider, because the apportionment arrived at by the contractual route was fair. It would only be if the LVT was satisfied that Mr Pogson’s apportionment was not fair that it could substitute its own view of what was fair. Mr Gilchrist pointed out that the LVT had not said anywhere in its decision that Mr Pogson’s approach was unfair, and it had specifically acknowledged that there was more than one fair method of apportioning the charges consistently with the RICS Code.

48. I cannot accept Mr Gilchrist’s submission. Section 27A deprives the landlord’s surveyor of his role in determining the apportionment. Paragraph (2) is to be read as if the method of ascertaining a fair apportionment was omitted altogether. Mr Pogson’s conclusions cannot therefore have any contractual effect. That being the case, it was for the LVT to decide what was a fair proportion of the expense of communal services payable by the respondents. It is not suggested that the method it preferred was unfair, and the fact that the alternative method, which it rejected, may also have been fair does not undermine its conclusion.

49. It should be noted that there are other forms of lease in which the provision of a certificate or the making of a determination is a condition of the liability of the tenant to make a payment. The lease in this case is not in that form, but in cases where such a determination triggers a liability it may well be that the contractual procedure continues to bind the parties, even though the content of the certificate or determination may be open to challenge because of the operation of section 27A(6).

50. I therefore dismiss the appeal on the second issue.

The third issue: Was there sufficient evidence to support the LVT’s conclusions and were they sufficiently reasoned?

51. Mr Gilchrist challenged a number of the LVT’s findings of fact, asserting that the material on which it based some of its conclusions had not been exposed to the parties for comment and had not been sufficiently explained.

52. The LVT visited the Marina and heard expert evidence from the two surveyors as to the consideration which they considered most important in ascertaining a fair apportionment of the charges for security (which was the main point of contention). It preferred the approach of Mr Gale-Hasleham, which it adopted as its own. The suggestion that there was insufficient evidence to support the LVT’s conclusion, or that it had relied on matters which were not open to the parties for comment, is therefore unsustainable. Although it said on a number of occasions that it was “not persuaded” by particular points made by Mr Pogson, the LVT was clearly not adopting a neutral or indecisive position on those issues and it provided sufficient reasons of its own to explain its view that boat moorings and boathouse apartments should attract equal weighting.

53. The appeal on the third issue is therefore dismissed.

The fourth issues: section 20C

54. I can deal with this issue shortly. Paragraph (2) of the Schedule to the lease makes no express reference to a liability on the part of the tenant to contribute to costs incurred by the appellant in connection with legal proceedings. The only liability is to contribute to the expense of “all communal services … and other things the use and enjoyment of which” is common to premises on the Marina. Elsewhere in the lease the tenant covenants to pay a fixed annual “supervision charge” of £14.50 in consideration of the appellant’s “general supervision of the observance and performance of the covenants on the part of the other Lessees of other boathouses and premises” on the Marina. Given these provisions it is clearly not open to the appellant to add the cost of proceedings before the LVT (or the Tribunal) to the charges it collects from the respondents.

55. No issue under section 20C of the 1985 Act therefore arises, and while the LVT was justified in considering the respondents’ request for the making of an order, the extent of its reasoning does not need to be considered further in this appeal.

Dated: 28 April 2014 Martin Rodger QC

Deputy President