Residential leaseholders are provided with certain protections in relation to service charge because of the provisions set down by sections 18 to 30 of the Landlord and Tenant Act 1985.
- “Service charge” means “an amount payable by a tenant of a dwelling as part of or in addition to the rent” (section 18).
- Section 19 limits what a landlord can recover as a service charge. A landlord can only recover costs incurred in connection with services, repairs, maintenance, improvements, insurance or management to the extent that the costs have been reasonably incurred and, if the costs relate to services or works, the services or works are of a reasonable standard.
- The First Tier Tribunal (Property Chamber) has jurisdiction to determine whether a service charge, or proposed service charge, is reasonable (section 27A).
- “Dwelling” is “a building or part of a building occupied or intended to be occupied as a separate dwelling, together with any yard, garden, outhouses and appurtenances belonging to it or usually enjoyed with it” (section 38).
In JLK Limited v Ezekwe and ors  UKUT 277 (LC), the Upper Tribunal (Lands Chamber) considered the meaning of “dwelling”.
In 2012, a 19th century commercial building was converted to provide 93 units of residential accommodation in a scheme intended for ultimate occupation by students. The majority of the units comprised a bed sitting room with en-suite facilities. Each was let for a term of 250 years, and each lease demised the unit together with the right to use communal kitchens, lounges, showers and toilets situated on the same floor along with other facilities in the building. Heating and hot water was provided by a communal boiler.
It seems the intention was that each of the lessees would receive an income from the unit by way of charge to the occupying student.
The leases included a covenant on the part of each leaseholder to pay an annual maintenance charge, this being a proportion of the sums spent by the landlord in the maintenance and administration of the building.
In April 2014, a Prohibition Order under section 20 of the Housing Act 2004 was made. It seems the communal boiler had broken, and that there was no hot or cold water as a result. The use of the building was therefore prohibited.
Some of the lessees then brought an action against the landlord under section 27A, challenging their liability to pay service charge.
The issue was whether or not those lessees had the benefit of the protections offered by sections 18 to 23 of the Landlord and Tenant Act 1985.
At first instance, the First Tier Tribunal (Property Chamber) decided that the units did constitute “dwellings” and that it had jurisdiction to determine applications made under section 27A.
Decision of the Upper Tribunal
The Upper Tribunal identified three main issues.
- Whether, for a unit of accommodation to be a “dwelling” for the purposes of the Landlord and Tenant Act 1985, it is necessary that it should be used as, or intended to be used, as someone’s home.
- If so, whether the units in question satisfied that requirement.
- Were the units occupied or intended to be occupied as “separate” dwellings or was the availability of communal facilities fatal to the necessary element of separateness?
The Upper Tribunal considered various authorities on “dwelling”, and in particular looked at whether for the units to be “dwellings” that they had to be a place where someone lived and made their home.
The Upper Tribunal rejected the arguments that accommodation had to be someone’s home in order to be a “dwelling” within the meaning of section 38. It also rejected the arguments that the shared facilities meant the units could not be regarded as a home.
But, the Upper Tribunal then went on to consider whether the units were occupied or intended to be occupied as separate dwellings. For the Tribunal to have jurisdiction to hear any applications under section 27A, the units had to be “occupied or intended to be occupied as a separate dwelling” [my emphasis].
The Upper Tribunal found that the necessary element of separateness was not satisfied in this case. The units were not intended to be occupied as “separate” dwellings, because they were only part of each student’s dwelling, with the remainder of the dwelling being made up of the communal living space (which was not demised).
The upshot was that the Tribunal did not have jurisdiction to consider the applications on the payability and reasonableness of service charge.
This decision helpfully confirms the approach of the Tribunal to the concept of “occupation as a separate dwelling” in the context of service charges and the Landlord and Tenant Act 1985.