This was an appeal to the Upper Tribunal (“the Tribunal”) concerning the scope and application of a service charge apportionment clause.
The clause in question gave a fixed percentage (based upon a calculation of the property’s relative square footage within the building), followed by the words “or such part as the landlord may otherwise reasonably determine”.
The lessor had for some years, and quite unsurprisingly, exercised its contractual discretion to deviate from the fixed percentage.
There were two issues to be determined by the Tribunal:
In order to answer these issues, the Tribunal considered the previous decisions of Windermere Marina Village Limited v Wild and Barton  UKUT 163 (LC) and Gater and others v Wellington Real Estate Limited  UKUT 561 (LC).
Accordingly, following the reasoning in Windermere and Gater, the Tribunal found that any wording which has the effect of providing for the manner in which an issue capable of determination under section 27A(1) was to be determined, namely by (for instance) a binding decision of the landlord’s surveyor, the landlord, or indeed anyone acting as the landlord’s agent, is void in accordance with S.27A(6) of the Act.
The Tribunal therefore stated the following:
“A clause purporting to provide for a determination of apportionment by the landlord or the landlord’s agent is void. It is void whether or not it provides that the landlord’s decision is “final and binding” or similar, and whether or not the landlord agrees to submit to the jurisdiction of the Tribunal.”
As a result, the Tribunal deleted the words “or such part as the landlord may otherwise reasonably determine”.
However, the effect of removing such words in this case is quite distinct from that which was seen in both Windermere and Gater, whereby, in those cases, once the void wording was deleted there left a determination to be made by the Tribunal as to what such a fair proportion would be.
Therefore, in dealing with the second issue on appeal, the Tribunal found that as the clause provided a fixed percentage in the alternative, it did not fall to the Tribunal to determine the necessary proportion, and hence the fixed percentage as prescribed by the lease would apply.
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Michael Grant is a member of the Housing and Property team at 42 Bedford Row and specialises in all aspects of residential and commercial property litigation.
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