Norwich City Council v Redford and another [2015] UKUT 30 (LC)

The Upper Tribunal (Lands Chamber) has held that a landlord is not entitled to apportion the cost of services provided to multiple properties in a portfolio covered by a global service contract on the basis of the relative rateable values of the individual properties concerned.

The Council owned a number of properties across Norwich, including an estate comprising five blocks of leasehold flats.  The estate was covered by a service charge regime that allowed the Council to charge the tenants of the flats for various services, including the provision of communal lighting.

The Council had entered into a contract for the provision of communal lighting to all of its residential flats across the city, not just those on the estate.  The Council had dealt with apportionment of the sums it claimed from its tenants for communal lighting on the basis of the relative rateable values of the properties covered by the maintenance contract.  This was challenged by the tenants of one of the flats on the estate.

The service charge provision in the lease in question required the tenants to pay the percentage that was determined from time to time to be a fair share of the Council’s expenditure attributable to the tenants’ flat, proportionate to other properties that were either in the same block, or entitled to exercise the same rights or entitled to use the same services.  The tenants applied to the Tribunal for a decision on whether the apportionment of costs by reference to rateable value of all properties covered by the maintenance contract reflected the costs actually incurred by the Council in connection with the communal lighting for the estate.  The tenants also expressed concerns about the Council’s inability to evidence what costs were reasonably payable as the Council was unable to provide evidence of the true cost of the charges attributable to the estate.

The Tribunal ruled in favour of the tenants finding that the charges for the communal lighting included in the service charge did not comply with the terms of the tenants’ lease and were therefore not payable and that on the basis of the information provided by the Council it was not in fact possible to calculate the true cost payable by the tenants.    

This decision is of particular relevance to landlords with large portfolios of properties and where it is relatively common to have an agreement with one contractor to provide services to a number of properties within the portfolio.  It is important to keep separate accounts for individual properties and to have regard to the details of the service charge clauses in individual leases otherwise the ability to recover from tenants may be put at risk.