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Landlord loses appeal over service charges for improvements

The Court of Appeal has ruled that a landlord was wrong to use service charges to recover the cost of improvements to a property.

The case involved a tenant who was a long lessee of a flat owned by the local authority. Under the terms of her lease, she was obliged to pay a service charge in respect of the costs of repairs.

The authority served a notice of intention to replace a flat roof with a pitched roof and to replace wooden-framed windows with new metal-framed units. The replacement windows would, in turn, require the replacement of external cladding and the removal of asbestos.

The tenant objected and Upper Tribunal (Lands Chamber) concluded that the roof replacement gave rise to a recoverable service charge, but not the works to the windows. It held that the local authority had an obligation to carry out repairs, as opposed to a discretion to undertake improvements.

It concluded that the local authority should have taken particular account of the lessee’s interests, her views on the proposals and the financial impact of the work.

The local authority appealed and claimed that the focus of the inquiry had to be on the landlord’s decision-making process and whether it had acted reasonably in deciding to undertake the works.

The Court of Appeal found in favour of the tenant. It held that the authority was wrong to say the focus of the inquiry had to be on the landlord’s decision-making process. What mattered was the outcome and the interests of the tenant had to be taken into account.

Please contact us if you would like more information about the issues raised in this article or any aspect of commercial property law.

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