Fitzroy Place Residential Ltd & Others vs Lovitt & Others

This case concerned the apportionment of service charges in a large mixed-use development in Central London, specifically addressing the discretion of the landlord to vary the proportions payable by the leaseholders.

TLDR:

• Dispute over service charge apportionment in Fitzroy Place, a mixed-use development.
• Landlord's discretion to vary service charge proportions was contested.
• Upper Tribunal upheld the First-tier Tribunal's decision, limiting landlord's discretion.
• Case impacts residential and commercial leaseholders.

Fitzroy Place, located on the site of the former Middlesex Hospital in Central London, is a mixed-use development comprising both residential and commercial premises. The appellants, including the freeholder, head-leaseholder, and management company, appealed a decision of the First-tier Tribunal (FTT) regarding the apportionment of service charges among the leaseholders.

The dispute arose over the interpretation of a standard form of lease used in the development, particularly the proportions in which leaseholders of private apartments were required to contribute towards the cost of services provided by the landlord. The appellants argued that the lease allowed them discretion to vary these proportions, while the respondents, including individual leaseholders and the Fitzroy Place Residents' Association, contested this interpretation.

The FTT had determined that the discretion given to the landlord under the lease was limited to changing the apportionment of individual items of expenditure and did not permit a wholesale change in the method of apportionment for all service charges. The appellants appealed this decision, arguing that the lease provided a broader discretion.

The Upper Tribunal, led by Deputy Chamber President Martin Rodger KC, upheld the FTT's decision. The Tribunal found that the lease's primary method of apportionment was based on the net internal area of the premises compared to the aggregate net internal area of the lettable areas of the block or estate. The discretion to vary this apportionment was limited to specific circumstances and did not allow for an entirely different method to be adopted across the board.

The Tribunal emphasized the importance of adhering to the agreed method of apportionment, as outlined in the lease, and noted that any variation must be fair and reasonable, taking into account the nature of the expenditure and the premises benefiting from it. The decision reinforced the principle that leaseholders should not be subjected to arbitrary changes in their service charge liabilities.

This case has significant implications for both residential and commercial leaseholders in mixed-use developments, highlighting the need for clear and precise lease terms regarding service charge apportionment. It also underscores the importance of judicial scrutiny in ensuring that landlords do not overreach their discretionary powers to the detriment of leaseholders.

Legal representatives: Katrina Mather, instructed by Bryan Cave Leighton Paisner LLP, for the appellants; Edward Blakeney, instructed by Keystone Law, for the third respondent; Alexander Whatley, instructed directly, for the fourth respondent.

Judicial Panel: Martin Rodger KC, Deputy Chamber President

Case Citation Reference: [2024] UKUT 63 (LC)