Uddin & Ors v Notting Hill Genesis (LANDLORD AND TENANT – SERVICE CHARGES – assured tenancies) (2025) UKUT 56 (LC)

This was Notting Hill Genesis’ appeal from a FTT decision that service charges that it had been charged by the freeholder and in turn had sought to charge to its assured tenants were not payable under the tenancy agreements, and also were unreasonable in amount.

NHG had leases of two blocks of flats, which it (then being Paddington Churches Housing Association) had let to assured tenants. Under its leases, NHG had to pay the freeholder service charges for maintenance and repair of the blocks, and for estate common parts.

NHG’s assured tenancy agreements specified an initial sum as the weekly service charge payment. This could be reviewed twice a year, so was a variable service charge. The service charge had increased significantly from 2016, and the tenants brought a challenge to the charges in the FTT, specifically raising the ‘third party’ charges from the freeholder as an issue.

The FTT had decided that a) the charges were not payable under the tenancy agreements, and b) there was in any event no evidence put forward by NHG as to why the charges were reasonable. All the ‘third party’ charges from 2016 to 2023 were not payable.

NHG appealed.

There were six different forms of tenancy agreement involved, and for some tenants, no tenancy agreements were in evidence at all. But the tenancy agreement issue effectively came down to three kinds (plus the missing agreements).

i) tenancy agreements with a schedule of services, typically saying

• Internal Cleaning & Window Cleaning
• Internal Lights
• Pest control
• Roof terrace Replacement
• Alarm Equipment
• Floor Covering to (communal Areas Only)
• Communal TV System (including Cable Satellite)
• Entry Phone
• Alarm Equipment
• Daily Building Fabric
• Building Fabric Sinking Fund
• Cyclical Maintenance Fund
• Audit Fee
• Management Fee
• Basement Fee
• 10% Admin Charge

ii) Tenancy agreements with a screenshot of a page from a software programme showing service charge items by acronym. Each of these had an entry for “PSCTP”.

iii) Tenancy agreements with an initial weekly charge, but no schedule or screenshot.

For type i) tenancy agreements, NHG argues that the “third party” charges fell under ‘management fee’ in the schedule.

The Upper Tribunal disagreed. Firstly, there was no presumption that a landlord could recover 100% of the costs that it incurred in fulfilling its obligations.

A useful starting point is an observation of Lewison LJ in City of London v Leaseholders of Great Arthur House (2021) EWCA Civ 431, at (38), that in a lease or tenancy which provides for the tenant to pay for services provided by the landlord, “there is no presumption that the cost of all works that the landlord is obliged to carry out can be passed on to the Lessees”.  That was said in the context of a long lease granted under the statutory right to buy, but it is even more apposite in the case of an assured tenancy under which the tenant pays a weekly rent, part of which is a service charge and the remainder is for the right to occupy the premises.

As to whether ‘Management fee’ could encompass the third part charges, in the context of the list of charges, it was difficult to see that any tenant reading the list could have come to a conclusion that this was so.

Reading the list as a whole, and the agreement of which it is part, no consistent impression is created; the impression is instead of a fairly random collection of activities or installations which is hard to categorise or explain. The normal meaning of a management fee is that it is a charge for the services of a manager in arranging services, rather than a charge for the services which the manager has arranged. I do not think a reasonable person would be alerted to the possibility that by the inclusion of a management fee in the schedule the landlord was agreeing to procure and the tenant to pay for a mixed bag of services to the Estate as a whole including the supply of electricity to common parts, maintenance of some parts of the building or cleaning and lighting of common areas, roads and service installations of the Estate. A reasonable person would not, without assistance, be able to understand what was covered by the management fee or in what way it was different from the 10% Admin Charge. They might assume that it was not intended to cover the cost of an audit, and they would appreciate that there was a charge for administration to be paid on top, but quite how management and administration were divided between the two categories would be unclear.

For the type i) agreements, the third party charges were not payable.

On the type ii) agreements, the position was different.

The PSCTP entry was not explained, and it was not a common acronym or label. So it was not clear from the face of the screenshots what this charge element related to.

However, while the meaning was ambiguous, tenants had signed up knowing that ‘PSCTP’ was an element in the service charge that they were agreeing to pay and the way it was calculated.

Following Cardiff Community Housing Association Ltd v Kahar (2016) UKUT 279 (LC), in which the schedule of services was blank, but there was an initial specified sum for a service charge, variable on notice, the ambiguity could be cured by inquiry. In Cardiff, the tenant was liable for the services that the landlord had considered in arriving at the initial service charge figure, to which the tenant had agreed. But only those services, not any added later. Applying that here, the ambiguity as to what PSCTP referred to was curable aby inquiry, but the tenant had signed up to an agreement which included the services originally intended to be under that heading, which here were the ‘third party’ services.

On that basis, the tenants with such agreements would be liable for the third part service charges, save for the reasonableness issue – see below.

The same reasoning applied to the type iii) agreements with a blank schedule. These were directly analogous to the Cardiff decision. The tenants were liable for whatever services had been originally factored in to the calculation of the service charge figure give. (Save for reasonableness).

Where no tenancy agreement was in evidence (or only partial ones with nothing on the service charge), no decision could be made. It was surprising that the tenants had not been asked for their copies of the tenancy agreements in the FTT proceedings, if NHG could not provide them.

On reasonableness of the charges, the FTT had found that the tenants had done enough to raise the question of whether the charges were reasonable in amount or reasonably incurred, but NHG had put forward no evidence at all as to this. On the basis that the FTT had no basis to find that they were reasonable, it did not do so.

On NHG’s argument that, given the FTT’s payability findings, the finding on reasonableness was by the by, the UT found

it appears clear to me that the FTT was providing an additional reason why the tenants were not liable to pay the disputed charges. NHG had been unable to explain what the charges were for, so it was impossible for the FTT to ascertain whether they have been reasonably incurred or were reasonable in amount. The FTT was entitled to take the view that the tenants had raised enough of a case to put the burden on NHG of establishing those matters. It is striking, for example, that while the PSCTP charge represented about 15% of the original service charge (£2.57 out of £17.64 in the example I was shown) it had risen to 72% of the estimated charge for 2020-21 (£34.33 of a total weekly charge of £47.36). There may be a perfectly good explanation for that apparent disparity, but it was not provided by NHG and the FTT was entitled to conclude that the charges had not been justified and were therefore not payable. There is no cross appeal against that determination and it is binding on NHG as far as the years 2016 to 2023 are concerned.

So, despite the findings on type ii) and type iii) tenancy agreements, which would operate in the future, the 2016-2023 third party charges were not reasonable in amount for all relevant tenants, in full.