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Housing Law - Service Charge Payable by Lessee of Dwellings

By : Andrew Lane


The freeholder sought to argue that to be a service charge, the head-lessee would need to be just a "tenant of a dwelling" (s.18), rather than the tenant of dwellings and other parts, as the head-lessee was here. In support of this proposition they relied upon the language of the 1985 Act itself (and the use of "dwelling" elsewhere, such as s.3) and the Rent Act language used from the time service charge statutory provisions were introduced by the Housing Finance Act 1972. It was accepted that either parties’ submissions would produce anomalies but the freeholder gave the example that if Mr Ruddy was correct and the maintenance charge payable by the head-lessee was a "service charge" then so would the charges paid by a head-lessee of a shopping centre which happened to include a janitor’s flat.

Mr Ruddy argued that the county court of decision of Heron Maple House Ltd-v-Central Estates Ltd [2002] 1 EGLR 35 should be applied. The head-lessee was the tenant of each of the 24 flats, and the fact they were also the tenant of the other flats and other parts of the block was irrelevant. As for the Rent Act provenance of the service charge statutory provisions, caution should be exercised in applying the same language and meaning to what are two very different systems. With respect to the shopping centre example given by the freeholder, why should there be no protection in such cases against any unreasonable charge? In a case such as this the corollary would be that the head-lessee would be required to pay the maintenance charge come what may and then when passing it on to the 24 sub-tenants through their service charge be subject to the irrecoverability provisions of the service charge regime.

The Court of Appeal found, as set out in the lead judgment of Lord Justice Jonathan Parker, that the "tenant of a dwelling" should not be read as "tenant of a dwelling and of nothing else", and section 18(1) did not suggest otherwise. Further, there was no significant relationship between the service charge provisions and the Rent Acts, the former emphasis being "not so much on protecting the tenant in his home as on providing him with a way of challenging unreasonable charges sought to be levied by his landlord". Section 18(1) should be given its ordinary meaning and this allows for the charge imposed by the freeholder in this instance on the head-lessee being a "service charge" for the purposes of the Landlord & Tenant Act 1985. Permission to appeal was refused.

Oakfern Properties Ltd-v-Desmond Ruddy [2006] EWCA Civ 1389