Keith Howard Barton v Platform Housing Limited

The appellant, Mr Barton, is the tenant of a flat belonging to the respondent, Platform Housing Ltd (“Platform”). Under the terms of his tenancy Mr Barton is required to pay Platform a monthly rent together with a monthly service charge and a separate charge for heating and hot water. The rent and service charge are sums determined by Platform which remain unchanged until they are increased once a year by a notice given by Platform stating the new amounts Mr Barton is required to pay.

Mr Barton would like the First-tier Tribunal, Property Chamber (“the FTT”) to consider whether the service charges he has paid since his tenancy commenced in 2020 have been reasonable. He applied to the FTT under section 27A, Landlord and Tenant Act 1985 (“the 1985 Act”), for a determination by it of the amount he was required to pay. But the FTT refused to consider his application and struck it out on the grounds that the charge payable by Mr Barton was not a service charge within the meaning of section 18(1) of the 1985 Act. Mr Barton now appeals against that decision, with the permission of the FTT.

The appeal raises an issue which was first determined by the Lands Tribunal in Home Group Ltd v Lewis [2008] EWLands LRX/176/2006, a decision followed in Chand v Calmore Area Housing Association Ltd [2008] EWLands LRX/170/2007. Both those decisions were distinguished by this Tribunal in Re: Southern Housing Group Ltd [2010] UKUT 237 (LC), without expressing any doubt about their correctness. In giving permission to appeal the FTT nevertheless suggested that these cases may have been wrongly decided and should be considered again.

At the hearing of the appeal Mr Barton represented himself and Platform was represented by Mr Ranjit Bhose KC. I am grateful to them both for their submissions.

As the FTT struck Mr Barton’s application out without determining it, it made no findings of fact, but the relevant facts are not in dispute.

Mr Barton occupies his flat at 52 Victoria Court in Matlock under a written tenancy agreement in the model form published by the National Housing Federation for use by registered providers of social housing. The agreement commenced on 21 September 2020 and begins by recording that Platform is a registered community benefit society and is registered with the Social Housing Regulator as a non-profit provider of social housing. It creates a monthly periodic assured non-shorthold tenancy within the meaning of the Housing Act 1988.

The relevant parts of the agreement are found in clause 1, in a section headed “General Terms”, and provide:

The services which Platform agrees to provide are listed in Schedule 1 to the agreement, which is mentioned in clause 1(3)(i). Each service is listed and a cost is provided for each entry in the list. In aggregate, these equal the original monthly service charge of £95.94.

The most important features of the service charge are that it is fixed for the whole year at whatever figure Platform has specified in a notice given under clause 1(4)(i) and 1(4)(iii). The agreement does not prescribe how the service charge is to be calculated and neither defines nor limits the matters which Platform may take into account in setting the charge. Nor does the agreement include any mechanism for calculating the amount of any surplus or shortfall between the charges collected and the costs incurred by Platform in providing the service. No balancing charge is payable by Mr Barton to cover any shortfall and no credit or repayment is due to him if the services costs less than the sums collected (although in October 2023, after renegotiating its energy supply arrangements, Platform applied a credit to its tenants’ accounts).

Platform provided a statement explaining to the FTT how the service charge is set, in which it said this:

“9.

Platform operate the service charge in line with the Tenancy Agreement and it is operated as a fixed service charge. The service charge is only increased once a year, in April (at the same time as the rent is increased). When considering the increase to be applied to the service charge each year, Platform considers a combination of factors; any costs which are expected to fall due under a contract Platform has already entered into (for example in relation to employment contracts or utilities agreements); estimated costs on budgets drawn up for services to be provided by Platform; and any possible repairs that might be required, which are usually calculated on a three-year average.

10.

Taking into account these factors and anything else which might be relevant for that particular year, Platform will come to a figure by which the service charges are to be increased. Mr Barton is notified of the rent and service charge figure he is required to pay in accordance with the terms of the Tenancy Agreement and using the appropriate notices, and that will be the figure for the entire year, regardless of the actual costs which Platform end up spending in providing the services. There is no reconciliation process carried out at the end of the year and Mr Barton is not required to pay any more than the fixed amount if the costs were higher than the fixed charge, nor is he entitled to a credit where costs were lower than the fixed charge. The effect of this is that the service charge does not vary according to the actual costs incurred by the landlord.”

Sections 18 to 30 of the 1985 Act contain provisions about service charges designed to limit the amount residential tenants and leaseholders are obliged to pay for services, to improve transparency and access to information, to require consultation on significant expenditure, and to provide for determination by an independent tribunal, the FTT, of amounts payable. The scope of all of these provisions is governed by the definition of “service charge” in section 18.

Section 18 provides as follows:

“18.

Meaning of “service charge” and “relevant costs”

(1)

In the following provisions of this Act “service charge” means an amount payable by a tenant of a dwelling as part of or in addition to the rent—

(a)

which is payable, directly or indirectly, for services, repairs, maintenance, or improvements or insurance or the landlord's costs of management, and

(b)

the whole or part of which varies or may vary according to the relevant costs.

(2)

The relevant costs are the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a superior landlord, in connection with matters for which the service charge is payable.

(3)

For this purpose—

(a)

“costs” includes overheads, and

(b)

costs are relevant costs in relation to a service charge whether they are incurred, or to be incurred, in the period for which the service charge is payable or in an earlier or later period.”

Provisions in materially the same form as sections 18 and 19 have been in place for more than 50 years (originally found in sections 90 to 91A of the Housing Finance Act 1972, then in Schedule 19 to the Housing Act 1980, and now in the 1985 Act). Depending on the terms of the particular tenancy agreements they have always been capable of applying to charges for services provided by housing associations to their periodic tenants (although by section 26(1), 1985 Act, they do not apply to local authority periodic tenancies).

Sections 18 and 19 are among the provisions of the 1985 Act which are to be amended by Part 4 of the Leasehold and Freehold Reform Act 2024 which is concerned with the ‘Regulation of leasehold’. When brought into force, sections 53-60, 62, 64 and 67-71 will amend and enhance the protections provided to tenants and leaseholders by the 1985 Act. I will return to these prospective amendments later.

The FTT struck out Mr Barton’s application to it because it considered that it was bound by the decisions of the Lands Tribunal and of this Tribunal referred to in paragraph 3 above to hold that the sums payable by Mr Barton for services are not “service charges” as defined by section 18(1) of the 1985 Act. The FTT’s jurisdiction under section 27A, 1985 Act is to determine “whether a service charge is payable” and, if it is, to determine the amount which is payable and other relevant details. If a sum is not a service charge, as defined by section 18, the FTT currently has no power to consider it.

Home Group v Lewis concerned payment provisions in the standard form of tenancy agreement employed by his landlord, a registered social housing provider. It expressly provided for the tenant to have the right to apply to a rent assessment committee under section 13, Housing Act 1988, for a determination of any rent increase, which Mr Barton’s tenancy does not. But, just like Mr Barton’s tenancy, it provided for rent and service charge to be increased annually by a notice given by the landlord and placed no restrictions on the matters which could be taken into account in determining the amount of the new charges:

“1.3

In this Agreement the term ‘Rent’ refers to the sum of the net rent, and service charge and water charge set out above or as varied from time to time, in accordance with this Agreement. The payment of monthly rent is due in advance on the 1st day of each month.

1.4a During the first year of this tenancy the Association may increase or decrease the Rent payable only once. The Association will give the Tenant no less than one calendar month’s notice in writing stating the new Rent.

1.4b After the first year, the association will increase or decrease the Rent once a year by giving the tenant no less than one calendar month’s notice, in writing, of the increase or decrease. The notice shall specify the Rent and the included Service Charge proposed.”

Home Group, the landlord, based the annual service charge on its estimated expenditure in the forthcoming year. Mr Lewis, the tenant, applied to the LVT (the predecessor of the FTT) under section 27A, 1985 Act, for a determination of the amount payable by him. The LVT was satisfied that it had jurisdiction and that the charges were a “service charge” within the meaning of section 18(1), but Home Group was granted permission to appeal that issue to the Lands Tribunal (the predecessor of this Tribunal).

The Lands Tribunal (HHJ Huskinson) allowed the appeal. The substance of his reasoning is at [19], as follows:

“21.

There is nothing in the tenancy agreements indicating that any altered rent is to be calculated in any particular manner, or linking an alteration in rent (including service charge) with an alteration in the costs of providing any relevant services. Accordingly, it seems to me that section 18(1)(b) is not satisfied. It is true that it can be said that the Appellant in deciding whether to serve a notice of increase and, if so, how much that increase should be may well inform itself (as indeed it accepts it does) by reference to the estimated costs of providing services in the forthcoming year. However the ability in someone to serve a notice increasing the rent, if it chooses to do so, and to calculate that proposed new rent taking into account increases in the costs of services does not enable it in my judgment to be said that the rent (including service charge) is a payment “the whole or part of which varies or may vary according to the relevant costs”. The sum payable does not vary in accordance with the relevant costs. Nor in my judgment can it be said that it “may vary” in accordance with those costs. There is no direct relationship between the amount of the costs as a cause and the amount of the service charge as a consequence. Interposed between the amount of the costs and the amount of the service charge is the independent decision of the landlord (here the Appellant) or of the Rent Assessment Committee as to how much the new rent/service charge should be. Of course it can be said that the Appellant and that Rent Assessment Committee may take into account the reasonably estimated amount of the service costs in the forthcoming year, but that in my judgment is at least one remove from a situation where a rent varies or may vary according to the relevant costs.”

The Lands Tribunal considered a second point, at [22], turning on the express term of the Home Group tenancy permitting the tenant to refer any rent increase to a rent assessment panel under section 13 of the Housing Act 1988. It suggested that section 14(4) of the 1988 Act (which concerns the treatment of sums payable for services when a new rent is assessed by the panel) would be rendered meaningless if an assured tenant also had the right to apply to the LVT for a determination of service charges. That point does not arise in this case, because Mr Barton has no right to refer the rent increase to a tribunal under section 13, 1988 Act. It also appears not to be a good point (as it overlooks the need to take account of the payment of fixed service charges when a rent is determined under section 14), but it is not necessary to consider it in any detail for the purpose of this appeal.

Home Group v Lewis was considered and applied by the Lands Tribunal (HHJ Reid QC) in Chand v Calmore Area Housing Association. The tenancy agreement under consideration was in substantially the same form as in the earlier case and the Lands Tribunal found once again that it did not provide for the payment of a “service charge” within the meaning of section 18(1), 1985 Act. The reasoning of Judge Huskinson was adopted and applied. The critical consideration was that there was nothing in the tenancy agreement linking an alteration in rent (including service charge) with an alteration in the costs of providing any relevant services: “[i]nterposed between the amount of the costs and the amount of the service charge is the independent decision of the landlord […] as to how much the new rent/service charge should be”.

The two decisions of the Lands Tribunal were considered by this Tribunal (George Bartlett QC, President) in Re Southern Group Housing Ltd. The tenancy agreements under consideration in that appeal provided for the annual service charge to be specified by the landlord in a notice, but they differed from the forms of agreement which had been considered by the Lands Tribunal in that they included a specific provision limiting the amount the landlords could charge for services to their actual expenditure. They also enabled the landlords to adjust the amount payable in the course of the year if there was a material change in the cost of providing the services. If higher or lower costs were incurred than had been anticipated, the surplus or shortfall was to be subtracted or added to the charge for the following year. The Tribunal found that the service charges were within the scope of section 18(1), 1985 Act, because they “may very according to the relevant costs” of providing services. The earlier cases were distinguished by the Tribunal, at [17], without suggesting that they were wrongly decided:

“17.

The difference between the provisions of the tenancy agreements in Home Group and Chand v Calmore Area Housing Ltd and those of the leases in the present cases is that in the former there was nothing in the agreements indicating that any altered rent was to be calculated in any particular manner, or linking an alteration in rent (including service charge) with an alteration in the costs of providing any relevant services; whereas in each of the present cases there is provision enabling the landlord to vary the service charge but imposing a limit to any increase by reference to the costs of providing the services.”

This Tribunal is not bound to follow previous decisions of the Lands Tribunal. Nor are we bound to follow our own previous decisions. But it is well-established that where a point of principle has been decided by one judge, another judge sitting at the same level who is asked to consider the same point at a later date will regard themselves as bound to follow the earlier decision unless they are sure that it was wrong. That convention applies in the Upper Tribunal. It is all the more important to observe it where the first decision has been repeatedly followed over a lengthy period, and where it is likely that many tenancies have been entered into on the understanding that the law is settled (at least at the level of this Tribunal). Applying that approach, while I am not strictly bound to follow Home Group, I would only be entitled to reach a different conclusion if I was entirely convinced that it was wrongly decided. I will consider the arguments in this appeal with that approach in mind.

In his grounds of appeal, Mr Barton advanced two arguments. The second of these concerned section 26 of the 1985 Act which disapplies sections 18 to 25 of the Act from the tenancies of certain public authorities. After a discussion of the scope of this exception Mr Barton did not press his second ground of appeal and proceed only with his first.

Mr Barton argued that a distinction ought to be made between fixed service charges and variable service charges, and that only fixed service charges fell outside the scope of the protection afforded to tenants and leaseholders by sections 18 to 30 of the 1985 Act. The service charge which he is required to pay is not fixed, which he defined as meaning a charge which stays the same, without changing or being able be changed. On the contrary, his service charge is variable, in that it can be and is varied by Platform every year under clause 1(4)(i) of the tenancy agreement.

Mr Barton considered that Platform was only able to describe the service charge it collected as a fixed charge because of its own accounting practice which avoided an annual reconciliation of sums received and expenditure incurred. It was, he suggested, Platform’s own choice not to reconcile its service charge income and expenditure and to recoup any shortfall or credit any surplus, and that this should not be allowed to deprive tenants of their entitlement to refer the amount of the charges to the FTT.

Mr Barton also challenged the reasoning of the Lands Tribunal in Home Group and suggested that there was no need for a “causative link” between the costs incurred by the landlord and the charge payable by the tenant. He referred to section 19(2) of the 1985 Act which applies where a service charge is collected in advance, and provides that after the relevant costs have been incurred: “… any necessary adjustment shall be made by repayment, reduction or subsequent charge or otherwise”. Mr Barton focused on the words “or otherwise” and submitted that this left landlords free to adopt the approach taken by Platform of not carrying out any reconciliation or adjustment at all. For that reason, he suggested, there was no need for a causative relationship between the costs incurred and the service charges levied by the landlord for a charge to fall within section 18(1).

In responding to Mr Barton’s submissions on behalf of Platform, Mr Bhose KC began by referring to the regulatory framework in which private registered providers of social housing like Platform operate. Such housing providers are subject to the supervision of the Regulator of Social Housing and are required to comply with the Government’s published policy on rents for social housing, including by setting initial rents by reference to a formula related to average rents and earnings in their area, and by setting reasonable and transparent service charges which reflect the services being provided to tenants.

Mr Bhose confirmed that Platform’s tenancy agreements follow the model form of the National Housing Federation, which has been amended a number of times since the decision in Home Group without making any change to the basis on which service charges are dealt with. Under that model form the tenant is required to pay the same defined amount of service charge, in advance, for each month of the first period of his tenancy until 31 March. If notice is given under clause 1(4)(iii) the tenant is then required to pay a new defined service charge, again in advance, for each month of the following year, and so on. There is nothing which links any variation in the service charge to any alteration in the landlord’s estimated costs. The tenant is never liable to pay anything more for any previous period than has already been paid. There is no balancing charge and the tenant’s liability, throughout, is to pay a fixed, not a variable service charge.

Mr Bhose referred separately to the charge for heating and hot water which forms part of the total charges payable by Mr Barton in addition to the rent and service charge and which is in respect of the cost of heating the flat itself. This charge may be increased under clause 1(4)(iv) more frequently than once a year but, Mr Bhose submitted, that was not sufficient of itself to result in a different conclusion, or make the heating charge a service charge within the meaning of section 18(1).

Mr Bhose also referred to section 53 of the Leasehold and Freehold Reform Act 2025, which is not yet in force. When it comes into force this will bring some additional service charges within the scope of some of the protections afforded by section 18 to 30 of the 1985 Act. It will achieve this by substituting new subsections 1 and 2 in section 18 which will distinguish between a “service charge” and a “variable service charge”. A “service charge” will be any amount payable by a tenant of a dwelling as part of or in addition to the rent which is payable directly or indirectly for the purpose of meeting or contributing towards the relevant costs. A “variable service charge” will be a service charge the whole or part of which varies or may vary according to the relevant costs. In effect, this rebrands the service charges which currently fall within the definition in section 18(1) as variable service charges. This rebranding is accompanied by changes to section 19 to 20F, and sections 30D and 30E, which apply these provisions to variable service charges only, leaving the rest of the statutory protections applying to all service charges as defined in the new section 18(1). In future, therefore, tenants who pay a fixed service charge will be entitled to apply to the FTT under section 27A for a determination of the amount they are required to pay, but that amount will not be limited by section 19, which will continue to apply a statutory test of reasonableness only to variable service charges.

The relevance of these changes, Mr Bhose suggested, was that Parliament had proceeded on the basis that charges which are fixed at the start of a 12-month accounting period are presently not “service charges” within the meaning of section 18(1). It had proceeded, in enacting section 53, on a particular interpretation of section 18(1) which assumed that the decision in Home Group was correct. In support of that submissions Mr Bhose referred to paragraph 275 of the Explanatory Notes to the 2025 Act which provides as follows:

“Section 53 makes a number of technical amendments to the 1985 Act to extend part of the existing regulatory framework to cover fixed service charges. Under current provisions there is no regulation of fixed service charge, which are those charges where the charges are fixed at the start of a 12-month accounting period. This can be based on a prescribed formula, or a regular landlord assessment of cost, or some other mechanism.”

Mr Bhose quite properly pointed out that there is uncertainty about the extent to which amendments to a statute which have not yet been brought into force can be relied on as an aid to the interpretation of the unamended statute (see R (BA (Nigeria)) v Secretary of State for the Home Department ([2010] 1 AC 444), per Lord Hope, at [26]).

It does not seem to me to be necessary to rely on the form which section 18 will take once section 53 of the 2025 Act is brought into force. The answer to the appeal is already clear. Nothing which Mr Barton was able to say in support of the appeal has persuaded me that the decision in Home Group was wrong. The distinction which he sought to draw between a “fixed” and a “variable” service charge, although it is a convenient shorthand, does not reflect the language of section 18, which refers only to service charges. The fact that the service charge which Mr Barton is required to pay can be varied every year is not sufficient for his purposes. Nor do I believe that section 19(2) assists him or that the words “or otherwise” will bear the weight he placed on them. Section 19(2) is concerned only with service charges, as defined in section 18(1), and provides statutory recognition that a periodic reconciliation of accounts, by one means or another, is an essential feature of the charges so defined.

To be a service charge within the meaning of section 18(1), as currently drafted, it is necessary that the charge must vary or be capable of varying “according to the relevant costs”. Mr Barton’s service charge does not vary according to the relevant costs incurred by Platform. In practice it is set by Platform on the basis of its estimate of relevant costs, and other factors, but that is not a requirement of the agreement. It is then fixed and does not change whether the relevant costs are greater or less than had been estimated. No consideration is ever required to be given to the relevant costs actually incurred by Platform. In those circumstances, for the reasons given in Home Group, at [21], the service charge payable by Mr Barton is not a service charge within the meaning of section 18(1).

I also accept Mr Bhose’s submission regarding the separate charge for heating and hot water, which is not required by the tenancy agreement to be related in any way to the cost incurred by Platform in supplying those services.

In my judgment the FTT was correct in its conclusion that it had no jurisdiction to entertain an application under section 27A, 1985 Act in respect of the service charge payable by Mr Barton under his tenancy agreement. For the reasons I have given the appeal is therefore dismissed.