Our team looks at recent case of JLK Ltd v Esekwe and others, in which the Court considered the meaning of a “dwelling” in the context of service charge liability under the Landlord and Tenant Act 1985.
The Law
The Landlord and Tennant Act 1985 provides residential tenants with certain protections in relation to service charges. In particular, it allows leaseholders to challenge reasonableness of service charges in relation to residential “dwellings”. It is not available to leaseholders of commercial premises.
The key provisions of the statute are:
– Section 18, which defines a “Service Charge” as “an amount payable by a tenant of a dwelling as part of or in addition to the rent”;
– Section 19, which limits what a landlord can recover as service charges;
– Section 27A, which allows the landlord or tenant to ask the First Tier (Property Chamber) to determine whether a service charge, or proposed service charge is reasonable; and
– Section 38, which defines a “dwelling” as “a building or part of a building occupied or intended to be occupied as a separate dwelling, together with any yard, garden, outhouses and appetences belonging to it or usually enjoyed with it”.
Facts
A large commercial building was converted into units of accommodation intended for occupation by students. Each unit consisted of a single bedroom with a wardrobe and a desk, with all but six rooms having a further en suite shower, washbasin and WC. A communal kitchen and living area was shared between five units.
These units were disposed of pursuant to long leases which came right to use various communal facilities in the building. Heating and hot water were provided by a communal boiler.
It appears that the intention was for the long leaseholders to then receive an income from the students in occupation of the units.
The leases required the long leaseholders to pay an annual maintenance charge.
Problems arose when then communal boiler in the building stop working leaving the occupants without running water. This, in turn, lead to prohibition order being made under S20 of the Housing Act 2004 meaning that it was an offence to use or permit the building to be used.
Some of the long leaseholders brought an action under S27A challenging the reasonable of the service charge in these circumstances. This opposed on the basis that the units were not “dwellings” within the meaning of the statute.
Decision
Initially the Court decided that the units did constitute “dwellings”, but permission to appeal was granted.
The appeal Court disagreed. To be considered a “dwelling” under S38 the building, or part of the building must be “occupied or intended to be occupied as a separate dwelling”. It was held that the units were not intended to be occupied as “separate” dwellings. Rather, the bed-sitting rooms that comprised the units were only a part of a tenant’s dwelling, which in fact comprised of a further kitchen and lounge.
Therefore, the units themselves did not fall within the definition of a “dwelling” and the long leaseholders were not entitled to challenge their liability for the service charges under S27A.
Comment
The result for the long leaseholders is particularly harsh. Had the building been habitable, the leaseholders could have passed on the service charge to the occupiers. As it was, the leaseholders had lost their income and their ability to challenge the service charges.
The decision is helpful in that it provides some clarification on the concept of “dwelling” for the purposes of LTA 1985.
The Judge was critical of the wording of S38, as it includes the word “dwelling” when that is what it is trying to define.
Our Dispute Resolution Team at Morrisons specialise in residential service charge advisory services and disputes.