Residential service charges: validity of service charge apportionment

Landlords with existing residential leases that provide for a third party to determine the service charge will be concerned by an Upper Tribunal (Lands Chamber) decision. The tribunal held that a provision in a lease of a dwelling that provided for the apportionment of the service charge by a third party whose decision was final and binding was void.

Landlords should ensure that any apportionment accords with current guidance, but as this case shows, that alone is not a guarantee that the apportionment will be accepted, particularly in developments with different user groups where there is room for genuine differences of opinion over the benefit a service provides. Landlords that want certainty will be advised to grant residential leases that specify the proportion or the percentage of the service charge that each tenant will be liable for, otherwise they risk losing the ability to control the apportionment.