Fladgate’s Real Estate Disputes team has successfully secured permission from the Court of Appeal on behalf of a landlord client seeking to pursue a second appeal against a ruling that a mixed-use property was a “dwelling” within the meaning of the Landlord and Tenant Act 1985. The claim could have wide-reaching ramifications for property owners, investors and occupiers.
Background
The Landlord and Tenant Act 1985 (the “LTA 1985”) contains a range of protections for occupiers of residential premises which are not available to commercial tenants. Service charges imposed on residential tenants must be “reasonably incurred”, and landlords of such leases are required to go through an often-treacherous consultation process before passing on charges for “qualifying works” or “qualifying long-term agreements”. If that process is not followed to the letter, the landlord may find itself unable to recover more than £250 from each tenant – leaving a significant shortfall against its actual expenditure.
By section 18(1) of the LTA 1985, these protections are afforded to any tenant of “a dwelling”. Section 38 provides a less-than-helpful definition of “dwelling” as “a building or part of a building occupied or intended to be occupied as a separate dwelling…”
Unsurprisingly, this circular definition has been fertile ground for litigation over the years. Most cases have focused on whether the premises in question are “separate” (where, for instance, kitchen facilities are shared), but surprisingly few have arisen in the context of a demise let for mixed business and residential use.
The claim
The availability of the LTA 1985 protections arose in the immediate case after the landlord brought a claim for unpaid service charges. The tenant argued that its lease, which permits use as “offices (and ancillary residential use)”, amounted to a “dwelling” for the purposes of the LTA 1985 and that the reasonableness of the service charges should, therefore, be referred to the First-tier Tribunal (Property Chamber) (the “FtT”) for determination.
At a first hearing in the County Court in January 2024, DDJ Gill agreed with the tenant and made a referral to the FtT. On appeal in October 2024, HHJ Judge Hellman upheld the first-instance decision and found that the policy considerations underlying the LTA 1985 were different to those for other comparable pieces of legislation, such as the Rent Act 1977 or the Housing Act 1988.
However, such a finding gives rise to obvious abnormalities. As acknowledged in HHJ Hellman’s judgment:
“If the Premises are a “separate dwelling”, the tenant would be entitled to the benefits of the service charge protections under the LTA 1985 even if the Premises were only ever used as offices.”
The landlord, therefore, applied for permission to appeal to the Court of Appeal.
Second appeal
In February 2025, the Court of Appeal held that the landlord’s appeal has a “real prospect of success” and allowed the application to proceed to a final hearing. In view of the lack of existing authority, the Court also accepted that the application raises an important point of principle which requires judicial determination.
Comment
Given the prevalence of mixed-use premises, it is perhaps surprising that there is no existing authority on whether a tenant of a mixed office/residential demise can claim the benefit of the service charge protections under the LTA 1985. Most landlords and investors would naturally prefer to avoid the administrative burden and financial risks that come with being subject to those protections, and the final decision is one that many in the industry now eagerly await.
The appeal is being conducted by Partner Liam Bell and Senior Associate Jordan McAndrew.
Case: Cloisters Business Centre Management Company Limited v Anvari & Anr (CA-2024-002713)
