How does Section 27A (6) of the Landlord and Tenant Act 1985 apply to agreements between landlords and leaseholders or tenants?

There have been significant changes in the UK property law after the recent Supreme Court decision in Aviva Investors Ground Rent GP Ltd and another v Williams and others of 2023. These changes apply to section 27A (6) of the tenants-increasingly-love-corporate-landlords'>Landlord and Tenant Act 1985.

The purpose of Section 27A(6) is to ensure that tenants are not bound by agreements that restrict their right to challenge servicechargesorted.co.uk/blogs/collecting-service-charge-debts-in-uk'>service charges or impose unfair conditions on the determination of such matters. It helps protect tenants' rights to seek a fair resolution through the appropriate legal channels, such as the First-tier tenancy-agreements-made-easy'>planetrent.co.uk/blog/could-a-tax-tribunal-ruling-mean-btl-investors-avoid-3-stamp-duty-surcharge'>Tribunal or relevant court, without being unduly constrained by prior agreements.

Section 27A (6) of the tenants-increasingly-love-corporate-landlords'>Landlord and Tenant Act 1985, states that an agreement made by the tenant of a dwelling (excluding a post-dispute arbitration agreement) is void if it attempts to establish a specific way or requires specific evidence for determining any question that could be the subject of an application under subsection (1) or (3) of the same section.
This means that if a tenant and a tenants-increasingly-love-corporate-landlords'>landlord enter an agreement that specifies a particular method or requires specific evidence for determining a question related to servicechargesorted.co.uk/blogs/collecting-service-charge-debts-in-uk'>service charges, that question could be brought before the First-tier tenancy-agreements-made-easy'>planetrent.co.uk/blog/could-a-tax-tribunal-ruling-mean-btl-investors-avoid-3-stamp-duty-surcharge'>Tribunal (Property Chamber) by subsection (1) or (3) of Section 27A, then that provision within the agreement would be void.

When do agreements between landlords and tenants stand and when can they be voided?

It is important to note that this provision does not invalidate the entire agreement between the tenant and the tenants-increasingly-love-corporate-landlords'>landlord but only renders the specific provision related to the determination of questions regarding servicechargesorted.co.uk/blogs/collecting-service-charge-debts-in-uk'>service charges void.

Background on Section 27A paragraph 6 case law

Section 27A (6) of the tenants-increasingly-love-corporate-landlords'>Landlord and Tenant Act 1985 has historically received limited attention until the Williams v Aviva case. This case has effectively overturned several previous judgments, including Windermere Marina Village v Wild (2014) UKUT 163 (LC) and Oliver v Sheffield City Council (2017) EWCA Civ 225.

The jurisdiction of the First-tier tenancy-agreements-made-easy'>planetrent.co.uk/blog/could-a-tax-tribunal-ruling-mean-btl-investors-avoid-3-stamp-duty-surcharge'>Tribunal (Property Chamber) (FTT) has expanded over the years, allowing it to determine servicechargesorted.co.uk/blogs/collecting-service-charge-debts-in-uk'>service charge disputes. Section 27A (6) of the 1985 Act plays a crucial role in this context, eliminating previous tenant agreements that attempt to dictate how questions under section 27A (1) or (3) should be determined.

What the Tribunal said in Windermere Marina Village v Wild

Windermere Marina Village v Wild gave section 27A (6) a broad interpretation. It helped create provisions that allowed the tenants-increasingly-love-corporate-landlords'>landlord's surveyor to define and determine "fair and reasonable" servicechargesorted.co.uk/blogs/collecting-service-charge-debts-in-uk'>service charge proportions void and unenforceable.

What the Tribunal said in Gater V Wellington Real Estate 2014

Gater v Wellington Real Estate (2014) UKUT 561 (LC) affirmed Windermere, stating that the FTT should completely disregard the tenants-increasingly-love-corporate-landlords'>landlord's decision-making process.

Although Oliver v Sheffield City Council (2017) EWCA Civ 225 upheld the Windermere appeal, it was not the central issue in the case. Lord Justice Briggs held that if the mechanism for determining distribution were clear, it would not violate section 27A (6), but if it were at the tenants-increasingly-love-corporate-landlords'>landlord's discretion, it would be void. A crucial turning point came with the Fairman and others v Cinnamon (Plantation Wharf) Limited (2018) UKUT 0421 (LC) case. This case interpreted a clause allowing the tenants-increasingly-love-corporate-landlords'>landlord to alter fixed servicechargesorted.co.uk/blogs/collecting-service-charge-debts-in-uk'>service charge percentages as requiring FTT involvement. This indicated that section 27A (6) didn't strike down entire provisions but deprived the tenants-increasingly-love-corporate-landlords'>landlord of the ability to regulate apportionments.

The Williams case complicated matters further. Here, servicechargesorted.co.uk/blogs/collecting-service-charge-debts-in-uk'>service charges were allocated as fixed percentages. The Upper tenancy-agreements-made-easy'>planetrent.co.uk/blog/could-a-tax-tribunal-ruling-mean-btl-investors-avoid-3-stamp-duty-surcharge'>Tribunal ruled that this provision was completely void and unenforceable, thus reversing the FTT's initial decision. Aviva Investors then appealed to the Court of Appeal, which held that the lease provision for re-apportionment was only void when the tenants-increasingly-love-corporate-landlords'>landlord exercised it. Both parties could apply to the FTT to determine servicechargesorted.co.uk/blogs/collecting-service-charge-debts-in-uk'>service charge apportionments.

This led to the Leaseholders' appeal, ultimately reaching the Supreme Court.

Aviva maintained that the earlier cases, including Windermere and Oliver, were wrong. Lord Briggs agreed and acknowledged his own mistake in the Oliver case. He concluded that section 27A (6) was not intended to broaden the FTT's jurisdiction as much as it had in previous decisions.

So, what does the Aviva Investors v Williams Supreme Court ruling mean for landlords and property managers?

If tenants-increasingly-love-corporate-landlords'>landlords and property managers have leases that specify a fair and reasonable proportion and grant the power to reapportion servicechargesorted.co.uk/blogs/collecting-service-charge-debts-in-uk'>service charges, they will surely experience some relief. They can follow the lease's terms, subject to FTT's oversight, to ensure their actions are contractually valid.

Summary of the Aviva Investors v Williams Supreme Court decision for servicechargesorted.co.uk/blogs/collecting-service-charge-debts-in-uk'>service charge apportionment clauses for fair and reasonable apportionment

This decision reverts to the legal position pre-Windermere, allowing tenants-increasingly-love-corporate-landlords'>landlords to exercise their rights within the boundaries of reasonableness. However, leaseholders can still challenge the decisions if they believe they are unfair or unreasonable, ensuring there are checks and balances in place in property management.