12 Days of Christmas 2025 - Day 8

Bradley v Abacus Land 4 Ltd [2025] EWCA Civ 1308

For Day 8 of our 12 Days of Christmas feature, we look at a Court of Appeal decision relating to the exercise of landlord’s discretion when allocating cost in residential service charges.

The facts

The dispute arose between Abacus Land 4 Ltd (Abacus) (the landlord and freehold owner of a mixed-use building) and long leaseholders of residential flats within it. The building included a basement gym originally for the exclusive use of the leaseholders. Under the lease terms, the leaseholders were required to pay service charges for maintaining the building, including the gym, in such amount “…as the landlord acting reasonably shall determine”.

In 2013, Abacus granted a long lease of the gym to a commercial operator, and although the residents retained rights of access, after 2020 their use became more limited. Despite this, the landlord continued to allocate 100% of the gym’s maintenance costs to the residential leaseholders as part of the service charge. The leaseholders challenged this apportionment under section 27A of the Landlord and Tenant Act 1985 (LTA 1985), arguing it was unfair given they no longer had exclusive use.

The decision

The First-Tier Tribunal (FTT) initially sided with Abacus, but the Upper Tribunal (UT) overturned that decision, finding the cost allocation unreasonable.  Abacus appealed to the Court of Appeal.

The Court of Appeal allowed Abacus’ appeal, restoring the FTT’s decision.  The court emphasised that the lease gave Abacus primary discretion to determine service charge allocations, subject only to the requirement that such decisions be reasonable. The FTT’s role under section 27A of the LTA 1985 is not to decide what it considers fair or reasonable, but to assess whether the landlord’s decision falls within a range of reasonable outcomes. The court found that the FTT had correctly applied this test by asking whether Abacus’ decision was “one that no reasonable landlord could have made”. Since the gym remained part of the common parts and the residents retained access, Abacus’ decision to recover the full cost from the residents was not outside the bounds of reasonableness.

The court rejected the UT’s approach, which had applied a stricter “objective reasonableness” test more relevant to an application under section 19 of the LTA 1985. It was held that this was inappropriate in the context of section 27A, where the question is whether the landlord breached the lease, not whether the decision was objectively the best or fairest.

Conclusions

This case should give landlords comfort that their discretion to allocate service charges "in a reasonable amount" in residential leases is a broad one. Landlords are not required to act in a way that is objectively fair to all parties provided their decision is within a reasonable range. The case is also a good reminder of the true extent of the FTT’s jurisdiction under section 27A of the LTA 1985.

And now for a festive joke to get you in the Christmas spirit. Why did the Judge refuse to eat Christmas pudding? Because it was full of appeal!