Mixed-tenure developments and service charges

The Upper Tribunal’s decision in Notting Hill Home Ownership Ltd v Samoail and others [2026] UKUT 235 (LC) provides an important reminder that service charge liability is determined by the terms of the lease, not by the costs a landlord happens to incur under a superior lease.  

The case will be of particular interest to housing associations, freeholders, developers and management companies involved in mixed-tenure developments, where multiple layers of leases and management arrangements can create a mismatch between the costs a landlord pays and those it can recover from leaseholders.  

The dispute 

The appeal concerned Notting Hill Home Ownership Ltd (“NHHO”), which held a headlease of Block V1 at the Viridian Apartments development in Battersea. Under its headlease, NHHO was required to contribute towards the costs of maintaining and managing the wider estate, including communal gardens, concierge services and other shared facilities.  

However, the shared ownership leaseholders occupying Block V1 had no right to use many of those facilities. The block had its own entrance, was physically separated from other parts of the development and did not benefit from a range of amenities available elsewhere on the estate.  

Despite this, NHHO sought to recover the full amount of the service charges it paid under the headlease from its leaseholders. The leaseholders challenged those charges before the First-tier Tribunal, arguing that the leases did not require them to contribute towards facilities and services from which they derived no contractual benefit.  

The landlord’s case 

NHHO argued that the leases contained an obvious drafting mistake. It contended that references to the “estate” should be interpreted as references to the wider “development”, thereby allowing the landlord to recover all service charge liabilities arising under its headlease.  

Alternatively, NHHO applied under section 35 of the Landlord and Tenant Act 1987 to vary the leases on the basis that they failed to make satisfactory provision for the recovery and calculation of service charges.  

The Upper Tribunal’s decision 

The Upper Tribunal dismissed the appeal and upheld the First-tier Tribunal’s conclusions.  

No obvious drafting error 

The Tribunal accepted that the leases were not perfectly drafted. However, it found there was no clear drafting mistake capable of being corrected through contractual interpretation. The service charge provisions made commercial sense as written and deliberately limited recovery to expenditure incurred in connection with the building occupied by the leaseholders.  

The Tribunal therefore refused to adopt an interpretation that would significantly expand the leaseholders’ liabilities. 

No basis for varying the leases 

The Tribunal also rejected the application to vary the leases under section 35. 

It held that the leases already made satisfactory provision for service charge recovery, allowing the landlord to recover expenditure reasonably incurred in relation to the repair, maintenance, management and servicing of the building. The fact that NHHO had accepted broader obligations under its headlease did not render the subleases defective or unsatisfactory.  

The Tribunal gave short shrift to the argument that leaseholders benefited from simply being near facilities they could not use. Whilst residents might appreciate the wider estate being well maintained, that indirect benefit was insufficient to justify imposing liability for those costs.  

Perhaps most significantly, the Tribunal observed that the real difficulty arose from the headlease itself rather than the shared ownership leases. NHHO had assumed obligations under the headlease that went beyond what it could recover from its leaseholders. That commercial mismatch was not something the Tribunal was prepared to correct.  

Why does this matter? 

The decision does not establish that leaseholders can only be charged for services they personally use. It remains perfectly possible for a lease to require contributions towards facilities that provide little or no direct benefit to a particular leaseholder.  

What the case does confirm is that such liabilities must be clearly set out in the lease. In the absence of express wording, courts and tribunals are unlikely to rewrite contractual arrangements or imply wider service charge obligations.  

The judgment reinforces several important principles: 

• service charge liability depends on the wording of the lease; 
• headlease liabilities do not automatically pass through to underleases; 
• alleged drafting errors will only be corrected where both the error and the solution are obvious; and 
• section 35 of the Landlord and Tenant Act 1987 is not a mechanism for rescuing a landlord from an unfavourable lease structure.  

Practical lessons 

For housing associations, freeholders and management companies, the key lesson is in the importance of ensuring consistency between headleases, management documentation and occupational leases. 

Where a landlord agrees to contribute towards estate-wide costs but grants leases that only permit recovery of building-specific expenditure, any resulting shortfall may ultimately rest with the landlord. As this case demonstrates, the Tribunal is unlikely to intervene simply because the arrangement has become commercially disadvantageous.  

The decision therefore serves as a timely reminder that careful drafting at the outset remains the best protection against service charge disputes and unrecoverable management costs. 

Clive Adams is a Partner at Birketts.