Over the past year, tribunals across England and Wales have been busier than usual with service charge disputes, and a recent run of cases has shifted the ground beneath both landlords and tenants. One of the most significant, Fitzroy Place Residential Ltd and others v Lovitt and others, decided in 2024, made it clear that a landlord cannot make a permanent, blanket change to how service charges are calculated — even if the lease appears to give them that discretion. For anyone renting or leasing commercial space in a mixed-use building, that ruling changes the assumptions you can safely make about your bills.
I’ve been following these cases closely because they keep coming up in conversations with business owners who lease commercial space. The pattern is almost always the same: a large, unexpected bill arrives, the lease seems to allow it, and the tenant feels powerless. But the recent rulings have drawn clearer lines around what a landlord can and cannot do. Here’s what you actually need to know.
How Service Charge Discretion Actually Works After Fitzroy Place
The core issue in Fitzroy Place was straightforward: the lease gave the landlord a “primary” method for calculating each tenant’s share of the service charge, based on internal floor area. It also included a clause allowing the landlord to use a different method that was “fair and reasonable” in the circumstances. The landlord decided the primary method was unfair to commercial tenants and switched to a completely different calculation for everyone, permanently. The Upper Tribunal said no — that discretion was meant for individual items or types of expenditure, not for rewriting the entire apportionment system.
What this means in practice is that if your lease contains a discretion clause, you cannot assume the landlord can use it to permanently shift cost burdens between commercial and residential tenants. My view is that any tenant facing a sudden change in how their service charge is calculated should ask for the specific item of expenditure that triggered the change. If the landlord cannot point to one, the change is likely vulnerable to challenge.
Why the Bradley Case Matters for Mixed-Use Buildings
The Bradley v Abacus Land 4 Ltd case is a textbook example of how quickly things can go wrong in a mixed-use building. The property had been converted from an office block to include residential flats, four commercial units, and a gym. Originally, the gym was for residents only. In 2013, the freeholder granted a lease to a gym operator on terms the Upper Tribunal later described as a “remarkably good deal” — the landlord paid all utilities, maintained the equipment, and the gym tenant paid no service charge at all.
When a dispute arose with the gym tenant, the landlord agreed to refurbish the gym at a cost of over £200,000 and forgo rent for three years. It then tried to pass those costs onto the residential leaseholders. The tribunal found that from 2020 onwards — when residents had restricted access to the gym — charging them the full amount was neither reasonable nor fair. But here is the critical detail: for the period between 2013 and 2020, the tenants could not challenge the charges because they had paid them without complaint and had accepted the landlord’s use of gym rent to reduce their bills.
If you are a commercial tenant in a mixed-use building, I would recommend reviewing your service charge demands as soon as they arrive. If something looks off, raise it in writing immediately. A tenant landlord lawyer can help you understand whether the apportionment method being used is consistent with the lease terms and recent case law.
Where Tenants Lose Their Right to Challenge
The Poplar Housing v Khan case illustrates a trap that catches many tenants. The tenant tried to challenge the reasonableness of costs for major works carried out ten years earlier. The tribunal ruled that because he had made multiple payments over that period without any indication they were being made under protest, those payments amounted to an “implied admission” — the costs were payable in full.
In G&A Gorrara Ltd v Kenilworth Court Block E RTM Co Ltd, the Upper Tribunal clarified that a series of unqualified payments does not automatically mean you have agreed to the charges. Other factors matter, such as whether you had enough information to challenge the costs at the time. In that case, the tenants had been given annual accounts showing total estate spending but not a breakdown per block, so they could not reasonably have known which costs applied to their building.
The practical takeaway is this: if you pay a service charge demand that later turns out to be unreasonable, your silence can be used against you. Always respond in writing, even if it is just to say you are paying under protest while you review the figures. For commercial tenants, this is especially important because the sums involved are often much larger than in residential leases.
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| Case | Key Issue | Outcome for Tenant |
|---|---|---|
| Fitzroy Place v Lovitt | Landlord made permanent change to apportionment method | Tenant won — discretion limited to ad hoc items |
| Bradley v Abacus Land 4 Ltd | Landlord passed gym costs to residents after restricting access | Tenant won for post-2020 period; lost for 2013–2020 due to payment without protest |
| Poplar Housing v Khan | Tenant challenged costs 10 years after payment | Tenant lost — payments implied admission |
| Tower Hamlets v Lessees of Brewster House | Landlord sought to recover £8m for structural defects | Tenant won — defects not covered by maintenance covenant |
What to Do When You Receive a Service Charge Demand
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Check the Apportionment Method Against Your Lease
Start by comparing the service charge demand to the method set out in your lease. If the lease specifies a primary method — such as by floor area — and the landlord has used something else, ask for a written explanation of which specific expenditure item triggered the change. If the landlord cannot provide one, the change may be invalid under the Fitzroy Place ruling. Keep a copy of every demand and your written queries. A guide to service charge transparency can help you identify what information you are entitled to request.
Challenge Unreasonable Costs Immediately
Do not wait. The Poplar Housing case shows that paying without protest for even a few years can bar you from challenging those costs later. If you believe a charge is unreasonable, write to the landlord or managing agent within 30 days of receiving the demand. State clearly that you are paying under protest and that you reserve the right to challenge the amount through a tribunal under section 27A of the Landlord and Tenant Act 1985. If the sums are significant, consider consulting a tenant landlord lawyer before making any payment.
Understand What Costs Can and Cannot Be Recovered
The Tower Hamlets case established that structural defects — problems that existed when the building was built — are not covered by a standard service charge covenant to maintain or repair. If your landlord tries to pass on costs for fixing inherent design flaws, you have strong grounds to challenge them. Similarly, costs for improvements that go beyond maintenance, such as upgrading common areas to a higher standard than originally provided, may not be recoverable unless the lease specifically allows it. Review the lease carefully for any clause that defines “improvement” separately from “repair” or “maintenance.”
Keep Records of Every Communication
In the Gorrara case, the tenants succeeded partly because they had insufficient information to challenge the charges at the time. If you keep a clear paper trail — including emails, letters, and notes of phone calls — you can demonstrate that you did not simply accept the charges. A simple filing system, such as a accordion file folder for lease documents and service charge demands, can make it much easier to produce evidence if a dispute arises.
Frequently Asked Questions
Can my landlord change how my service charge is calculated without my agreement? ▾
What happens if I pay a service charge demand I disagree with? ▾
Can I be charged for structural defects through the service charge? ▾
How long do I have to challenge a service charge? ▾
What information is my landlord required to provide with a service charge demand? ▾
Can I deduct disputed service charges from my rent? ▾
The recent court rulings have given tenants clearer grounds to challenge unreasonable service charges, but only if you act quickly and keep proper records. My advice is straightforward: review every demand as soon as it arrives, raise any concerns in writing immediately, and never assume that paying under silence is safe. If this was useful, you might also want to read Navigating Tenant Service Charge Year-End Adjustments in the UK.
Sources and Further Reading
Commercial Renting vs Buying in the UK: A No-Nonsense Comparison — A practical look at whether leasing or purchasing commercial space makes more financial sense for your business.
Tips for Understanding Your Landlord Service Charge Budget in the UK — How to read and question the annual budget your landlord provides for service charge costs.
UK Property Service Charge Provisions Put to the Test. Hogan Lovells, 2024.
New Rules for Service Charge Accounting. Cox Hinkins, 2025.
