E14 Limited v Limehouse East Management Limited

Introduction

1. This is an appeal by the leaseholder of units in Basin Approach, Limehouse against a decision of the First-tier Tribunal about service charges, in its jurisdiction under section 27 A of the Landlord and Tenant Act 1985 . The appellant was represented by its director, Mr Jason Avraamides, and the respondent by Mr Carl Brewin of counsel; I am grateful to them both for their helpful arguments, and for their patience with my many questions during the hearing. Basin Approach, Block F, and the appellant’s leases

2. Basin Approach is a development of 180 units spread across 6 apartment blocks and 9 townhouses in Limehouse, London E14. It was constructed by Bellway Homes in 1999/2000 and is one of a number of developments on the Limehouse Basin next to the river. This appeal is about Block F, which comprises 10 residential units on the first floor and above and three units on the ground floor of which the appellant holds long leases. They are known as units 177, 178 and 179, Basin Approach; I am going to refer to them as the ground floor units (the “GFUs”). Leases of the residential units on the first floor and above (which I call the “Apartments”, echoing the definition in the appellant’s leases) were granted before the leases of the GFUs.

3. Here is a plan of the ground floor of Block F:

4. The plan above is taken from the lease of unit 1 of the GFUs, and the same plan appears in each of the three GFU leases. The three units can be seen; Unit 3 has its own external door; access to units 1 and 2 is gained through the double doors (middle left), through a courtyard, and through the door that I have marked with a right-facing arrow. There is a separate external door, a lift and a staircase to the Apartments, none of which are used by the occupiers of the GFUs. The blank rectangles are garages, demised to the lessees of the Apartments, except for the one that I have marked with a left-facing arrow which is a bin store; the leases of the Apartments and the GFUs all grant the right to use the bin store.

5. The appellant holds leases of the three GFUs, granted in July 2003 for a term of 200 years. They were let as commercial units, and the leases prohibited residential use. I believe the leases were identical and I refer to the lease of unit 1. There were five parties: the Landlord (British Waterways Board), the Developer (Bellway Homes Limited), the Basin Company, the Estate Company (the respondent) and the Tenant (the appellant). The lease defines “the Estate” to mean the whole of Basin Approach with its six blocks, “Limehouse Basin” to mean a much larger area surrounding the Estate, and “the Building” to mean means Block F as described in paragraphs 2 and 3 above, “containing Apartments and commercial units”. Crucial to the appeal are the following: “Apartments” means the residential apartments in the building and an Apartment means any one of them. “Commercial Block” means that part of the Building comprising commercial units only and excluding any of the Apartments “Relevant percentage”: Part A Proportion of 20.78614% plus the Part B Proportion of 0.18864%”

6. The Part A Proportions in the three leases of the GFUs add up to 100%; units 2 and 3 pay just over 31% and 47% respectively.

7. The tenant covenanted to make the following payments: a. To the Developer, the “Insurance Contribution” b. To the Estate Company, the Estate Service Charge c. To the Basin Company, the Basin Service Charge

8. Taking those out of order, the Basin Service Charge is defined as a reasonable proportion of the Basin Company’s expenditure on carrying out a number of obligations, including for example security and landscaping. It is not in issue in this appeal. The Insurance Contribution is defined as the “Part A Proportion of the sums expended by the Developer or the Landlord or the Estate Company from time to time in performing the Developer’s Covenant in the Eighth Schedule.” The Eighth Schedule requires the Developer (etc) “to keep the Building and the Estate insured to the full costs of reinstatement.”

9. Pausing there, it can be deduced from what has been said above that the lease requires the tenant to pay 20.78614% of the cost of insuring the Building and the Estate. Therefore the leases of the three GFUs together enable the Developer, or whichever party is insuring, to recover 100% of those costs from these three units, on an estate of 180 units. I assume it has not done so. Mr Avraamides pointed out that that was not what the parties intended, and no doubt he is right. This provision is not in issue in the appeal, but it is worth noticing. It does not inspire confidence in the drafting.

10. Now for the service charge, which is in issue in this appeal. The tenant is required to pay the Relevant Proportion of the Estate Company’s expenditure on its obligations set out in the Sixth Schedule. The Sixth Schedule is in three parts, Part A labelled “Commercial Block Costs”. Part B headed “Estate Costs” and Part C headed “Costs applicable to Parts A and/or B”. The tenant is required to pay the Part A Proportion of the items in Part A, the Part B Proportion for the items in Part B, and for Part C there is a rather complicated provision requiring the tenant to pay one proportion or the other depending upon whether the cost was “relative to the matters mentioned” in Part A or Part B. Part C includes items such as operating and maintaining the light, water and power supply, operating a reserve fund, enforcing covenants and so on. The items in Part B includes maintaining the roads and pathways on the Estates, refuse facilities, a slipway and so on. Parts B and C of the Sixth Schedule are not in issue in this appeal, which is about Part A.

11. So back to Part A, headed “Commercial Block Costs”, of which the tenants of the GFUs together pay 100%. Part A comprises eight paragraphs, each of which expressly refers to the Commercial Block, and includes obligations to decorate the exterior and interior of the Commercial Block, and to repair and maintain the main structure of the Commercial Block, including its foundations, roof and the exterior load-bearing walls, its passages, landings and entrances, its gas and water pipes, its entrances and its forecourts and so on. The Estate Company is also to maintain a video entry phone system, to keep the “entrance halls and forecourts” lit and tidy, as well as the “amenity space and landscaped area (if any)”, and to arrange for rubbish collection. It is to arrange for the inspection and insurance of any specialised plant and equipment in the Commercial Block, except for the lift.

12. This appeal is largely about the meaning of the term “Commercial Block”, and therefore about how much the tenants of the GFUs have to pay, because the extent of the Estate Company’s obligations under the Sixth Schedule cannot be known unless we know what the Commercial Block is. The original definition is set out above. In 2016 the leases were varied, because the respondent wanted to convert them to residential units (which was prohibited by the leases). Consent was given, and the leases were varied to allow residential use and to change the definitions of the Apartments and of the Commercial Block to the following: ‘“Apartments” means the residential properties in the Building on the first floor and above of the Building and an Apartment means any one of them “Commercial Block” means any part of the Building comprising commercial units and including units on the ground floor formerly used as commercial units (including those units registered under HMLR title numbers EGL462597, EGL451228 and EGL451230) but now converted into and used as residential units only but excluding the Apartments’

13. The principal issue in this appeal is the meaning of Commercial Block. Does it mean, as the appellant says, just the three demised premises registered under the stated title numbers, i.e. just the GFUs themselves? Does it mean the whole Building, other than the demised units, as the respondent says? Or does it mean something else?

14. A further element of the relevant factual background is that the leases of the Apartments were granted before those of the GFUs, and provided for the ten Apartments to share 100% of the cost of maintaining the Building etc. Part A of the Sixth Schedule to those leases matched Part A of the Sixth Schedule to the GFU leases but referred to the Building rather than to the Commercial Block; the obligations set out in it are, I think identical save that in the Apartment leases there is an obligation to maintain the parking area which does not appear in the GFU leases. And there is no exclusion of the obligation to maintain the lift. The proceedings in the FTT

15. The appellant, and lessees of flats in Blocks C and D (not involved in the appeal), applied to the FTT for a determination about service charges in its jurisdiction under section 27 A of the Landlord and Tenant Act 1985 . The service charge years in issue were 2020/21 to 2023/24; the appellant challenged a number of items of expenditure on grounds of reasonableness, and also sought “a determination of the relevant percentage payable” for service charges for its three flats. That was how the FTT put it; what it decided about that issue was summarised by it on the first page of the decision as follows: “The terms of the updated leases in respect of Building F require the third applicant [E14 Limited, the appellant] to contribute to the costs of maintaining the whole Building, including all areas on, above and below ground level except where expressly excluded i.e. lifts.”

16. It is apparent from that determination that what was in issue was not the percentage payable (clearly set out in the lease) but the construction of the lease. I am going to focus on that, as the principal issue in the appeal, and discuss what the FTT decided and the appeal against that decision. I can then deal briefly with grounds 2 and 3, which relate to what the FTT decided about specific charges.

17. In its paragraphs 95 and following, under the heading “Costs to the former Commercial Units” the FTT explained the issue about the definition of “Commercial Block.” It recorded Mr Avraamides’ argument that it meant just the three registered titles, and that it does not include any shared or common areas, nor anything above the ground floor, nor anything on the ground floor except the demised units. He accepted that the GFU tenants were required to pay for services within their units, for example an entry phone system. He complained that the three GFUs together were now being required by the respondent to pay 12.9% of its total expenditure on the building, which was not the percentage the lease provided for and did not relate to the Commercial Block which he regarded as the three units only. Jumping ahead a little, it was explained to me at the appeal hearing that the respondent apportions its expenditure on the Building between all 13 units on the basis of floor area; hence the 12% for the GFUs.

18. The FTT recorded Mr Brewin’s argument that the re-definition of the terms in 2016 meant that the “Commercial Block” was now co-extensive with the building (but excluding the demised areas). He argued that that was effected by the change from the words “that part of the Building” in the original definition (see paragraph 5 above) to “any part of the Building” in the new definition (see paragraph 12 above). He submitted that it would be unfair for the appellant not to contribute to the maintenance of the building; and he argued that the express exclusion of liability for the lift meant that everything else was intended to be included.

19. The FTT agreed with Mr Brewin and said: “The tribunal accepts the respondent’s interpretation and effect of the varied leases, to that put forward by the third applicant. The tribunal finds that the variations both intended to and do include the third applicants three units as part of Building F and do not amount to a separate standalone entity as submitted by Mr Avraamides. The tribunal finds therefore, the third applicant is required to contribute to the costs incurred in respect of Building F and the estate save where expressly excluded.” The appeal about the definition of the “Commercial Block”

20. The appellant appeals that conclusion, with permission from this Tribunal.

21. I have to confess that at the outset of the hearing I had understood the appellant to be arguing that the Commercial Block was the ground floor, being that part of the Building that included the GFUs and did not include the Apartments. However, in the course of the hearing I came to understand that Mr Avraamides insists that “the Commercial Block” means the three GFUs only and is co-extensive with their registered titles. A key part of his reasoning was that there are two separate charging pools; the leases of the Apartments already provided for the ten Apartments to pay percentages that add up to 100% of the costs of maintaining the Building, and the tenants of the GFUs have to pay only for something specifically provided to them within their demised premises, such as an entry phone, or for example the cost of changes in the estate regulations for the GFUs that do not apply to the Apartments. Any wider interpretation of the Commercial Block leads to double recovery and cannot be right.

22. Mr Avraamides also argued that the leases include a provision that the tenant is not liable for anything that is already payable by a third party; as I said to him in the hearing, that provision is in Part C of the Sixth Schedule and has only the narrow effect that the tenant is liable to reimburse the landlord for the cost of rectifying structural defects only insofar as that is not paid for by insurance or by a third party.

23. Mr Avraamides’ argument cannot be correct. It would leave pretty much the entirety of Part A of the Sixth Schedule without any purpose. Schedule 6 Part A sets out 8 paragraphs-worth of obligations on the part of the Estate Company, the respondent, whose cost the appellant is required to share, and it makes no sense at all to suppose that either the original parties or the parties to the variation of the lease intended none of that to apply to the very tenants for whom it is specifically drafted with its express mention of the Commercial Block. Whatever “Commercial Block” means, it must extend beyond the demised premises. Otherwise there is no point in having a service charge at all. Mr Avraamides’ argument also makes irrelevant and pointless the exclusion of the lift since on his reasoning it is excluded anyway. Furthermore it means that the lease would have omitted a provision for the tenant to pay its share of benefits that it shares, such as the maintenance and repair of the building, its decoration inside and outside, the cleaning of the common parts, the rubbish collection and so on.

24. But neither can the FTT’s construction of the revised definition be correct, despite Mr Brewin’s valiant argument in its favour. If the parties intended the Commercial Block to mean “the Building” they would either have said so expressly, or they would have deleted the definition of the Commercial Block and for every instance of the term in the Sixth Schedule they would have substituted “the Building”. It is wholly implausible that so radical a change would have been made by the substitution of the words “any part” for “the part”. And the FTT appears to have given no consideration to the fact that if the Commercial Block is co-extensive with the Building then the Estate Company is entitled to recover 100% of its expenditure on the Building from the tenants of three of the 13 units. I acknowledge that the respondent has not sought to do so, but it is implausible that the leases of the GFUs would enable it to do so.

25. Neither party gave a clear account of what the Estate Company had charged the GFU tenants before 2016.

26. To understand what the revised definition means we have to go back to the words of the definition. I remind myself of the law as set out by the Supreme Court in Arnold v Britton [2015] UKSC 36 . Lord Neuberger said this at paragraph 25: "When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to "what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean", to quote Lord Hoffmann in Chartbrook Limited v Persimmon Homes Limited [2009] AC 1101 , para. 14. It does so by focussing on the meaning of the relevant words ... in their documentary, factual and commercial context. That meaning has to be assessed in the light of: (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial commonsense, but (vi) disregarding subjective evidence of any party's intentions."

27. Here is the definition as varied, for ease of reference: ““Commercial Block” means any part of the Building comprising commercial units and including units on the ground floor formerly used as commercial units (including those units registered under HMLR title numbers EGL462597, EGL451228 and EGL451230) but now converted into and used as residential units only but excluding the Apartments’

28. As to the natural and ordinary meaning of the words, it appears to me that the words naturally describe “part of the Building” and that to say they refer to the whole (excluding the demised Apartments and GFUs) would be a very uncomfortable stretch. And if that was what was meant it would be odd to exclude the Apartments while including the GFUs; and it would leave without function the word “only”.

29. The other relevant provisions of the lease include the “Relevant Proportions” and the fact that the term “Commercial Block” is intended to define an area for which the GFU tenants alone are responsible. So again it would be very odd indeed if that area were the whole building; the parties cannot have intended that (although as we saw they made a mistake about the Insurance Contribution (paragraph 9 above)).

30. The overall purpose of the clause is to provide for the GFU tenants to make a contribution to expenditure from which they benefit. The obligations set out in the Sixth Schedule are clearly lifted from a precedent and are not entirely relevant to the GFUs – they do not benefit directly from a roof for example; but for the most part these are things they should be contributing to – the maintenance and decoration of their external walls, for example, which are not demised, rubbish collection, the forecourt and so on – with the careful exclusion of the lift from which they do not benefit. So the appellant’s construction remains implausible.

31. The facts and circumstances known to the parties at the time the leases were executed include the existence of the upper floors, and the Apartment leases. The Apartment leases are in very similar from to those of the GFUs, but Part A of the Sixth Schedule in the Apartment leases requires the tenants each to contribute the relevant proportion (adding up to 100%) of the Building. What the parties to the GFU leases would have expected in 2003 as a matter of commercial commonsense – coming on to the fifth factor, and also looking at the parties objectively because the subjective intentions of the actual parties are irrelevant – is that when the GFUs were let in 2003 the Apartment leases would be adjusted to reduce their contribution to the Estate Company’s expenditure on the Building. In other words, the parties’ knowledge of the Apartment leases would lead them to suppose, not that the GFU tenants would pay nothing for the maintenance of the Building, but that they would pay part of the cost of the maintenance of the Building (leaving the landlord either to adjust the Apartment leases, or just to charge less than the stated Part A Proportion to the Apartment tenants, which is what it has in fact done). Hence the need to define the Commercial Block as that part of the Building for which the GFU tenants were responsible.

32. The facts and circumstances known to the parties to the Deed of Variation in 2016 were primarily the fact that the tenant wishes to convert the units to residential use. They knew the terms of the existing leases. If they expected to change the apportionment of service charges they could be expected to have done so in clear terms.

33. That still does not get us any further than the fact that neither party’s construction can be right.

34. However, the “Apartments” were also re-defined in 2016, and I think that can give us some assistance. They are stated in the revised definition to be on the first floor, and the definition of the Commercial Block expressly excludes the Apartments. The revised definition is quite a long sentence. If we look first at the original definition (where the Apartments were obviously on the first floor because the GFUs were commercial units) it reads: “that part of the Building comprising commercial units only and excluding any of the Apartments”

35. The word “comprising” is ambiguous. To my mind the definition refers to the part of the Building where the GFUs are and where the Apartments are not: it can naturally be read as: “that part of the Building containing the commercial units only and not containing the Apartments”. If that was what it meant – and in my judgment the considerations I have set out above indicate as much – then it probably referred to the Building below the first floor, i.e. the ground floor. Hence the express exclusion of the lift in Part A of the Sixth Schedule – that would be pointless if the “part” of the Building was limited either to the GFUs themselves or to the parts that the GFU tenants used. The appellant would protest that most of the ground floor is garages; but the garages are demised and so the costs incurred under Part A of the Sixth Schedule will not be spent on the garages. They will be spent on the structure and exterior of the ground floor, the foundations, the internal and external doors and passageways – but not the lift, which is expressly excluded.

36. This is a bit rough and ready, because it leaves the GFU tenants paying for all the external doors, and for the stairs which they do not use, and a bit imprecise because the precedent-based drafting of Part A of the Sixth Schedule includes maintenance of the roof which is not relevant (although two garages and the bin stores have a roof). It is not ideal because it requires the respondent rather artificially to split expenditure between the ground floor and the upper part of the Building, and in some cases the split will not be obvious, for example external painting. It would have been much easier just to have the GFUs pay a proportion of the expenditure on the whole Building (which is what in fact the respondent has been charging them). But as a rough-and-ready arrangement the idea that the GFUs pay for the ground floor is workable.

37. When we then turn to the revised definition, it reads as follows, with the new wording separated out: ‘“Commercial Block” means any part of the Building comprising commercial units and including units on the ground floor formerly used as commercial units (including those units registered under HMLR title numbers EGL462597, EGL451228 and EGL451230) but now converted into and used as residential units only but excluding the Apartments’

38. The same construction makes sense. The change from “the part” to “any part” is difficult to understand because the GFUs all sit together, and I do not know why that change was made. But leaving that aside the new wording simply re-describes the GFUs to acknowledge that at the point when the Deed of Variation was made they were commercial but were going to be residential. The important word “only” is still there. It can naturally be read as: ““any part of the Building comprising commercial units (including any converted to residential use) only and not containing the Apartments” In my judgment that is what this poorly-drafted definition means, and the “part” referred to is the ground floor excluding the lift.

39. That construction is faithful to the clear intention to designate “part” of the Building. It chimes with the three Part A Proportions adding up to 100%. It does not chime with what is provided in the leases of the Apartments, and therefore enables double recovery; but all of the available solutions – especially the respondent’s – enable double recovery, and as a matter of fact the respondent is not seeking double reimbursement. It has adjusted the residential lessees’ proportions in practice, and it would be open to it to agree a more formal variation of the Apartment leases.

40. On this construction, the respondent can charge the GFU tenants 100% of what it spends on the ground floor only. When it incurs expenditure on the whole building, it will have to apportion part of that expenditure to the ground floor, and it can then charge the GFU tenants together 100% of that proportion.

41. The landlord’s pragmatic solution of apportioning the costs of the whole building between all the lessees, regardless of the provisions of the leases, might well be fairer, and might not be any less advantageous to the appellant, than the construction I have set out at paragraph 38 above. The parties may of course negotiate any arrangement that suits them against the background of what the leases say.

42. Accordingly the appeal succeeds on ground 1, in that the FTT’s construction is wrong and irrational, and its decision on the meaning of “Commercial Block” is set aside. I have substituted the Tribunal’s own construction of that definition. It means the ground floor of the Building, excluding the lift. Ground 2

43. Grounds 2 and 3 occupied very little time at the hearing of the appeal.

44. Ground 2 was that certain issues had not been determined by the FTT. At the hearing of the appeal it was established that two of those issues had been conceded by the respondent so that no decision was needed and that another (cleaning costs) had in fact been determined. As to the remaining items listed in paragraph 56 of the appellant’s skeleton argument, the parties agreed that once the definition of the Commercial Block was resolved there would be no need for any further determination about these items. Under this ground the appellant also sought a determination of the way the respondent manages the reserve fund contributions; that is an accounting matter and is outside the FTT’s jurisdiction under section 27 A of the Landlord and Tenant Act 1985 . Ground 3

45. One of the matters decided by the FTT was that the costs of the safety checks for the “communal front doors” were payable as part of the service charge. The appellant sought a determination that that meant only the internal communal doors in corridors and not the communal external doors (which I take to mean both the shared external door for access to units 1 and 2 on the ground floor and also the external door on the ground floor used to access the lifts and stairs to the Apartments). The respondent said it means both.

46. The reason why Mr Avraamides raised this ground was that he wanted to argue that a safety check of the external doors was not necessary.

47. At the point when permission to appeal was granted the respondent also sought to appeal the determination about the doors, and the Deputy President gave permission on this ground to the appellant only for that reason. The respondent’s appeal on this ground is not pursued. In my judgment the reference to “communal front doors” certainly includes the external doors, and there is no basis on which the appellant can now challenge the FTT’s reasoning about safety checks. The FTT’s decision stands on this point. Conclusion

48. The appeal on ground 1 succeeds and the Tribunal has substituted its own decision about the construction of the term “Commercial Block”. The appeal on grounds 2 and 3 fails.

49. Permission to appeal was also given on the order made by the FTT under section 20 C of the Landlord and Tenant Act 1985 . If either party wishes to make any submissions about that they may do so by 4 pm on 16 January 2026. Upper Tribunal Judge Elizabeth Cooke 22 December 2025 Typographical errors corrected on 6 January 2026 Right of appeal Any party has a right of appeal to the Court of Appeal on any point of law arising from this decision. The right of appeal may be exercised only with permission. An application for permission to appeal to the Court of Appeal must be sent or delivered to the Tribunal so that it is received within 1 month after the date on which this decision is sent to the parties (unless an application for costs is made within 14 days of the decision being sent to the parties, in which case an application for permission to appeal must be made within 1 month of the date on which the Tribunal’s decision on costs is sent to the parties). An application for permission to appeal must identify the decision of the Tribunal to which it relates, identify the alleged error or errors of law in the decision, and state the result the party making the application is seeking. If the Tribunal refuses permission to appeal a further application may then be made to the Court of Appeal for permission.