Recently, I represented a client before the First-tier Tribunal in what initially appeared to be a relatively straightforward challenge to service charge demands under section 27A of the Landlord and Tenant Act 1985. The charges in question were substantial, spanning several years and largely arising from fire safety works and remedial measures introduced in the wake of the Grenfell Tower tragedy in June 2021. Like many leaseholders facing large and escalating demands, the client’s instinctive question was whether the charges were reasonable. When the client approached our clinic for advice, a review of her lease revealed a far more fundamental problem.
The client was a shared ownership leaseholder whose immediate landlord was a housing association. A shared ownership leaseholder purchases a percentage interest in a property, usually from a housing association, pays a mortgage on that share and pays rent on the remainder. In legal terms, they are leaseholders. In practical terms, they often occupy a somewhat unusual position somewhere between owner and tenant.
Shared ownership has become an increasingly important route into home ownership for those unable to purchase a property outright. For many, it is not so much a first choice as the least difficult option available. Few people grow up dreaming of owning 25% or 40% of a flat while paying rent on the rest.
Conventional social housing is increasingly difficult to access, whilst private rents in many parts of the country remain prohibitively expensive. Shared ownership can therefore appear attractive if the combined cost of mortgage repayments, rent and service charges is broadly comparable to private sector rent; at least some of that monthly expenditure is contributing towards ownership of a home.
The shared ownership leaseholder’s contractual relationship is usually with the housing association, which acts as the leaseholder’s immediate landlord under the lease.
In most cases, therefore, one would expect service charge obligations under the lease to operate through that landlord-and-tenant relationship. That was not what was happening in this case. The service charge demands being issued to my client were not being made by the housing association at all. They were being issued by a property management company.
At first blush, that may not sound remarkable. Many leaseholders receive correspondence from managing agents and companies. The difficulty was that neither the property management company nor the agents issuing the demands had any direct contractual relationship with my client under her lease.
More striking still, the demands expressly stated that they were issued on behalf of the superior landlords. That immediately raised an obvious question, and alarm bells. Why were superior landlords demanding payment from a shared ownership leaseholder whose contractual obligations appeared, on the face of the lease, to be owed to an entirely different landlord? The more closely the lease structure was examined, the more difficult that question became to answer.
The property formed part of a layered leasehold arrangement comprising a headlease and an underlease. Under the underlease, my client’s immediate landlord was a housing association. Under the headlease sat other parties, including the management company responsible for administering the estate.
What seems to have happened is that the ability to administer the charges came to be treated as the right to demand them. That distinction is not academic.
The result was a situation in which all demands for payments, including ground rent as well as service charges, had been issued for years by those who had no contractual right to demand the sums claimed.
Years of demands. Years of asserted entitlement. Years of threats of legal action for non-payment. Then, one week before the hearing with my client, an admission from the Respondent management company that there had never been a contractual right to demand the money directly from my client in the first place. So much for settled practice.
Service charges are creatures of contract. The right to recover them does not arise because a party manages a building, incurs expenditure or believes payment ought to be made. The right must be found in the lease.
Perhaps the most obvious question arising from the case is how had nobody spotted the problem sooner?
The answer may lie, at least in part, in the sheer number of actors involved in a typical shared ownership arrangement. Management companies organise services, managing agents issue demands, freeholders and intermediate landlords sit at different levels of the leasehold chain, housing associations act as the shared ownership landlord and the leaseholder ultimately receives the bill. What could possibly go wrong?
The housing association often occupies an awkward middle position within this leasehold structure. It receives service charge information from those managing the properties and passes the cost on to the shared ownership leaseholders. As the housing association is frequently not the party ultimately footing the bill, there can be little incentive for it to investigate whether the demands have been issued by the correct party or whether the contractual machinery has been properly followed. There is certainly little incentive for them to consider whether those charges they are passing on are reasonable.
Before long, everyone is operating on the basis that the arrangement must be right because it has always been done that way.
The Tribunal Judge observed that disputes of this nature are appearing with increasing frequency. The growing body of litigation concerning shared ownership service charges suggests that this issue may be systemic.
In Notting Hill Home Ownership Ltd v Samoail and others [2026] UKUT 235 (LC), the Upper Tribunal considered service charge demands issued to shared ownership leaseholders at Viridian Apartments in Battersea. The case was, on one view, about the recoverability of service charges for communal facilities. In truth, it was about the consequences of losing sight of a simple principle: a leaseholder’s liability begins and ends with the lease they agreed to.
The leaseholders occupied an affordable housing block with its own separate entrance. They could not access the communal gardens, concierge services, gym or other facilities available to residents elsewhere on the development. Yet for years, they were charged for precisely those services and amenities.
The Upper Tribunal had little difficulty rejecting Notting Hill Genesis’s arguments. The shared ownership leases required the leaseholders to contribute towards services provided to their own building, not facilities from which they were entirely excluded. Particularly memorable was the Tribunal’s dismissal of the suggestion that residents somehow benefited from being able to look at a well-maintained estate they could not use. Judge Cooke described that argument as “deeply unattractive”.
The Tribunal did not identify the problem in the leaseholders’ leases at all. The leases worked exactly as they were supposed to. The real difficulty was that Notting Hill Genesis had entered into a separate headlease which left it responsible for costs associated with parts of the development that neither it nor its shared ownership leaseholders could use.
Having found itself on the hook for those costs, it sought to recover them from leaseholders instead. The Tribunal’s response was straightforward: if the shared ownership leases did not permit those costs to be passed on, then they could not be passed on. The fact that Notting Hill Genesis had struck what, with hindsight, appeared to be an unfavourable bargain elsewhere in the leasehold structure was not a problem the leaseholders were required to solve.
There is an obvious parallel with the issue that arose in my client’s case. In both instances, the initial instinctive focus was on the service charges themselves. But the more important questions lay elsewhere. Who is entitled to demand payment? What exactly does the lease permit to be recovered? Does the contractual route being relied upon actually exist?
These are not technical curiosities. At Viridian Apartments, service charges for some residents rose into the thousands of pounds per year, and leaseholders spent years challenging demands which the Tribunal ultimately found were unsupported by the lease. The residents succeeded, but only after lengthy litigation and substantial personal cost.
In both my client’s case and Samoail, the legal principles themselves were not particularly complicated. The difficulty arose because nobody had stopped to ask the obvious questions.
Housing associations are often the only parties with visibility of the entire chain. If they are not asking whether a demand is contractually justified, it is difficult to see who else will. As shared ownership continues to grow, that scrutiny may become one of their most important functions.
Shared ownership was intended to make home ownership more accessible. Whether it can continue to serve that purpose may depend, in part, on whether those administering these schemes pay the same attention to the leaseholders’ rights as they do to the recovery of costs.
Leases do not care about custom, habit or administrative convenience. They care about what they say. Sooner or later, somebody has to dust the lease off and read it.
Maeve Fitzpatrick
