Upper Tribunal Overturns Decision on Service Charges for Flats Built in Airspace

Neutral Citation Number: [2026] UKUT 244 (LC) Case No: LC-2026-18 IN THE UPPER TRIBUNAL (LANDS CHAMBER) AN APPEAL AGAINST A DECISION OF THE FIRST-TIER PROPERTY CHAMBER Ref: LON/00AM/LSC/2025/0947 Royal Courts of Justice, Strand, London WC2A 2LL 29 June 2026 TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007 LANDLORD AND TENANT – SERVICE CHARGES – lease of airspace above block of flats granted to developer – seven flats constructed in airspace – developer applying to FTT to determine payability of service charges under airspace lease – FTT striking out application – whether FTT having jurisdiction – s.27A, Landlord and Tenant Act 1985 – appeal allowed BETWEEN: MARE STREET LTD Appellant -and- THEOWAL LIMITED Respondent Northside Studios, 16-29 Andrews Road, London E8 Martin Rodger KC, Deputy Chamber President 29 June 2026 [NAME] , company director, for the applicant Edward Blakeney , instructed by JB Leitch Ltd, for the respondent © CROWN COPYRIGHT 2026 The following cases are referred to in this decision: JLK Ltd v Ezekwe & Ors [2017] UKUT 277 (LC) Ruddy v Oakfern Properties Ltd [2007] Ch 335 Introduction 1. The only issue in this appeal is whether the First-tier Tribunal, Property Chamber (the FTT) was entitled to strike out an application under section 27 A, Landlord and Tenant Act 1985 for a determination whether the appellant, Mare Street Ltd, was liable to pay service charges to the respondent, Theowal Ltd in respect of premises in East London known as Northside Studios.

2. The FTT has jurisdiction under section 27 A, 1985 Act, as follows: “27A Liability to pay service charges: jurisdiction (1) An application may be made to the appropriate tribunal for a determination whether a service charge is payable and, if it is, as to (a) the person by whom it is payable, (b) the person to whom it is payable, (c) the amount which is payable, (d) the date at or by which it is payable, and (e) the manner in which it is payable.” 3. The appellant issued its application on 8 June 2025, seeking what it referred to as a “declaration” that it had no liability to pay service charge demands totalling £8,615.01 covering the years 2023 and 2024 which had been issued by the respondent on 1 April 2025. The service charges were claimed under a lease of the airspace above Northside Studios which had been granted to the appellant by the respondent on 19 May 2022.

4. On 11 November 2025, after receiving submissions from the parties but without conducting a hearing, the FTT struck out the application on the grounds that it did not have jurisdiction to determine it.

5. It is now agreed between the parties that the FTT fundamentally misunderstood the facts. It stated in its decision that it was common ground no development had yet occurred in the airspace. In fact, the contrary was true. Development had occurred, and on 26 October 2023 practical completion had been certified of an agreement between the parties under which the appellant had constructed seven flats in the airspace.

6. At the hearing of the appeal the appellant was represented by its director, Mr [NAME], while the respondent was represented by counsel, Mr Edward Blakeney. Having read the documents filed in support of the appeal I did not need to call on Mr [NAME] as it appeared to me that the FTT’s decision was obviously wrong. The Judge had based his decision on a misunderstanding of the facts and had not considered the issue raised by the application on a correct basis. That was an error of law which justified setting aside the decision and remitting the matter to the FTT for a proper determination.

7. Mr Blakeney acknowledged that the FTT had misunderstood the facts but nevertheless sought to persuade me that it had been entitled to strike the application out. Where this Tribunal is satisfied that the making of a decision by the FTT involved an error on a point of law, it may (but need not) set aside the decision and either remit it or re-make the decision ( section 12(2) , Tribunals, Courts and Enforcement Act 2007 ). In effect Mr Blakeney invited me to exercise my discretion not to set the decision aside, or alternatively, to set it aside and re-make it, confirming that the FTT had no jurisdiction to consider the application. In order to explain why Mr Blakeney’s submission cannot succeed, it is necessary to explain a little more about the facts and the application. The relevant facts 8. Before 2022, Northside Studios was an office and commercial building overlooking Regent’s Canal in Hackney. It comprised ground and three upper floors and had a flat roof.

9. On 18 January 2022 the parties entered into a Development Agreement. It recited that the respondent had obtained planning permission for the development of the property and had granted a lease to the appellant, and that the appellant, as Developer, would procure the carrying out of the development and would grant underleases of parts of the development on completion.

10. Although the Development Agreement recited that the parties had already entered into a lease, the document I was shown is dated 19 May 2022. It was entered into between the respondent as Landlord and the appellant as Lessee and granted a term of 150 years over property referred to as “the Airspace”. The Airspace is identified in the Lease as the volume of airspace above the whole of Northside Studios to a height of 7 metres but excluding the roof and any structural parts of the building. The Lease also provided that the appellant had permission to construct “the Flats” in accordance with the Development Agreement and that these would form part of the demise. Under clause 2.2 of the Lease the appellant agreed to pay a service charge.

11. Under clause 13.3 of the Development Agreement it was provided that the Developer would be released from all liability under the Development Agreement subject to the provision of collateral warranties and NHBC guarantees. Practical completion of the development was certified on 26 October 2023 and in the following months the appellant entered into agreement for the sale of long leases of the flats it had created.

12. By the end of 2023 the parties had fallen into dispute, the detail of which is unclear from the material supplied for the appeal. The dispute appears to concern the form and execution of the collateral warranties on which the release from liability provided for by clause 13.3 of the Development Agreement is conditional.

13. On 1 April 2025 the respondent issued seven separate demands for service charges, in aggregate totalling £8,615.01. Each of the demands referred to one of the seven new flats which had been constructed and covered the same periods from 15 October to 31 December 2023 (which is presumably a balancing charge) and from 1 January 2024 to 18 June 2024. The proceedings 14. Two months after receiving the demands the appellant applied to the FTT for a determination of its liability to pay them. In the application the appellant disputed its liability to pay the charges in their entirety, asserting that it was not a leaseholder under any of the completed leases of the flats and that under clause 13.3 of the Development Agreement its liability had expired. The first question it asked the FTT to decide was “Whether Mare Street Ltd is liable for the above service charge total or any related sum.” It also asked the FTT to determine other questions concerning its rights under the Development Agreement and the conduct of the respondent’s solicitors. In a covering letter filed with the application the appellant requested “declarations” in the terms of the same questions.

15. Mr [NAME] also filed a witness statement with the application in which he explained that the development had been successfully completed, practical completion had been certified in October 2023 and that “the flats created under the Airspace Lease were sold shortly thereafter.” 16. The FTT convened a video case management hearing attended by the respondent’s solicitors and by Mr [NAME] on behalf of the appellant. In directions issued on 30 September 2025 the Judge said she had formed a preliminary view that the FTT had no jurisdiction because the application was in connection with a lease of airspace. The FTT’s statutory jurisdiction was confined to “service charges” as defined by section 18 , Landlord and Tenant Act 1985 , i.e. “an amount payable by a tenant of a dwelling”.

17. The FTT directed the appellant to file submissions setting out the full legal basis on which it claimed the FTT had jurisdiction to consider the application. Additionally, it required submissions on its own power to grant “declaratory relief”. Mr [NAME] complied with this direction, submitting four separate, sprawling, repetitious documents; careful reading of these would have confirmed that it remained the appellant’s case that the project had created residential dwellings and would have identified section 27 A, 1985 Act as the source of the jurisdiction relied on.

18. In written submissions responding to Mr [NAME] (which were not drafted by Mr Edward Blakeney), the respondent referred to the definition of “service charge” in section 18 , 1985 Act as an amount payable by a tenant of a dwelling, and to the further definition of “dwelling” in section 60(1), 1985 Act (“a building or part of a building occupied or intended to be occupied as a separate dwelling”). It asserted that the “Airspace” as defined in the Lease was simply a volume of airspace, and that “the Flat”, as defined, referred to all of the flats and so could not be occupied or intended to be occupied as a separate dwelling. After referring to authority on which Mr Edward Blakeney does not wish to rely, it asserted “the applicant is simply not a tenant of a dwelling entitled to bring an application pursuant to section 27 A” and that “[t]he fact remains that the Lease relates to a body of airspace.” On that basis, it invited the FTT to strike the application out.

19. The respondent’s submissions were seriously misleadingly. I can only assume that the FTT’s misunderstanding of the facts originated in the respondent’s repeated assertions that the appellant “is the leasehold proprietor of airspace” and that the Lease “relates to a body of airspace”, without any acknowledgement that the airspace had been developed into seven flats since the Lease was granted. I do not know whether the respondent’s submissions were prepared by its solicitors or by counsel, but they were clearly professionally prepared (unlike the appellant’s). Professional representatives are under a duty not to mislead the tribunal but in this case the FTT was not given the assistance it was entitled to expect. The appeal 20. The FTT struck the application out because it failed to appreciate that the airspace had been developed to form seven flats. If the demise comprised only airspace, as the Judge believed, there was no dwelling and there could therefore be no service charge within the meaning of sections 18 or 27A, 1985 Act.

21. The decision cannot be sustained on the basis of the FTT’s original reasoning. The question which now arises is whether there is some alternative basis on which the application could be struck out and whether that would be an appropriate exercise of this Tribunal’s discretion under section 12(2) , 2007 Act.

22. The material before the FTT did not show what condition the building was in at any particular time. On the mistaken understanding that no development had occurred the FTT made no relevant findings of fact about the condition of the airspace or the state of occupation of the flats. There was evidence that practical completion of the development had been achieved, but whether individual flats were yet habitable, or at what point they had become so, is unclear. There was further evidence in the form of a dated but unexecuted lease that at least one of the flats was the subject of agreed terms by February 2024, though whether contracts had been exchanged or completed was not apparent from the material provided to the FTT.

23. The arguments relied on by the respondent before the FTT in support of striking out the application are unsustainable. The proposition that “the Airspace” was simply a volume of air was true so far as the definition in the Lease was concerned, but otherwise irrelevant. Whether a dwelling exists does not depend on the language of the lease intended to demise it. The reference to the definition of “the Flat” in the Lease, as meaning all of the flats to be created, is equally of no consequence for the same reason (and, in any event, it ignores the interpretation clause which follows immediately after the definition and explains that “the Flat” can mean any part, and therefore any individual flat as well as all seven).

24. It has long been established that charges payable by an intermediate landlord whose interest is under a lease comprising a number of dwellings, is a service charge within the meaning of section 18 ( Ruddy v Oakfern Properties Ltd [2007] Ch 335 ). The proper analysis is therefore that once at least one flat had been sufficiently completed to be described as a dwelling, the appellant became the tenant of a dwelling and the Lease was a lease of a dwelling. The fact that the appellant was also the tenant of other dwellings held under the same lease does not mean that each dwelling was not a separate dwelling or that each charge which it was liable to pay could not be a service charge.

25. Mr Edward Blakeney submitted that the FTT did indeed lack jurisdiction to determine the application, but not for the reason it had given.

26. First, he relied on the assertion by the appellant in its submissions to the FTT that it was no longer the tenant of any of the flats because the time stipulated by clause 13.3 of the Development Agreement for its liability to cease has expired. Mr Edward Blakeney did not say whether the respondent accepted that proposition, but relied instead on what he called “the logic” of the appellant’s position. If the appellant was no longer a tenant, then the disputed sum could not be an amount payable by a tenant; the appellant was invoking the FTT’s jurisdiction but inviting it to make a determination that would establish that it did not have jurisdiction.

27. I do not accept that the logic of the appellant’s position deprives the FTT of jurisdiction. As Mr Edward Blakeney pointed out, relying on what the parties had agreed and I accepted in JLK Ltd v Ezekwe & Ors [2017] UKUT 277 (LC) the requirement that the relevant units be dwellings has to be satisfied in respect of the time to which the proposed determination relates rather than, for example, at the date on which the lease was granted. The relevant period in this dispute is the period in respect of which the service charges are claimed, which is from 15 October 2023 to 18 June 2024. The earliest date from which the appellant could be released from liability under the Development Agreement by reason of clause 13.3 was 12 months after practical completion, which occurred on 26 October 2023. None of the charges were claimed in respect of a period after the clause 13.3 release date.

28. Secondly, Mr Edward Blakeney argued that the information put before the FTT by the appellant, on which it had been content for the question of strike out to be determined, was insufficient to demonstrate that there were completed dwellings in what had formerly been only airspace. On the contrary, the draft agreement for sale of a new lease of one of the flats implied that the flat was not yet complete when the agreement was expected to be entered into. The appellant agreed to complete the construction of the flat in a good and workmanlike manner in according with the agreed specification and planning permission. The inference, Mr Edward Blakeney suggested, was that the flat was not complete in February 2024 when the unexecuted draft was prepared.

29. Once again, I do not accept that a lack of clarity concerning the sequence of events deprived the FTT of jurisdiction or is to the benefit of the respondent’s case. Where a court or tribunal is asked summarily to strike out a claim which depends on disputed facts (in this case, whether the property comprised in the Lease included a completed dwelling), the facts relied on by the claimant will be assumed to be correct for the purpose of determining whether the case can proceed. The FTT will look at the case on paper and ask whether, assuming the facts relied on in support of the case are true, the case is either one which has no realistic prospect of success or is one over which the FTT has no jurisdiction. The only evidence before the FTT in this case is contained in Mr [NAME]’ witness statement, which asserted that the flats had been completed and sold shortly after practical completion. There was no factual evidence from the respondent, only the misleading submission in reply which is no longer relied on. Mr Edward Blakeney acknowledged that if one of the flats was a dwelling during the relevant period, the FTT had jurisdiction to hear the application. Those are the facts asserted by the appellant, and on an application to strike out the proceedings it is entitled to the benefit of the doubt on that issue.

30. Mr Edward Blakeney also submitted that it was beyond the jurisdiction of the FTT to determine the questions posed by the application, including whether the appellant’s obligations under the Development Agreement had come to an end. I do not accept that. The FTT clearly has jurisdiction under section 27 A to determine whether a service charge is payable, and if so, by whom. If some prior question of law or fact must be determined before it can be ascertained whether a service charge is payable, then the FTT has jurisdiction under section 27 A to determine that prior question. The fact that another court or tribunal may also have jurisdiction to determine the same question, together with other questions arising out of the same contractual relationship, does not deprive the FTT of its jurisdiction under section 27 A.

31. The FTT clearly does not have jurisdiction to determine all of the matters which the appellant has asked it to consider. It cannot usefully address any question which is not also a necessary step towards determining whether a service charge is payable. But the fact that an applicant has asked the FTT to determine some questions for which it lacks jurisdiction is not a reason to strike out its application altogether. Nor is the fact that an unrepresented party asks the FTT to make a “declaration” any justification for dismiss ing its application or requiring it to demonstrate that the FTT has power to grant “declaratory relief”. There was no doubt that the appellant was invoking the FTT’s jurisdiction under section 27 A, as it said so repeatedly.

32. I therefore reject Mr Edward Blakeney’s invitation to confirm the FTT’s order for different reasons. This case cannot be determined without proper consideration of the facts. If it transpires that none of the flats in the former airspace had been completed sufficiently so that they could be lived in at any time between 15 October 2023 and 18 June 2024, whether or not they were actually lived in, then the FTT will not be in a position to determine whether the charges levied by the respondent are payable. If, on the other hand, the flats could have been lived in and could properly be called dwellings for all or part of the period to which the charges relate, the FTT will have power under section 27 A to determine all of the section 27 A questions. Given the sums involved it is unlikely to be an effective use of the FTT’s resources for the issue of jurisdiction to be addressed separately from the substantive issues, if they arise. Disposal 33. For these reasons the appeal is allowed and the application under section 27 A is remitted to the FTT for determination. The sums involved are modest and the parties may think it a better use of their time and resources to seek to reach agreement. If they cannot do so, they should apply to the FTT for directions for the hearing of the application within one month of the date of this decision. Martin Rodger KC Deputy Chamber President 29 June 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.