Decision has landed before Liam Spender and St David’s Square intercom for eternity contract comes before Court of Appeal on November 4 (see below)
Leaseholders at Romney House in Marsham Street – directly opposite ministers and civil servants reforming leasehold at MHCLG – have just lost an important case at the Court of Appeal.
It concerned a landlord’s discretion to allocate gym costs to one of the schedules in the lease, and the case is a fair example of how property developers and “asset managers” grind out extra bunce from a freehold block of flats.
The leaseholders’ defeat follows on from the 2021 Supreme Court decision in Aviva Ground Rent Investors GP v. Williams.
The Court of Appeal finds that where a tenant goes to the First-tier Tribunal to challenge the landlord’s decision on which costs to include in the service charge then the Tribunal is limited to assessing whether the landlord has followed a reasonable process and it cannot consider whether the costs charged are actually reasonable in amount.
This significantly reduces the protection of leaseholders when they rely on contractual terms regarding landlord decision making.
All a landlord need show is that it has made a decision that is not so unreasonable no reasonable landlord could ever have made it. In this case, that means it was “reasonable” for the landlord to dump the costs of running someone else’s gym business on residential leaseholders’ service charges.
In 2013 Romney House Developments as landlord decided to sublet the gym at the 168-flat site, which was originally built as offices in the 1930s. There are also four commercial units on the ground floor.
Land Registry records show that on 25 October 2013 the developer and original freeholder Romney House Developments Limited granted a 999 year lease of the gym to Nash City Limited. Companies House records show that Romney House Developments was the only shareholder in Nash City.
Nash City paid nothing upfront for the lease and committed to a rent of £5,000 per year with capped increases. The length and payment terms of the lease are unusually generous. A typical commercial gym lease would be much shorter than 999 years and at a much higher rent, particularly in Westminster.
Also on 25 October 2013 Romney House Developments sold the building’s freehold to Guernsey based Abacus Land 4, part of Will Astor’s Long Harbour property empire. Abacus Land 4 paid £1.45 million for the freehold according to Land Registry records.
According to Land Registry records, on 30 January 2014 Nash City sold the gym lease for £50,000 to current tenant Adam White. There is no suggestion of any wrongdoing by Mr White.
Between 2006 and 2013 the leaseholders had had exclusive use of the gym. The 999-year lease given to the gym operator did not require the gym tenant to contribute anything to the service charge but did require that the tenant allowed leaseholders to use the gym space and equipment.
Between 2013 and 2020 the landlord set-off the £5,000 yearly rent against the gym costs, but charged the rest to the residential leaseholders.
But in 2019 there was a dispute between the gym tenant Mr White and the landlord, by now Long Harbour / Abacus Land 4. In 2021 the dispute settled on the basis that the landlord would upgrade the gym and not charge any rent for three years. The rent credit stopped.
The landlord charged all of its legal costs and c £218,000 for upgrading the gym to the leaseholders.
The gym was closed during COVID restrictions. When the gym reopened in 2020, the gym tenant then also restricted the opening hours of the gym for leaseholders. According to the leaseholders after the 2020 lockdown the gym was reopened but residents were only allowed access from 7am to 10am, and from 5pm to 8pm (and not at all on Sundays or Bank Holidays).
These were the timings the gym tenant had covenanted to have the gym staffed under his separate lease. The gym had previously been open 24 hours.
The leaseholders challenged the gym costs on the basis that the landlord had no discretion under the terms of the lease to charge the costs of the gym after they had lost exclusive use of it.
The FTT agreed with the landlord, but the Upper Tribunal agreed with the leaseholders.
The Court of Appeal reversed the Upper Tribunal and restored the FTT.
The Court of Appeal finds that a contractual requirement of reasonableness in deciding how to allocate costs between different service charge pots gives the landlord broad discretion.
Subject to the words of the lease in question, a landlord’s decision will only be in breach of contract if it is so unreasonable that no reasonable landlord could ever have made it. But different considerations may apply if, for example, the words of the lease impose a higher standard.
This case is unusual in that the leaseholders did not also challenge the costs under section 19 of the Landlord and Tenant Act 1985.
As the judgment in this case makes clear, section 19 requires the court to apply an objective standard of reasonableness with a particular focus on the amount charged and whether that represents an objectively reasonable outcome in all the circumstances, including by reference to the leaseholders’ interests.
If the leaseholders had made a challenge under section 19 then the answer in this case may have been different.
Unfortunately, it appears that the leaseholders fell into the common trap of believing that the First-tier Tribunal is a place where leaseholders can go without legal representation.
The leaseholders were not legally represented at the hearing while, at the leaseholders’ expense, Abacus / Long Harbour retained barrister Tom Morris and debt-collecting solicitors JB Leitch to argue their case.
Implications for Liam Spender’s case in Court of Appeal on November 4
LKP Trustee Liam Spender is in the Court of Appeal on 4 November 2025 leading a group of 70 leaseholders fighting his freeholder over a contract for eternity intercom at St David’s Square in London.
The freeholder, part of the ARC Time Freehold Income Fund, is arguing that unless the leaseholders can show the costs were unreasonable at the start of the contract then none of the costs under that contract can be challenged under section 19, however high the costs become.
In other words, the landlord is arguing section 19 has no effect once a long-term contract is in place. If the case goes against the leaseholders then landlords will succeed in removing the main legal form of protection against unreasonable service charge costs.
The full Court of Appeal ruling is here:
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Court of Appeal backs rights of 200,000 shared ownership leaseholders after right to manage duel with Israel Moskovitz
As government seeks balance in leasehold litigation costs, Liam Spender asks Court of Appeal to cap freeholder’s lawfare fees over ‘contract for eternity’ dispute
Losing their £5m judicial review against the leasehold reforms threatens freeholders’ long era of primacy. So, what’s next?
This is insane. We are living in 21st century, in England, by feudal rules!
The decisions in the article will affect all leaseholders in a bad way. The reasonableness of costs are determined by following a reasonable process. What does it even mean?? The decisions was clearly made by judges who are either freeholders themselves or were bribed. This is insane.
I had one of the judges in this sitting in my case also against a large landlord; bribery definitely!
Could it be that the tenants challenged this on the wrong basis? It appears the breach was their access to the gym and this was a benefit in lieu of costs. When they were denied access this is what gave ground to the legal action and not the costs themselves.