Cloisters Business Centre v Anvari: mixed-use premises and service charge protection

The Court of Appeal has clarified a significant point of principle concerning service charge provisions under the Landlord and Tenant Act 1985, determining that premises let for mixed business and residential purposes can constitute a "dwelling" for the purposes of statutory protection against excessive service charges.

The case concerned Unit 6 at Priory House, Cloisters Business Centre in Battersea—a Victorian convent converted to units in 1987. The lease, granted for 999 years from September 1987, permitted use as "Offices (and ancillary residential use)". The landlord argued this mixed-use designation meant the unit was not a "dwelling" within section 38 of the 1985 Act, and therefore service charge disputes should remain in the county court rather than transfer to the First-tier Tribunal.

Lord Justice Lewison, delivering the leading judgement, traced the legislative evolution of service charge protections from the Housing Finance Act 1972 through to the current provisions. Originally, protection was limited to tenants of flats occupied "wholly or mainly as a private dwelling". However, amendments introduced by the Landlord and Tenant Act 1987 substituted "dwelling" for "flat" and removed the express requirement for wholly or mainly residential occupation.

The court examined the definition of "dwelling" in section 38 of the 1985 Act: "a building or part of a building occupied or intended to be occupied as a separate dwelling". Critically, this definition contains no requirement that occupation as a dwelling should be the whole or even the main form of occupation, nor does it expressly exclude tenancies to which Part II of the Landlord and Tenant Act 1954 applies.

Drawing on established case law including the Epsom Grand Stand Association case from 1919 and the doctrine established in Vickery v Martin (1944), the court confirmed that mixed-use premises can constitute a dwelling even where residential use is ancillary to business use. Parliament had repeatedly endorsed this interpretation through subsequent legislation, and where it intended to restrict protection to purely residential tenancies, it said so expressly.

The policy underlying service charge restrictions differs fundamentally from security of tenure provisions. Whilst security of tenure protects tenants in their homes, service charge provisions protect tenants in their pockets by providing mechanisms to challenge unreasonable charges. There is no requirement that the tenant personally occupies the dwelling or that it serves as their only property.

The court rejected the landlord's argument that every square centimetre of Unit 6 had to be used as offices. This interpretation was deemed unrealistic, particularly given that whether a tenant breaches a use covenant must be judged by examining the leased property as a whole. The lease permitted "ancillary residential use"—residential use that was subordinate or subsidiary to office use—which encompasses all residential activities, not merely limited residential-character activities.

Whilst mixed-use property tenants gain service charge protection under sections 18 to 27A of the 1985 Act, they do not receive all protections afforded to purely residential tenants. Notably, sections 81 of the Housing Act 1996 and 167 of the Commonhold and Leasehold Reform Act 2002, which restrict forfeiture for service charge arrears, explicitly exclude tenancies under Part II of the 1954 Act.

The appeal was dismissed, confirming that Unit 6 constituted a dwelling for service charge purposes despite its mixed-use designation.

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