Commercial landlords of mixed-use properties may inadvertently fall within the residential service charge regime.
Residential service charges enjoy statutory protections which, amongst other things, enable tenants to challenge the reasonableness of their service charges and require formal consultation before major works. The recent Court of Appeal case of Cloisters Business Centre Management Co Ltd v Anvari & Wolff [2026] EWCA Civ 17, confirms the reach of these residential statutory protections to commercial lettings.
The court concluded that a letting of a business centre unit with an ancillary residential use qualified as a “dwelling” within the meaning of section 38 of the Landlord and Tenant Act 1985. As a result, it benefited from residential statutory protection of its service charges. A conflicting boilerplate clause prohibiting residential use did not override a negotiated permitted user clause.
As long as a unit is capable of residential occupation and intended (at least in part) to be occupied as such, it qualifies as a “dwelling” under the 1985 Act. Actual use is irrelevant.
Parliament had deliberately removed the previous requirement that occupation be “wholly or mainly” residential when replacing “flat” with “dwelling” in the legislation. Where it intended to exclude business tenancies from protection, it did so expressly. Here it did not. As a result, it was open to leaseholders to dispute service charges in the First Tier Tribunal (FTT) even though the units had a primary commercial use.
Key takeaways
There are practical implications for commercial landlords who may not expect to be subject to the residential service charge regime. Where the user clause in a tenancy permits residential use, even if it is ancillary and even if the property is not actually used as such, the residential statutory service charge regime of the Landlord and Tenant Act 1985 will still apply.
Service charge challenges in the FTT, even if successfully defended by the landlord can be time-consuming and expensive. In the absence of unreasonable conduct, the usual rule is that the parties bear their own costs.
Landlords of mixed‑use units can be subject to challenges to the reasonableness of service charges, to consult on major works and long-term contracts risking a £250 cap if they do not and to provide statutory information with service charge demands without which they are invalid.
Landlords should check their units to identify any permitted mixed use. If mixed-use is not actually required, the user provisions should be tightened to avoid inadvertently triggering residential protections.
