Service Charges: Whether issue estoppel applied to First-tier Tribunal proceedings relating to the reasonableness of service charges

The Upper Tribunal considers an appeal by a leaseholder of a decision made in the First-tier Tribunal that the variable service charge demanded by his housing association landlord was reasonable and payable. The appeal addressed the application of issue estoppel, assessing whether or not the FTT was estopped from reaching a different conclusion in later proceedings.

The background

In Vernon v Orbit Housing Association [2026], the appellant leaseholder was an assured tenant of a flat in an over-55s sheltered housing block. The respondent housing association was his landlord.

The lease, completed in 2021, required the leaseholder to pay a “Scheme Based Support Charge” (“SBSC”), as well as a weekly variable service charge. The variable service charge related to the usual maintenance and services, but the lease did not define the SBSC, simply stating a cost of £18 per week and allowing for it to be varied on one month’s notice.

In earlier proceedings, the leaseholder applied to the FTT for determination as to the payability of the SBSC in 2021/22 and 2022/23. The landlord stated that the SBSC was a charge for services provided at night, such as planned care calls, assistance for those who needed it, security and other checks. The FTT found that the SBSC was a charge for the provision of personalised care for those on specific service agreements, and not for the provision of services to all residents.

The FTT further found that the SBSC was not a charge for “services, repairs, maintenance, improvements or insurance” in line with the definition of a service charge contained at s.18 Landlord and Tenant Act 1985. The FTT had no jurisdiction to make a determination as to the SBSC as a result, but did state in its judgment that if the SBSC was a service charge, the cost was not reasonably incurred because the services were not delivered to all residents.

The housing association appealed this earlier decision in the Upper Tribunal, which found that the leaseholder was obliged to pay the SBSC under the terms of his lease, and that the charge was a variable service charge within the meaning of s.18 LTA 1985, meaning that the FTT did have jurisdiction to determine its reasonableness. Finally, the UT agreed with the FTT’s finding that the SBSC was not reasonably incurred, concluding that the SBSC was not payable for the two service charge years in question. The housing association refunded the leaseholder the SBSC for these years.

The housing association continued to charge the leaseholder the SBSC for two further years, and the leaseholder again challenged these charges. In April 2025, the FTT found that the leaseholder had benefited from services covered by the SBSC, and that the charge was reasonable and payable. Even though the leaseholder didn’t want the services provided, they were nevertheless available for the benefit of all residents. The leaseholder appealed this 2025 decision in the Upper Tribunal.

The decision

The Upper Tribunal (“UT”) found in favour of the landlord, dismissing the leaseholder’s appeal. Having considered fresh evidence in the later proceedings, the First-tier Tribunal was entitled to decide that the SBSC was reasonable and payable for the service charge years 2023/24 and 2024/25.

The leaseholder argued that the decision made by the FTT in 2025 was inconsistent with its decision in 2023, an argument based on “issue estoppel” which is defined by Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] as “…the principle that even where the cause of action is not the same in the later action as it was in the earlier one, some issue which is necessarily common to both was decided on the earlier occasion and is binding on the parties…”. Therefore an essential element to a party’s cause of action or defence cannot be argued again later.

The leaseholder argued that, because the FTT had found the charge was unreasonable in the earlier proceedings, it could not reach a different decision in 2025 unless evidence, which could not have been presented earlier, could show that the earlier decision was incorrect.

The landlord presented additional information to the FTT in the 2025 application, namely the housing association’s contract with its service provider and a s.106 agreement which together evidenced an obligation to provide night services for the benefit of all residents.

The landlord argued that issue estoppel did not apply. The earlier FTT decision applied only to the two service charge years in dispute, the later decision related to a different period, and the additional documentation was presented in the FTT.

The UT found that no issue estoppel arose; the FTT was not estopped from finding the SBSC to be reasonable and payable in the second action. In the first proceedings, the FTT had found that no services had been provided to the leaseholder and therefore the SBSC was not payable. Evidence showed the situation to be different in the later proceedings, and the FTT was entitled to reach a different conclusion.

Advice and action for landlords

This decision clarifies how issue estoppel may be applied in practice, concluding that the First-tier Tribunal may not be estopped from determining later proceedings where new evidence is presented that alters the facts of the case.

Here, in the later proceedings the housing association was able to demonstrate through presentation of the s.106 agreement and the service contract documentation that services were contractually delivered for the benefit of all leaseholders, whether or not the leaseholder wished to receive them.