Service charge and mixed-use properties

The Court of Appeal’s decision in Cloisters Business Centre Management Co Ltd v Anvari 2026 is a useful reminder for landlords of mixed-use property that the residential service charge regime can apply more widely than many expect.

The case concerned a long lease of a self-contained live/work unit in a converted building in Battersea. The permitted use was ‘offices (and ancillary residential use)’. Although the tenant was not actually using the premises for residential purposes (it was being used for storage), the unit included features such as a kitchen and shower room and was clearly capable of being lived in. 

The key question was whether the premises constituted a ‘dwelling’ for the purposes of the Landlord and Tenant Act 1985. If so, statutory controls on service charges would apply, including the tenant’s ability to challenge them in the First-tier Tribunal.

The Court of Appeal had little difficulty in upholding the earlier decisions and confirming that the unit was a ‘dwelling’, despite its mixed-use nature and the lack of any actual residential occupation.  In particular: 

• there is no requirement that a property be used mainly (or at all) for residential purposes to fall within the statutory definition;
• what matters is what the lease allows, not how the premises are in fact used day to day;
• the fact that residential use was described as “ancillary” did not prevent the unit from being a dwelling; and
• if a unit is self-contained and capable of residential occupation, that will be a powerful indicator that the Act applies.

For those dealing with commercial and mixed-use assets, the practical consequences are significant. Once a unit falls within the definition of a dwelling, landlords must comply with the residential service charge regime. That brings with it a number of familiar (and sometimes onerous) requirements around consultation, reasonableness and the form of demands.

Perhaps more importantly, it opens the door to challenges in the First-tier Tribunal, even where the property is, to all outward appearances, part of a commercial scheme.

In light of the decision, landlords should consider whether existing portfolios contain units that permit any form of residential use.  Do not assume that actual use will determine the position – the lease wording is likely to be decisive which is why the lease drafting at the outset is also important, specifically whether there is a genuine need to permit residential use. 

Subscribe to our latest insights by topic here.