The reasonableness test under s.19 LTA 1985: what the caselaw actually says

Under section 19 of the Landlord and Tenant Act 1985, a service charge is payable only to the extent that it is reasonably incurred, and for services or works of a reasonable standard. That word "reasonable" hides four decades of caselaw.

The two-part test

1. Was the cost reasonably incurred? (Process question — was the landlord's decision to spend the money reasonable?)
2. Are the services / works of a reasonable standard? (Output question — is what was delivered actually up to it?)

Both must be satisfied. A landlord can pass one and fail the other.

Waaler v Hounslow — the leading case on improvements

Waaler v Hounslow LBC [2017] EWCA Civ 45 held that when a landlord chooses improvements (as opposed to strictly necessary repairs), it must take special account of the leaseholders' interests, including their views and their financial ability to pay. This is stricter than the ordinary reasonableness test.

Practical impact: for a £1.5m cladding replacement that goes beyond minimum compliance, the tribunal will expect to see:

• consultation with leaseholders on options and cost;
• consideration of a cheaper compliant alternative;
• reasoned decision-making documented at the time.

Continental Property Ventures — burden of proof

Continental Property Ventures Inc v White [2006] 1 EGLR 85 confirmed the tribunal's inquisitorial approach — while the leaseholder must articulate the challenge, once articulated the landlord must justify the expenditure with evidence.

Veena SA v Cheong — the "range of reasonable responses"

Veena SA v Cheong [2003] 1 EGLR 175 recognised that a landlord's decision is reasonable if it falls within the range of reasonable responses open to a landlord, even if the tribunal (or the leaseholder) would have made a different call. This is protective of landlords who make good-faith decisions.

What the tribunal actually looks for

• Multiple quotes or benchmarked market data.
• Documented rationale for the chosen contractor.
• Post-work verification — did the work address the problem?
• Consistency with the specification and the demand.

Where leaseholders win reasonableness cases

• Sole quotes with no comparables.
• Repeated year-on-year inflation with no explanation.
• Gold-plated fixes to trivial problems.
• Missing or dead reserve funds forcing borrowing costs.

Related

• [How to challenge service charges at the FTT](/guides/how-to-challenge-service-charges-at-the-first-tier-tribunal)
• [Section 20 consultation explained](/guides/section-20-consultation-explained-for-leaseholders-major-works)