Preliminary point — Lessee paying service charge to company — Company to maintain building in repair — Landlord seeking possession for arrears of service charge — Whether landlord in breach of duty where company failing to discharge obligations — Whether term to be implied into lease — Lessee entitled to pursue claim against company and to seek appointment of receiver — Judgment for landlords on striking-out application
The plaintiffs owned flats at Silchester Court, Croydon. There were 58 flats in each block of which 15 were let on rack-rents and the remainder let on ground rents. The defendants were the present occupiers of no 22. The defendants’ lease was made in 1978 between the plaintiffs, Silchester Court (Croydon) Management Co Ltd (the “company”), as lessors and J as the lessee. The term was for 99 years at a premium of £11,500 at an initial yearly rent of £10. The company was incorporated for providing services and managing the building. The lessee covenanted to pay the service charges to the company, which was obliged to maintain and renew the common parts.
The plaintiffs alleged that the residue of the term created by J’s lease was vested in the defendants and that they had served a section 146 notice that the defendants had failed to pay the rent and service charge in accordance with the terms of the lease. The plaintiffs claimed possession as well as arrears of the service charge. In the counterclaim the defendants maintained that the plaintiffs owed them a fiduciary duty to ensure that the company did not breach their repairing covenants and that there was an implied term in the lease that if the company failed to perform the covenants, the plaintiffs would perform them for the tenant’s benefit. They also claimed that in breach of the covenant for quiet enjoyment, the plaintiffs and the company had allowed the building to fall into a state of disrepair. The plaintiffs applied to the court for a determination on a point of law whether it was an implied term that if the company failed to perform its covenants, the plaintiffs were to perform them for the tenant’s benefit. They also asked for the defendants’ defence alleging breach of the covenant for quiet enjoyment be struck out.
Held Judgment for the plaintiffs in part.
1. An omission which was a breach of duty could constitute a breach of a covenant for quiet enjoyment. But an omission, such as one alleged on the part of the company, which was not a breach of any duty owed by the landlord to the tenant, could not amount to a breach of the covenant for quiet enjoyment.
2. Where it was sought to raise an implied term, the court should have regard to whether the lease provided a comprehensive code for the carrying out of repairs. Prima facie the lease militated against implying a term that, in the event that the company failed to discharge its obligation, it was for the landlord to enforce them.
3. The lessees had undoubted rights to enforce the compliance by the company of its obligations. The defendants were entitled to apply for a receiver if the company did not discharge its obligations: see Claythorpe Properties v Evans [1986] 2 EGLR 34.
4. Allegations raised against the plaintiffs should be struck out but the defendants’ claim for relief from forfeiture stood, as did their right to claim for the appointment of a receiver.
5. Nothing touched on the rights of the defendants to pursue their counterclaim against the company.
Michael Daiches (instructed by Rumke, Joseph & Rabin) appeared for the plaintiff landlords; Stephen Hockman QC and Richard Barraclough (instructed by Amphlett Lissimore) appeared for the defendant tenants.
