Landlord and tenant — Appeal by landlords from decision of Mr Scott Baker QC on a preliminary question as to construction of lease — Whether tenants of part of a building were liable to make contributions in the nature of a ‘services rent’ in respect of works done to the parapet on the roof of the building — The demise to the tenants (respondents to the appeal) comprised the second floor of the building (in fact the top floor) and they had the use of other parts of the building, such as entrance hall, staircase, landings and passages — The parapet had to be rebuilt after the bricks had become saturated with damp — Respondent tenants were required to contribute towards the repair works, the contribution being demanded by a certificate signed by the landlords’ surveyor, whose decision was stated to be binding on the parties — The claim for a contribution was based mainly on an item, ‘maintenance of the exterior’, in a list of items of expenditure in respect of the offices on the first and second floors — It was argued for the appellant landlords that, as the respondents’ second-floor offices were on the top floor, maintenance of the roof was maintenance of part of the exterior of the respondents’ offices — Held, distinguishing the decision of Douglas-Scott v Scorgie, that in the context of the present case the roof could not be regarded as part of the exterior of the second-floor offices — The court also rejected submissions that the claim could succeed under the heading of expenses attributable wholly to the first- and second-floor offices or, alternatively, under the head of repairs and maintenance in respect of parts of the building used in common by the respondents with the landlords and tenants of other portions of the building — The court distinguished the decision in South West Water Authority v Rumble’s, which
This was an
appeal by landlords, Rapid Results College Ltd, from a decision of Mr Scott
Baker QC, sitting as a deputy judge of the Queen’s Bench Division, in favour of
tenants on a preliminary issue of construction under a lease of office premises
at Brighton House, High Street, Ewell, Surrey. The tenants were Donald Douglas
Angell, Terence Michael Thompson, Philip Rodney Gasson and Malcolm John
Henderson. The decision of Mr Scott Baker QC is reported at [1985] 2 EGLR 66;
(1985) 275 EG 247.
K S Munro
(instructed by Sowman Pinks & Co) appeared on behalf of the appellants;
John Tonna (instructed by Brand & Co, of North Cheam, Surrey) represented
the respondents.
Giving
judgment, DILLON LJ said: This is an appeal from a decision of Mr Scott Baker
QC, sitting as a deputy judge of the Queen’s Bench Division on March 21 1985.
The appeal raises a question of construction of particular provisions in a
lease in relation to what is called a services rent. The lease is a document
which the draftsman has attempted to tailor to the particular requirements of a
particular building; the question that arises depends on particular provisions
and not on any general consideration.
The
respondents to this appeal, the defendants in the action, are the original
lessees, who carried on a profession in partnership in offices on the second
floor of the building. The appellants, the plaintiffs in the action, are by
assignment the reversioners entitled to the reversion on the lease. The lease
is of part of a building known as Brighton House, High Street, Ewell in Surrey.
That building was built some 20 years or so ago; it is a three-storey building
consisting of shops on the ground floor and offices on the first and second
floors. There is a flat roof, and on the roof and going round the perimeter of
the building there is a brick parapet wall. Included in the building as I have
described it there is a common staircase and landings. The first-floor office
and ground-floor shops extend slightly further than the second-floor offices;
there is a garage space at the back, and built over that, at mezzanine level,
there is a further building, to which it seems access can be obtained by a
bridge from the first floor of the main building.
The lease was
a lease for a term of six years from March 25 1975. That term has of course now
expired and the defendants have quit the building; the question that arises is
whether they are liable in respect of services rent during the continuance of
the term.
The lease was
granted at a yearly rent of £4,400, with provision for a review after the
expiration of three years of the term granted; the reviewed rent is to
represent a fair rack rental market value of the premises. In addition,
however, there is reserved by the lease to the landlords by way of additional
rent a further sum on account of expenses and outgoings incurred by the
landlords in compliance with the covenants on the part of the landlords
contained in the third schedule to the lease; this further sum is called the
‘services rent’ and is to be calculated in the manner specified in the fourth
schedule to the lease.
The covenants
on the part of the landlord in the third schedule include the usual covenant
for quiet enjoyment and a covenant to insure, and to keep insured, the demised
premises; to provide adequate heat during office hours from October to April to
panels or radiators fixed in the demised premises; to pay all charges for gas
and electricity consumed in the building; and in paragraph 3(4) it provides:
Whenever
reasonably necessary to maintain put in good and substantial repair redecorate
and renew:
(a) the external walls and structure and in
particular the roof foundations gutters and rainwater pipes of the building
(b) the gas and water pipes tanks drains and
electric cables and wires in under and upon or serving the building and enjoyed
or used by the Tenants in common with the tenants of other parts of the
building
(c) the main entrances common passages landings
and staircases and other parts of the building so enjoyed or used by the
Tenants in common as aforesaid
and then it
says: ‘together with the boundary walls surrounding the building’, which seems
to mean the walls around the car park. The demised premises are plainly not the
whole of the building. They are defined in the first schedule as follows:
FIRSTLY ALL
THAT office accommodation on the Second Floor of the building (hereinafter
called ‘the building’) known as Brighton House High Street Ewell as the same is
shown on the plan annexed hereto and edged red Together with the use in common
with the Landlords and the tenants and occupiers of other portions of the
building of the entrance hall staircase, landings and passages leading thereto
and the ladies’ lavatories on the first floor and the men’s lavatories on the
second floor of the building shown on the plan edged brown between the hours of
8 am and 7 pm on all days of the said term except Sundays and Good Friday
Christmas Day and Bank and public holidays AND SECONDLY ALL THAT the parking
space shown and coloured mauve on the said plan
and these are
said to be thereinafter together called ‘the demised premises’.
There is also
provision for a right of way along a service road and a pedestrian right of
way; and there is a grant of the
free passage
and running of water soil gas and electricity and other services relating to
the Landlords’ adjoining premises through the pipes wires and cables in through
or under the Landlords’ adjoining premises
with a
corresponding reservation to the landlords.
The fourth
schedule provides in para 1(b) for the calculation of the services rent. Under
subpara (i) the amount of the services rent is to be ascertained and certified
annually by a certificate signed by the landlords’ surveyor, whose decision is
to be binding upon the parties; that is to be prepared as soon after the
landlords’ financial year as may be practicable, and is to relate to that year.
‘The landlords’ financial year’ is then defined in subpara (ii), and under
subpara (iii) a copy of the certificate for each landlords’ financial year is
to be supplied to the tenants by the landlords without charge to the tenants.
Subpara (iv) reads:
The
certificate shall contain a fair summary of expenses and outgoings incurred by
the Landlords under the heads of expenditure specified in subparagraph (v)
hereof in compliance with the covenants by the Landlords contained in any lease
of any part of the building during the Landlords’ financial year to which it
relates.
Under subpara
(v):
The annual
amount of the services rent payable by the Tenants as aforesaid shall be
calculated as:
(a) Fifty per centum of the aggregate of the
following expenses and outgoings incurred by the Landlords in respect of the
premises being the offices on the First and Second Floors forming part of the
building and shown bounded by the red line on the said plan annexed hereto
(hereinafter called ‘the first and second floor offices’):
1. Insurance
2. Heating
3. Electricity
4. Maintenance of the exterior
5. Any other expenses or outgoings which
in the opinion of the Landlords’ surveyor (whose decision shall be binding on
the parties) are attributable wholly to the first and second floor offices
(b) Twenty-five per centum of the aggregate of
the following expenses and outgoings incurred by the Landlords in respect of
all other parts of the building specified in the First Schedule hereto of which
the Tenants have the use in common with the Landlords and tenants and occupiers
of other portions of the building:
1. Cleaning
2. Towels
3. Electricity not falling within
subparagraph 3, of paragraph (a) above
4. Repairs and maintenance
5. Any other expenses and outgoings
incurred by the Landlords in respect of the said common parts of the building
and
(c) Fifteen per centum of the aggregate of the
expenses and outgoings incurred by the Landlords in respect of the car park and
boundary walls thereof.
What happened
was that there was trouble in relation to the parapet on the roof of the
building. It appears that the rendering of the bricks which were on edge had
cracked away between the bricks on one side or another, so that the bricks
became saturated with damp. On the advice of their architect the landlords took
the parapet down and rebuilt it altogether. This cost a considerable sum of
money, over £21,000, to which architects’ fees of over £2,000 had to be added.
In September
of 1980 the landlords submitted a certificate claiming payment, by way of
services rent from the defendants as the lessees of the second-floor offices,
of a sum of £8,382.70 plus VAT, less £642.18 paid in advance; nothing turns on
the payments in advance. The £8,382.70 is calculated for the year ended March
31 1980, first by adding two-thirds of the cost of insurance of the whole
building, a sum for gas and maintenance of the boiler, 50% of total paid on
electricity, and for the maintenance of the exterior, two-thirds of the amount
paid on the parapet and the architects’ fees, and small sums for cleaning and
towels. This produces £16,765.41, of which the £8,382.70 is the ‘one-half’ —
the 50% referred to in subpara (v) of the provisions for the calculation of
services rent in the fourth schedule to the lease.
The defendants
objected to paying this sum. They took quite a range of points; they said that
the reconstruction of the parapet wall was not maintenance; they said that what
had been done was not reasonably necessary to maintain and put in good and
substantial repair or renew the external walls and structure and roof of the
building. But they also took the point that work on the roof and parapet could
not fall within any of the factors which the landlords are entitled to take
into account under para 1b(v) in the fourth schedule in calculating the
services rent.
Since that
point did not depend on evidence as to the precise work done or the need for
it, or any distinction which might involve expert evidence between maintenance
and repair, it was agreed in the court below that that question of construction
should be taken as a preliminary question at the trial. The learned judge
decided it against the landlords and in favour of the defendants. That put an
end to the action against the defendants. If on this appeal the plaintiffs
succeed, the action would have to go back for further trial at first instance,
to investigate the other issues which were raised by the defendants by way of
defence to the claim.
In the court
below it was urged that the provisions for the calculation of service rent
reflected, and should be construed so as to tie in with, and cover, the matters
on which the landlords had covenanted to incur expenditure under the third
schedule. Obviously there is a degree of echo in the provisions of the fourth
schedule of what the landlords are to do under the third schedule, because the
effective charging clause reserving the services rent describes it as a further
sum on account of expenses and outgoings incurred by the landlords in compliance
with the covenants on the part of the landlords contained in the third
schedule; but it does not follow automatically, nor has it been urged in this
court, that the services rent must necessarily cover everything that the
landlords are to do under the third schedule. The lease is for a term of only
six years; one would not automatically expect that a tenant at a rack rent of a
suite of offices in part of a building for a term of six years would be
undertaking responsibility for the cost of repair of the main structure roof
and foundations of the building. It is necessary, while bearing the third
schedule in mind, to construe the relevant words in the fourth schedule, where
the draftsman has apparently attempted to work out what is to apply, in part
50% of expenses being chargeable and in part 25%.
The main claim
by the landlords rests on the words in subpara (v)(a) in the fourth schedule,
‘4. Maintenance of the exterior’. Seeing those words one asks at once,
‘exterior of what?’ It occurred to me in
the course of argument that in the light of the provisions in the third
schedule, and as the heading ‘Insurance’ in (v)(a)1 in the fourth schedule
would probably involve, as a practical matter, an apportionment of an insurance
on the building as a whole, there might be a possibility of construing the
words ‘Maintenance of the exterior’ as referring to the exterior of the
building, and as implying an apportionment in the opening words ‘50% of the
aggregate of the following expenses and outgoings incurred by the landlords in
respect of the premises’. But I do not think that is possible, because the
draftsman of the lease has emphasised that the premises in respect of which
these outgoings are to be incurred are the offices on the first and second
floors forming part of the building shown bounded by the red line and
specifically referred to as ‘the first and second floor offices’. The draftsman
has gone on, in item 5, to deal with expenses which are attributable wholly to
the first- and second-floor offices, and I do not see that there is scope in
that context for saying that two-thirds, or some other fraction, of expenses of
maintenance of parts of the exterior, which are not exterior of the first- and
second-floor offices, are to be brought within (v)(a)4 in the fourth schedule.
Mr Munro, for
the appellants, accepted that ‘Maintenance of the exterior’ meant the exterior
of the first- and second-floor offices. His main argument was that as the
second-floor offices were on the top floor, maintenance of the roof was
maintenance of part of the exterior of the first- and second-floor offices. He
supported that argument by reference to the case of Douglas-Scott v Scorgie
[1984] 1 WLR 716*. That is a decision of this court in which it was held that
for the purposes of section 32 of the Housing Act 1961 the roof of a building
might, according to the evidence, form part of the exterior of a top-floor flat
in that building. As it seems to me, it is not possible in this case to say
that the parapets on the roof were part of the exterior of the second-floor
offices. Apart from that, in the context of this case I cannot regard the roof
as being part of the exterior of the second-floor offices. The phrase in
section 32 of the Housing Act 1961 is ‘structure and exterior of the
dwelling-house’ which is a different phrase; and the statutory context is
concerned with obligations imposed on a landlord as a matter of law in certain
tenancies of dwelling-houses; it is a very different context from that with
which we are concerned in the present appeal.
*Editor’s
note: Also reported at (1984) 269 EG 1164, [1984] 1 EGLR 40.
Therefore, as
it seems to me, what has been incurred by way of rebuilding of the parapet does
not fall within the words ‘maintenance of the exterior’ in 4(v)(a) of the
fourth schedule.
It is
submitted alternatively for the appellants that a proportion of the cost falls
within the wording of 5(v)(a):
Any other
expenses or outgoings which in the opinion of the Landlords’ surveyor (whose
decision shall be binding on the parties) are attributable wholly to the first
and second floor offices.
It seems to me
that the appellants have a difficulty in attempting to rely on 5, because they
are only seeking to charge a proportion, 50% of two-thirds of the cost of the
expenditure. They must thereby be recognising that the total expenditure on the
parapet is not wholly attributable to the first- and second-floor offices.
Therefore, as it seems to me, that expenditure cannot fall within item 5, and
the wording of item 5 does not permit a prior apportionment by the landlords’
surveyor so as to treat the part which he considers appropriate as wholly
attributable to the first- and second-floor offices.
There is a
further difficulty in the appellants’ way in that, as Mr Tonna, for the
respondents, has pointed out, the roof covers not only the first- and
second-floor offices as shown bounded by the red line on the plan but also the
common parts and stairway as shown bounded by a brown line on the plan, and the
parapet went round the whole of the roof. That again must indicate that the
expenses of rebuilding the parapet cannot be attributable wholly to the first-
and second-floor offices. Ordinarily one would regard expenses on a roof as
attributable to the building as a whole, not merely to the top two floors of
the building.
In the
alternative, the appellants argue that they can at least claim 25% of their
expenses in respect of the parapet under (v)(b) in the fourth schedule, as
being expenses and outgoings incurred by the landlords in respect of other
parts of the building, of which the tenants have the use in common with the
landlords and tenants and occupiers of other portions of the building; they
fall under heading 4 in (v)(b), it is submitted, as ‘repairs and maintenance’.
Again I leave
aside the question whether the work done is work of repair and maintenance as
opposed to work of some other nature, because that is a point which was not
argued in the court below. The point here is ‘use in common with the
landlords’.
Looking at the
lease and the parcels demised as set out in the first schedule, it is quite
plain that the tenants are given the use, in common with the landlords and
other tenants and occupiers, of the entrance hall, staircase, landings and
passages leading to the demised premises and various ladies’ and men’s
lavatories; they also have the free passage of water, soil and gas, electricity
and other services through various pipes, wires and cables; but they do not, in
the sense in which the word ‘use’ is used in the parcels in the grant of the
easements, have any use of the roof at all. This is underlined by the wording
of para 3(4) in the third schedule.
It is said,
none the less, that they do have the use of the roof in the sense in which that
phrase was used in the recent decision of the House of Lords in South West
Water Authority v Rumble’s [1985] AC 609. In that case the position
was that occupiers of a ground-floor shop, which had no direct water or
drainage facilities, were held to be liable to water charges in respect of
water services, because surface water was removed from the roof of the building
by way of a downpipe running into a gulley and from there into the water
authority’s sewers. It is, however, relevant to note that the phrase used in
that particular Act was not simply ‘use of the building’ but ‘use of sewage or
drainage facilities’. The court was concerned not with use of the building but
with the use of facilities which drained to a sewer or drain connected with the
local authority’s sewer. That is a
context of this lease to say that the occupiers of the first- and second-floor
offices have the use in common of the roof and parapet of the building.
I should add
that it is common ground that the surveyor’s certificate is not conclusive on
whether matters listed in the certificate do, as a matter of law, fall within
the subheads of the fourth schedule, and in particular in subpara (v) of that
schedule.
Therefore, in
my judgment the learned deputy judge was right in the conclusion which he
reached on the construction of this lease, and I would dismiss this appeal.
Agreeing,
NICHOLLS J said: I add only a brief comment on one point, namely, the primary
way in which the lessors put their case on this appeal. The primary
construction contended by the lessors is that in item 4 of clause 1(b)(v)(a) in
the fourth schedule, ‘exterior’ means exterior of the premises earlier referred
to in that clause, that is, the offices on the first and second floors shown
bounded by a red line on the plan.
The next step
in the argument is that although the roof and parapet wall do not form part of
the second-floor property demised by this lease, none the less they are
properly to be regarded as the exterior of the second-floor property. The
difficulty that I feel with this argument is that, accepting that the first
step is correct, the roof and parapet wall in question extend over not only the
part of the building edged in red on the lease plan but also the part of the
building edged in brown on the plan. Thus at best only part of the roof and
parapet wall would be within item 4, because only part of the roof and parapet
wall are contiguous to the part of the second floor which is edged in red.
Hence, even if one were to accept that the roof and parapet wall are capable of
being the ‘exterior’, the end result would be the unattractive one that part,
but only part, of the single flat roof and of the one continuous perimeter
parapet wall would be within item 4. I find it impossible to believe that such
a result was, or is to be taken as having been, the intention of the parties to
the lease.
Furthermore,
construing item 4 as contended would have the result that although occupying
one-third of the building, the tenants under this short lease would be
responsible for half the costs of the maintenance of the roof and the parapet
wall. It may be said that this is not inappropriate, because the tenants occupy
the top floor of the building immediately below the roof; but I do not think
that this result is so obviously right that it prompts the conclusion that this
must be what the parties to the lease intended.
In my view,
these considerations point to the conclusion that in this short lease, in item
4 ‘exterior’ does not include the roof of the building or, a fortiori,
the parapet wall.
SIR GEORGE
WALLER agreed with both judgments and did not add anything.
The appeal
was dismissed with costs.