Twenty Two Clifton Gardens Ltd v Thayer Investments SA
HH Judge Karen Walden-Smith
Landlord and tenant – Service charge – Proceedings in leasehold valuation tribunal – Appellant landlord bringing LVT proceedings to determined liability of respondent tenant for unpaid service charges – Whether legal and surveyor’s costs of those proceedings recoverable from respondent under terms of lease – Appeal dismissed
The appellant company owned a block of five flats, the tenants of which were all shareholders in the appellant. The respondent was the tenant of one of those flats. The appellant had originally been a party to the tenants’ leases as the management company, but had subsequently acquired the freehold. The service charge provisions in the leases provided for the tenants to pay a proportion of the appellant’s costs incurred in performing the obligations set out in a schedule. These included: (i) taking all reasonable steps “to enforce the observance and performance by the Lessee of other flats in the block of the covenants and conditions in the leases of the other flats which fall to be observed and performed by the Lessee” (para 10); and (ii) providing “such other services as it shall in its reasonable discretion deem necessary for the better use and enjoyment of the Property by the Lessee and other occupiers of the Building” (para 11).
The appellant brought proceedings in the leasehold valuation tribunal (LVT) to determine the respondent’s liability for unpaid service charges. The LVT determined that the appellant’s costs of instructing solicitors and counsel in those proceedings, and of obtaining an expert’s report from a surveyor, were not recoverable from the respondent as service charge under the relevant provisions of the lease. The appellant appealed.
Decision: The appeal was dismissed.
(1) In construing the lease, it was necessary to consider the situation when it was entered into. At that time, the management company and the lessor were two separate entities. Para 10 contained obligations on the part of the management company for the benefit of the tenants. The management company was not obliged to take any steps to enforce the lease covenants on behalf of the lessor since the lessor was itself a party to the leases and could take any steps it wished against the tenants. Para 10 unambiguously referred to enforcing performance by the “Lessee of other flats in the block”, not the lessee of the subject flat. There was nothing to suggest that the parties to the lease did not intend what was set out, namely that the costs of carrying out the enforcement fell on the non-defaulting tenants. There was no basis for rectification of the paragraph. It was important to give words their natural and ordinary meaning. Consequently, the obligation in para 10 of the schedule to the lease was to enforce the covenants and conditions in leases other than the subject lease. The appellant could not rely on para 10 as the basis for expending moneys to enforce against the lessee of the subject lease. The costs recoverable against the respondent did not include the solicitor and surveyor’s costs expended in bringing the LVT proceedings against it.
(2) Although para 11 was extremely widely worded, it did not provide a means of recovering the LVT costs against the respondent when these were excluded by virtue of para 10. The “other services” in para 11 had to be services other than those already referred to in para 10 and therefore did not include those enforcement matters expressly dealt with in that paragraph. Moreover, the bringing of LVT proceedings was not a service “necessary for better use and enjoyment of the Property by the Lessee”. The collection of service charges was a by-product of the provision of services for the better use and enjoyment of the property; it was not a service that, in itself, enabled the tenant better to enjoy the property: St Mary’s Mansions Ltd v Limegate Investment Co Ltd [2002] EWCA Civ 1491; [2003] 1 EGLR 41; [2003] 05 EG 146 applied. The provision in para 11 was to cover any other services deemed necessary for the better physical use and enjoyment of the property that were not covered elsewhere in the lease. Accordingly, the appellant was not entitled to recover the costs of the LVT proceedings from the respondent.
James Homes-Milner (instructed by William Heath & Co) appeared for the appellant; Richard Clegg (instructed by Iliffes Booth Bennett) appeared for the respondent.
Sally Dobson, barrister
Landlord and tenant – Service charge – Proceedings in leasehold valuation tribunal – Appellant landlord bringing LVT proceedings to determined liability of respondent tenant for unpaid service charges – Whether legal and surveyor’s costs of those proceedings recoverable from respondent under terms of lease – Appeal dismissedThe appellant company owned a block of five flats, the tenants of which were all shareholders in the appellant. The respondent was the tenant of one of those flats. The appellant had originally been a party to the tenants’ leases as the management company, but had subsequently acquired the freehold. The service charge provisions in the leases provided for the tenants to pay a proportion of the appellant’s costs incurred in performing the obligations set out in a schedule. These included: (i) taking all reasonable steps “to enforce the observance and performance by the Lessee of other flats in the block of the covenants and conditions in the leases of the other flats which fall to be observed and performed by the Lessee” (para 10); and (ii) providing “such other services as it shall in its reasonable discretion deem necessary for the better use and enjoyment of the Property by the Lessee and other occupiers of the Building” (para 11).The appellant brought proceedings in the leasehold valuation tribunal (LVT) to determine the respondent’s liability for unpaid service charges. The LVT determined that the appellant’s costs of instructing solicitors and counsel in those proceedings, and of obtaining an expert’s report from a surveyor, were not recoverable from the respondent as service charge under the relevant provisions of the lease. The appellant appealed.Decision: The appeal was dismissed.(1) In construing the lease, it was necessary to consider the situation when it was entered into. At that time, the management company and the lessor were two separate entities. Para 10 contained obligations on the part of the management company for the benefit of the tenants. The management company was not obliged to take any steps to enforce the lease covenants on behalf of the lessor since the lessor was itself a party to the leases and could take any steps it wished against the tenants. Para 10 unambiguously referred to enforcing performance by the “Lessee of other flats in the block”, not the lessee of the subject flat. There was nothing to suggest that the parties to the lease did not intend what was set out, namely that the costs of carrying out the enforcement fell on the non-defaulting tenants. There was no basis for rectification of the paragraph. It was important to give words their natural and ordinary meaning. Consequently, the obligation in para 10 of the schedule to the lease was to enforce the covenants and conditions in leases other than the subject lease. The appellant could not rely on para 10 as the basis for expending moneys to enforce against the lessee of the subject lease. The costs recoverable against the respondent did not include the solicitor and surveyor’s costs expended in bringing the LVT proceedings against it.(2) Although para 11 was extremely widely worded, it did not provide a means of recovering the LVT costs against the respondent when these were excluded by virtue of para 10. The “other services” in para 11 had to be services other than those already referred to in para 10 and therefore did not include those enforcement matters expressly dealt with in that paragraph. Moreover, the bringing of LVT proceedings was not a service “necessary for better use and enjoyment of the Property by the Lessee”. The collection of service charges was a by-product of the provision of services for the better use and enjoyment of the property; it was not a service that, in itself, enabled the tenant better to enjoy the property: St Mary’s Mansions Ltd v Limegate Investment Co Ltd [2002] EWCA Civ 1491; [2003] 1 EGLR 41; [2003] 05 EG 146 applied. The provision in para 11 was to cover any other services deemed necessary for the better physical use and enjoyment of the property that were not covered elsewhere in the lease. Accordingly, the appellant was not entitled to recover the costs of the LVT proceedings from the respondent.James Homes-Milner (instructed by William Heath & Co) appeared for the appellant; Richard Clegg (instructed by Iliffes Booth Bennett) appeared for the respondent.
Sally Dobson, barrister
