Service charge – Legal fees – Respondent having lease of flat in development – Appellant management company seeking to recover as service charge the cost of legal fees expended in connection with proceedings against developer for defects in building – These held not to be recoverable under terms of lease – Appeal dismissed The appellant was the management company for a waterfront residential development in Liverpool. The respondent was the lessee of one of the flats in the development; the appellant was a party to that lease. Although the lease provided for payment of a service charge, the respondent had not paid any service charge since 2006. In 2009, the appellant applied to the leasehold valuation tribunal (LVT) for a determination, under section 19 of the Landlord and Tenant Act 1985, of the reasonableness of the service charges demanded from the respondent for the years 2007 to 2009. The LVT disallowed certain items of service charge, including more than £30,000 in fees paid to solicitors for legal advice concerning defects in the building, which the appellant had sought with a view to bringing a claim against the developer. The claim in question had been commenced following consultation with the lessees in the building and was made in their names, since the appellant did not at that time have a proprietary interest in the development. The LVT held that the legal fees were not covered by the service charge provisions in the lease. The appellant appealed against the LVT’s decision in respect of various items including the legal fees. It contended that the cost of the proceedings against the developer could properly be recovered. Although such costs did not fall within the clause in the lease dealing expressly with legal fees, the appellant submitted that they were covered by a general clause permitting recovery of “All other expenses (if any) incurred by the Management Company in and about the maintenance and proper and convenient management and running of the Property”. Failing that, it relied on the following clause, which was expressed to cover “All costs and expenses (other than those specified above) of whatsoever kind incurred by the Management Company”. The appellant contended that it had been reasonable to bring the proceedings since the defects in the building were many and extensive and the cost of dealing with them would fall on the service charge unless they were remedied at the developer’s expense. Held: The appeal was allowed in part; it was dismissed in relation to the legal fees. The financing of legal advice to enable the lessees to take proceedings against the developer could, in a sense, be said to be related to the maintenance of the property, in that, if the proceedings were successful, the amount that the appellant would have to spend on maintenance would be reduced. However, the cost of such financing was not incurred “in and about the maintenance” or “proper and convenient running” of the property in the sense that those words were used in the relevant lease clause. The clause was prescribing a much more immediate connection between the expenditure and the maintenance. The other clause on which the appellant relied was expressed so widely that it was difficult to see what it might cover. Although, as expressed, it appeared to cover everything that the company might choose to spend money on, if it were given effect in that way it would render of no significance all the limitations contained, expressly or impliedly, in the earlier, more specific paragraphs. For that reason, it was not possible to give effect to it in the terms in which it was expressed. In light of the very specific clause dealing expressly with the costs of proceedings, which did not cover the costs of the proceedings against the developer, it was not possible to construe the more general clause as conferring an extra power, in unlimited circumstances, to include in the service charge costs relating to proceedings. Accordingly, the appellant was not permitted to include those costs in the service charges demanded from the respondent. Lawrence McDonald (instructed by JB Leitch Solicitors LLP, of Liverpool) appeared for the appellant; Victoria Roberts (instructed by QualitySolicitors Jackson & Canter, of Liverpool) appeared for the respondent. Sally Dobson, barrister
Service charge – Legal fees – Respondent having lease of flat in development – Appellant management company seeking to recover as service charge the cost of legal fees expended in connection with proceedings against developer for defects in building – These held not to be recoverable under terms of lease – Appeal dismissed The appellant was the management company for a waterfront residential development in Liverpool. The respondent was the lessee of one of the flats in the development; the appellant was a party to that lease. Although the lease provided for payment of a service charge, the respondent had not paid any service charge since 2006. In 2009, the appellant applied to the leasehold valuation tribunal (LVT) for a determination, under section 19 of the Landlord and Tenant Act 1985, of the reasonableness of the service charges demanded from the respondent for the years 2007 to 2009. The LVT disallowed certain items of service charge, including more than £30,000 in fees paid to solicitors for legal advice concerning defects in the building, which the appellant had sought with a view to bringing a claim against the developer. The claim in question had been commenced following consultation with the lessees in the building and was made in their names, since the appellant did not at that time have a proprietary interest in the development. The LVT held that the legal fees were not covered by the service charge provisions in the lease. The appellant appealed against the LVT’s decision in respect of various items including the legal fees. It contended that the cost of the proceedings against the developer could properly be recovered. Although such costs did not fall within the clause in the lease dealing expressly with legal fees, the appellant submitted that they were covered by a general clause permitting recovery of “All other expenses (if any) incurred by the Management Company in and about the maintenance and proper and convenient management and running of the Property”. Failing that, it relied on the following clause, which was expressed to cover “All costs and expenses (other than those specified above) of whatsoever kind incurred by the Management Company”. The appellant contended that it had been reasonable to bring the proceedings since the defects in the building were many and extensive and the cost of dealing with them would fall on the service charge unless they were remedied at the developer’s expense. Held: The appeal was allowed in part; it was dismissed in relation to the legal fees. The financing of legal advice to enable the lessees to take proceedings against the developer could, in a sense, be said to be related to the maintenance of the property, in that, if the proceedings were successful, the amount that the appellant would have to spend on maintenance would be reduced. However, the cost of such financing was not incurred “in and about the maintenance” or “proper and convenient running” of the property in the sense that those words were used in the relevant lease clause. The clause was prescribing a much more immediate connection between the expenditure and the maintenance. The other clause on which the appellant relied was expressed so widely that it was difficult to see what it might cover. Although, as expressed, it appeared to cover everything that the company might choose to spend money on, if it were given effect in that way it would render of no significance all the limitations contained, expressly or impliedly, in the earlier, more specific paragraphs. For that reason, it was not possible to give effect to it in the terms in which it was expressed. In light of the very specific clause dealing expressly with the costs of proceedings, which did not cover the costs of the proceedings against the developer, it was not possible to construe the more general clause as conferring an extra power, in unlimited circumstances, to include in the service charge costs relating to proceedings. Accordingly, the appellant was not permitted to include those costs in the service charges demanded from the respondent. Lawrence McDonald (instructed by JB Leitch Solicitors LLP, of Liverpool) appeared for the appellant; Victoria Roberts (instructed by QualitySolicitors Jackson & Canter, of Liverpool) appeared for the respondent. Sally Dobson, barrister