Landlord and tenant – Service charge – Construction of lease – Respondents holding long lease of flat on estate owned by appellant council – Appellants having city-wide contract for provision of communal lighting – Service charge levied on respondents including charge for lighting – Charge calculated according to comparative rateable value of estate and appellant’s other properties – Whether appellants entitled to charge on that basis – Whether failing to identify cost actually incurred in relation to estate –Appeal dismissed
The respondents held a long lease of a flat in Norwich in a block forming part of an estate of which the appellant council was the freeholder. A service charge was payable under the lease, to represent “a fair share as determined by the Council… of the Council’s Expenditure attributable to the Property”, including the “reasonable expenditure of the Council in complying with its obligation to provide, maintain etc lighting to the communal areas on the estate”.
The appellants had a city-wide contract for the maintenance of communal lighting in all their blocks of flats, not just those on the estate. In practice, they calculated the amount of the charge for the estate by apportioning the cost based on the relative rateable value of the estate and the other blocks that were covered by the contract.
The respondents were concerned that the apportionment of costs by rateable value did not reflect the costs actually incurred by the appellants on communal lighting to the estate and that the appellants had failed to produce any accounts, receipts or other documents as required by the lease. They applied to the first-tier tribunal (FTT), under section 27A of the Landlord and Tenant Act 1985, for determinations of whether the appellant’s method of charging, without providing details of the actual expenditures on a particular estate, was fair, reasonable and complied with the leases and as to what, if any, reasonable cost was payable.
The FTT held that the lighting maintenance charges did not comply with the lease and so were not payable. It also held that it was not possible, on the information provided by the appellants, to calculate the true cost payable by the respondents. The appellants appealed.
Held: The appeal was dismissed.
Under the terms of the respondents’ lease, the appellant was entitled to charge the appellant for a fair share of the cost of communal lighting provided the cost fell within the definition of “Council’s Expenditure” as defined. Properly construed, that definition required the expenditure to relate to the cost of communal lighting to the estate alone. That was the natural and ordinary meaning of the words “expenditure in complying with its obligation” to provide communal lighting “on the Estate”. The respective obligations of the parties to the lease were carefully described by reference to the property, the building and the estate, all of which were defined. There was no reference to any wider category of property or estate nor any provision for apportionment of costs which might be incurred in relation to a wider area.
The fact that the appellants had incurred city-wide contract costs to provide communal lighting did not mean that a portion of those costs calculated on the basis of rateable value was incurred in complying with the appellants’ obligation to provide communal lighting on the estate. While fixed sum city-wide contracts might be a legitimate approach if there were an overall variation in the service charge provisions of all the appellants’ leases, that had not occurred and the relevant lease had to be construed as it currently stood. The wording of the lease would not be understood by a reasonable person, having all the background knowledge which would reasonably have been available to the parties at the date of the lease, as permitting the appellant to include in the service charge money spent on providing communal lighting to other flats in the city outside the estate. Whether the cost determined by the appellants actually represented its expenditure in maintaining communal lighting on the estate could not be resolved in circumstances where the appellant had produced no evidence as to the actual costs referable to the estate.
The appeal was determined on the written representations of the parties.
Sally Dobson, barrister
Click here to read transcript: Norwich City Council v Redford and another
