Purpose-built blocks of flats — Landlord making fresh arrangements for buildings’ insurance — Premium rate higher than previous cover arranged by management company — Whether landlord entitled to recover sums insured — Whether arrangements “reasonable” — Judgment at first instance in landlord’s favour — Appeal by tenants and management company dismissed
Eleven of the 14 developments of large blocks of flats to which the appeals related were carried out by Rialto Homes plc and three by Tarmac. As the developments proceeded, completion of the sales of individual properties did not normally take place until the properties were finished. Thus there was a period when only some of the properties were sold and occupied and others were waiting to be finished. It was common practice to provide for the maintenance of the common parts and the unoccupied portion of the development through management companies controlled by the developers. As the individual properties were sold, the purchasers were required to subscribe for a share in the company. They then became responsible for the obligations carried out by the company.
The present reversions were sold to the respondents (“Sinclair”) in January 1993. During the development, insurance of the buildings was arranged and maintained by the developers and the management companies. When Sinclair acquired the reversions it decided to make fresh arrangements for insurance of the buildings. It required the management companies to insure with a nominated insurer and the amount of the cover was based on the same valuation as in the previous policies. However, the premium rate was considerably higher. The tenants thought it unreasonable that they should be required to pay more since the management companies were already using insurers of repute.
The appeals were brought by an individual tenant and a management company from each of the 14 developments against a first instance refusal of an order declaring that the premium was excessive. Alternatively, they sought an order under the provisions of sections 19 and 30(A) of the Landlord and Tenant Act 1985 that the landlord was not entitled to recover the insurance as they were not “relevant costs reasonably incurred” within the Act’s provisions. Judgment was given in favour of the landlord by the first instance judge on the ground that the landlord was entitled to insure through a nominated insurer, and he refused relief under the 1985 Act.
Held The appeals were dismissed.
1. There was no reason to imply any term that there should be a restriction on the landlord’s right to nominate either the company or the agency through which the insurance was to be placed. The management company and the tenant were protected by the qualification that the insurance office must be of repute but otherwise the right of the landlord was unqualified: see, inter alia, Havenridge Ltd v Boston Dyers Ltd [1994] 2 EGLR 74.
2. No question arose that the insurance was arranged otherwise than in the normal course of business nor through an office of repute. The rates proposed to be charged were market rates. That they were higher than those which the management company could have secured was beside the point.
3. With regard to the rights and liabilities of the landlord and tenant under the service charge provisions of the Landlord and Tenant Act 1985 (as amended), the court was not prepared to accept that the costs incurred by the landlord in effecting the insurance were costs “unreasonably incurred”.
David Halpern (instructed by Taylor Vinters, of Cambridge) appeared for the appellants; David Neuberger QC and Nicholas Dowding (instructed by Malthouse Chevalier) appeared for the respondent landlord.
