Landlord and tenant – Service charge – Construction of lease – Lease of maisonette on two floors of converted house – Terms of lease requiring appellant lessee to pay 40% of respondent landlord’s expenses in keeping roof and outside walls of the “premises” in good repair – Whether relevant clause to be read as if word “house” used instead of “premises” – Whether appellant liable for 40% of costs of repairing entire house or only roof of main house and external walls of maisonette – Appeal allowed
The appellant was the long leaseholder of a maisonette arranged over the third and fourth floors of a converted Georgian house in London W1. The respondent was her immediate landlord; it held a long headlease of the entire property, which also comprised a flat on the second floor, doctor’s waiting rooms with attendant facilities on the ground and first floors and a disused basement. There were flat-roofed extensions to the rear of the property at basement and ground-floor levels. Initially, the appellant held the maisonette under a 65-year sublease dating from 1958. That lease contained a clause requiring the appellant to pay to the respondent, as lessor, two-fifths of the expense that it incurred in performing a covenant “To keep the roof and outside walls of the premises in good repair”. In 1999, the appellant acquired a new, extended lease from the respondent, pursuant to the leasehold enfranchisement provisions of the Leasehold Reform, Housing and Urban Development Act 1993. The 1999 lease contained the same terms as the 1958 lease.
Between 2005 and 2006, the respondent carried out substantial works of repair and maintenance to the house. A dispute arose over the level of contribution that the appellant was required to make to the cost of those works. The respondent contended that the appellant was liable for two-fifths, or 40%, of its expenses in repairing the entire house, including the flat roofs over the basement and ground-floor extensions; the appellant maintained that she had to pay only 40% of the costs relating to the main roof and external walls of the maisonette.
The respondent claimed that the use of the word “premises” in the relevant clause of the lease was a slip and that it should be construed as if the word “house” had been used instead. A declaration to that effect was granted in the court below. The appellant appealed.
Held: The appeal was allowed.
The court should give effect to the express terms of a contract and should resist the temptation to redraft or improve on those terms. If the contract failed to say what both parties intended, then the normal remedy for an aggrieved party was an action for rectification. Although the court could correct an obvious clerical error as a matter of construction, that exception to the general rule was confined within clear limits. There needed to be a clear mistake on the face of the instrument and it had to be clear what correction needed to be made in order to cure the mistake, although, in deciding whether there was a clear mistake, the court could look beyond the document itself and have regard to the background or context. It had to be clear both that something had gone wrong with the language of the document and what a reasonable person would have understood the parties to have meant: East v Pantiles (Plant Hire) Ltd [1982] 2 EGLR 111; (1981) 263 EG 61, KPMG LLP v Network Rail Infrastructure Ltd [2007] EWCA Civ 363; [2007] Bus LR 1336; [2007] PLSCS 87, Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] 1 AC 1101; [2009] 3 EGLR 119 and Pink Floyd Music Ltd v EMI Records Ltd [2010] EWCA Civ 1429; [2011] 1 WLR 770 applied.
Applying that test, there were no grounds for reading the word “premises”, in the relevant lease clause, as if it said “house”. The clause, as presently worded, required the lessor to repair and maintain the outside walls and the roof of the maisonette. The lessee was obliged to pay 40% of the costs incurred by the lessor in carrying out those works. There was no obvious pattern to the various service charge provisions that led to the conclusion that the parties must have intended the lessee to pay 40% of the repair costs of all roofs and all outside walls. Such an obligation would be surprisingly onerous, since the floor area of the maisonette represented only 29.2% of the total floor area of the house. Furthermore, the lessee derived no benefit from the flat roofs above the basement and ground-floor extensions. Although it was unusual for a lessee’s liability to be confined to the walls and roofs specifically enclosing the demised maisonette, such a provision was not absurd; there was some logic to what was agreed. Moreover, it was not always the case that the landlord of a property with multiple tenants on historic leases recovered 100% of its expenditure through service charges. When construing a lease, there was no presumption that the service charge provisions would enable the landlord to recover all of its expenditure: Rapid Results College Ltd v Angell [1986] 1 EGLR 53 considered.
Accordingly, it was not possible to say that, in using the word “premises” instead of “house”, the parties had made a clear mistake. The clause in its present form was not commercially nonsensical. It should be construed as meaning what it said.
John Male QC (instructed by Dewar Hogan Solicitors) appeared for the appellant; Gary Cowen (instructed by Hammond Bale LLP) appeared for the respondent.
Sally Dobson, barrister
