Landlord and tenant –– Service charges –– Landlord and Tenant Act 1985 –– Section 20 consultation provisions –– Lease of several flats and other properties –– Tenant subletting flats –– Whether tenant under lease tenant of a flat –– Whether section 20 consultation provisions applicable where tenant holding and subletting several flats
The claimant superior landlord was the freehold owner of a large building that contained, on its upper floors, a mixture of offices, domestic and commercial accommodation. The domestic accommodation contained a substantial number of flats. The defendant (Central) held a headlease of the plant room, the lifts and lift shaft, the flats, and the hallways, staircases and roof of the building. The Part 20 defendants, Camden London Borough Council (Camden), held an underlease of substantially the same premises as demised by the headlease. Camden had demised the flats to individual occupier tenants. The headlease and the underlease each contained service charge provisions for the recovery of expenses incurred by the superior landlord and Central respectively on such matters as repairs. In 1999 the superior landlord carried out substantial repairs, and contended that £17,665 was due from the tenants. Neither the superior landlord nor Central produced estimates or carried out the consultation exercise required by section 20 of the Landlord and Tenant Act 1985. In proceedings against Central, the claimant sought a declaration that section 20 did not apply; Central joined Camden as a Part 20 defendant. Both Central and Camden asserted that as the respective demised properties included flats, section 20 did apply. As the section had not been complied with, the service charges in issue were not recoverable by the claimant.
Held: It was declared that section 20 applied to the tenancies created by the headlease and underlease respectively. In relation to any individual flat or dwelling, Central was the tenant of that dwelling. That it was also the tenant under the headlease of other flats or properties was irrelevant. The same was true of Camden in relation to the underlease. The 1985 Act speaks of the “tenant of a dwelling” not the “tenant of the dwelling and nothing else”.
The following cases are referred to in this report.
Horford Investments Ltd v Lambert [1976] Ch 39; [1973] 3 WLR 872; [1974] 1 All ER 131; (1973) 27 P&CR 88, CA
Uratemp Ventures Ltd v Collins [2000] 1 EGLR 156; (2001) 33 HLR 4
Nicholas Peacock (instructed by Nicholson Graham & Jones) appeared for the claimant; Timothy Polli (instructed by the solicitor to Camden London Borough Council) represented the Part 20 defendants; the defendant did not appear and was not represented.
Giving judgment, Judge Roger Cooke said:
This preliminary issue raises an unusual question of construction of the service charge provisions in the Landlord and Tenant Act 1985. I am much indebted to both counsel for their assistance.
Facts
1. The relevant facts are deceptively simple and are these:
At the material dates (it has since been sold), the claimant was the freehold owner of Maple House, 141-150 Tottenham Court Road, London W1. Maple House is a well-known landmark. It is a very large building, built to house Maples, the well-known furniture store, with, in addition, and especially on the upper floors, a mixture of office, domestic and commercial accommodation. The domestic accommodation consists of a substantial number of flats.
2. The defendant (Central) holds a headlease, dated 24 June 1982, of the demised premises under that lease, being the plant room in the basement, the lifts and lift shaft, the flats and the hallways and staircases that give access to them, and, finally, the roof of the building. Under the headlease, the landlord assumes some obligations as regards the common parts.
3. The Part 20 defendants, Camden London Borough Council (Camden), have an underlease, dated 17 February 1978 (executed before the headlease, but nothing turns on this), of the same demised premises. The two leases may not be quite word-for-word, but their terms are closely similar.
4. Camden, which are, of course, local authority landlords, have, in turn, demised the flats to individual occupier tenants.
5. The two leases both contain service charge clauses of a fairly conventional type, providing for payment of a fair proportion of the landlord’s expenditure on (among other things) repairs as specified in a schedule, the proportion to be certified by the landlord’s surveyor. Detailed provisions follow that do not concern the present issue.
6. In 1999, the landlords carried out substantial works, and certified the net sum of £17,665.27 as being due from the tenants. It is said that this is the first the tenants had heard of the works, or their cost.
How the issue arises
7. It is common ground, for present purposes, that neither the headlandlord nor Central, in its capacity as Camden’s landlord, produced the estimates, gave the notices or did anything else that they would have been required to do by section 20 of the 1985 Act, if that section were to have applied.
8. It would follow that if the section does apply, the sums claimed are irrecoverable, either by the claimant from Central or by Central from Camden.
9. It is central to the whole case whether section 20 (or, indeed, any of the service charge sections of the Act) applies. Therefore, District Judge Langley ordered that there be tried as a preliminary issue the question of whether section 20 applied. As there is no separate argument on this issue between Central and Camden, Camden assumed the burden of arguing the preliminary point, Central agreeing to be bound by the result.
Statutory framework and its history
10. Practitioners in this field will be familiar with the chequered history of service charges. The service charge is a very necessary instrument where blocks of property (but especially blocks of flats) are let on leases but are managed together and have common services. The cost of servicing the block has to be borne initially by the landlord (or, in some cases, the service company) and then has to be divided up and recovered from the tenants; sometimes the tenants are asked to make payments in advance or on account, especially if the repairs are large.
11. But, at the same time, this necessary and beneficial institution can be subject to abuse. The casebooks are full of examples: repairs done by companies owned by the landlord, landlord’s business expenses tacked on to the service charge, in some cases frankly dishonest overcharging, and in others a complete lack of particularity as to what the charge covered. There is no doubt that, over the years, it has become a fertile ground for dispute.
12. Parliament has therefore intervened on a number of occasions, especially to provide a regime that protects the residential tenant (none of the legislation applies to lettings of premises that are not residential premises).
13. The first step was taken in (now long-forgotten) section 90 of the Housing Finance Act 1972 (HFA), which, in short summary, gave tenants of flats (there defined as premises occupied wholly, or mainly, as a private dwelling and horizontally severed from the rest of the building) the right, in some circumstances, to information as to the make-up of the service charge if it exceeded a statutory minimum.
14. The next stage (the genesis) of section 20 was contained in section 124 of the Housing Act 1974 (by way of additional section 91A of the HFA), whereby service charges became recoverable, among other instances, only in the case of more expensive works, where two estimates were obtained and the tenants consulted about them. There followed also a provision intended to avoid contracting out.
15. In the Housing Act 1980, sections 90 to 91A of the HFA were replaced by a new code contained in Schedule 19. In para 5 was a provision very similar to section 91A. Once again, the relevant subject premises were expressed as “a flat”, and the definition was, to all intents, the same.
16. The Landlord and Tenant Act 1985, which was a consolidating Act, sets out the modern law (subject to –– for the purposes of this case –– one later amendment) in a comprehensive code set out in sections 18 to 30 inclusive. Section 20, which owed its origins to section 91A of the HFA, set out a highly detailed procedure for dealing with the “two estimates” regime. Once again, the relevant residential unit was the flat defined much as before.
17. However, a subsequent change was made that, it is submitted, affects the issue before me. By the Landlord and Tenant Act 1987, the subject unit ceased to be a flat and became a “dwelling”. “Dwelling” was defined by section 38 as meaning:
a building or part of a building occupied or intended to be occupied as a separate dwelling, together with any yard, garden, outhouses and appurtenances belonging to it or usually enjoyed with it.
18. I was not told this in terms, but it would seem likely that it became necessary to extend the type of subject unit to include houses and their curtilages (which, I think, is really what the definition extends to) because of the imposition of service charges following the sale of council houses. At all events, the subject unit ceased simply to be the flat and could be any kind of dwelling with the appropriate curtilage/appurtenances.
Opposing arguments in summary
19. For the landlords, Mr Nicholas Peacock’s argument in short summary is this:
(i) Both the object and legislative purpose of the Landlord and Tenant Act 1985 are inapplicable to a tenant such as Central or Camden, which are not tenants of individual flats/dwellings, but are the mesne tenants of a substantial slice of a building (including the roof).
(ii) He invited me to say that this is so as matter of first impression; ie if one looks at the legislative purpose (protection of residential tenants from exploitation) and the scheme of the legislation (plainly geared to dealing with individual residents).
(iii) But, further, he says that this can be made good by simply construing the statute, when it becomes apparent that the code is directed to a tenant of one flat. He says that there are plenty of indicia to negative any argument, based upon the Interpretation Act (and relied upon by Mr Timothy Polli), that a reference to one dwelling means, and includes, a reference to several.
20. Mr Polli, for Camden, says primarily the following:
(i) Assuming that the sections are primarily to be read as if they were references to one tenant of one flat, nevertheless the Interpretation Act allows one to look at it as reference to more than one flat, and the contrary indications relied upon by Mr Peacock are, properly analysed, no such thing.
(ii) If one gets over this hurdle, then any difficulty caused by the fact that the demises comprise not merely several (indeed many) flats is to be solved by the definition of the word “dwelling”, which is apt to include all the other parts of the building (eg common parts, lift and roof) comprised in the lease.
21. Both sides set out the inconveniences that would be suffered as a result of the other’s construction, which leads me to wonder whether, in fact, parliament gave full consideration to how the law was to deal with this situation (not, I would have thought, all that uncommon).
22. There is a further point that occurred to me in the course of argument; Mr Peacock had sought to meet it in case Mr Polli raised it, which he did not – at least initially. Can it simply be said that Central, say, is a tenant of a dwelling in respect of each dwelling, even though all are comprised in one lease, together with other property? Mr Peacock says “plainly not”, Mr Polli, adopting the point, says “yes”.
Resolving the problem
A. Individual points
23. I think it will help if I start by (in no particular order) resolving a number of individual questions raised in the arguments, since their resolution helps consideration of the main arguments:
(1) It is quite fair to say that some of the scheme of the service charge provisions of the 1985 Act is more obviously geared to individual occupiers of individual dwellings and to a policy to assist those persons. Thus, Mr Peacock points out the following:
(i) Section 18(1): “the rent” is the rent of a dwelling;
(ii) Section 19(3): prohibition of contracting out is more applicable to the individual residential occupier, although not inevitably so;
(iii) Section 20(2): which refers to “under the terms of his lease”, certainly suggests the individual tenant/occupier;
(iv) Section 20(5): which requires consultation with established tenants’ associations (but, of course, only where there is one; they are not there in all cases).
24. However, none of these would necessarily exclude, of itself, a tenant of multiple or “mixed” premises, which includes a dwelling or dwellings; the furthest they go is being more obviously applicable to the individual resident.
(2) There are other provisions relied upon by Mr Peacock as showing that the statutory provisions cannot apply (he would say as a matter of policy) to people in the position of Central and Camden:
(i) Section 20(3): sets low financial limits on the application of the Act, which would be unlikely to apply to commercial tenants of multiple/mixed property. He bases this upon a figure of so much per tenant, but this is not actually so. The language of the subsection, to my mind, is clearly so much per dwelling, which does not have the effect he contends for at all;
(ii) Section 23: which makes express provision for the giving of information “down the line”, where there are a series of landlords, necessarily recognising that these sections would not enure for the benefit of mesne landlords. I do not think it necessarily follows that the mesne landlord has himself no right to the information. The point of the section is that the tenant lower down can compel the mesne landlord to provide the information, and the fact that only the superior landlord has the information is no defence to the mesne landlord when he is asked to get it, because he, in turn, can compel his superior landlord;
(iii) Section 30: which states that tenant includes, where the premises are sublet, the subtenant. Mr Peacock says that this means that it is the subtenant who has the benefit of the Act. But there is nothing that says that it is the tenant in possession only who has the benefit of the Act. The fact that the subtenant is a tenant does not, of itself, stop somebody else being a tenant as well. After all, in any chain of tenancies some people will be both landlord and tenant, although there will be in that chain one landlord who is not also a tenant and one tenant who is not also a landlord.
(3) There are several practical questions that it helps to bear in mind at this juncture:
(a) In most cases, the position will be simple, however long the chain of tenancies. There will be one landlord (who may, indeed, be a subunderlessee) who is in possession of the common parts and in immediate reversion on the residents’ tenancies and one set of residential tenants in actual occupation (give or take the odd subtenant). The section 20 relationship will subsist in practical terms between the landlord in immediate reversion and the residents.
(b) But this position is not inevitable, and it is here perhaps that the statute is less than clear. Part only of the building may be demised, or at least some common parts may remain in the possession, or under the repairing/cleaning responsibility, of the freeholder (who repairs them etc and seeks service charges under his covenant with the next tenant down the chain). If section 20 does not apply down the chain until the
(c) It is not particularly unusual to find that more than one flat in a block is let to the same tenant, for example: (i) employers, especially international ones, may take a group of flats and use them for employees; (ii) investors may again take a group of flats and let them (possibly furnished) at rack-rents; (iii) in some areas, an individual may own several flats and let them as holiday lets. There are numerous other permutations. If Mr Peacock is right and the strict construction is that section 20 applies only where one flat is let individually to an actual resident, none of these arrangements will have the protection of section 20. One must ask rhetorically why this should need to be.
B. Construction
25. It is against the background of this necessarily miscellaneous group of conclusions that I approach the main arguments.
1. Claimant’s argument
26. Mr Peacock takes his initial stand on the definition of “service charce” in section 18; self-evidently, if this is not a service charge, as defined, that is the end of the case. It is defined as a charge paid by a tenant of a dwelling in addition to the rent. The language, as Mr Peacock points out, is the language of the singular and not the plural.
27. The definition of “dwelling” requires it to be occupied or intended to be occupied as a separate dwelling.
28. First of all, Mr Peacock approaches this as first impression. As a matter of common sense, he says, Central is not the tenant of a dwelling, it is tenant of premises that include a number of dwellings, but that is not the same thing. I agree with him about the first impression. However, this has to be qualified: (i) by an argument to which I will come a little later; and (ii) while it is undoubtedly true that the main purpose of the legislation is to deal at “ground level” with the problems of individual residents, it does not necessarily follow that it has to work exclusively by reference to them: see above A2(iii).
29. Next, he says, on the basis of section 30, the legislation envisages only one tenant and one tenancy of an individual dwelling. For reasons I have given, I do not think this is the proper view of section 30. It is inclusive, not exclusive.
30. Then (and I think this is the heart of his argument) he contends that the Act has a plain legislative object, that is to protect the individual resident. He points out the various sections upon which I have already commented in A1. For the reasons I gave there, I do not think they are as strong an indication as Mr Peacock suggests. For my part, I would not seriously doubt that the protection of the individual resident is the primary object of the legislation. But it does not seem to me that where there is a chain of leases the object has necessarily to be achieved by protecting only those at the end of the chain and denying protection to those higher up.
31. Mr Peacock took me to two authorities. They were respectively Horford Investments Ltd v Lambert [1976] Ch 39 and Uratemp Ventures Ltd v Collins [2000] 1 EGLR 156. Both are cases concerned with familiar Rent Act concepts. In Horford, the Court of Appeal held that the protection of the statute was intended to apply to a single dwelling and not several let together. In Uratemp, the House of Lords was concerned with the familiar question of what was and was not let as a separate dwelling. With all respect, I think both authorities are more distant cousins than twins to this case. The overall policy of the Rent Acts is to give security of tenure to the occupant and not to anybody else. In the case of service charge provisions, the policy of the Rent Acts is undoubtedly to stop the exploitation of residential tenants, but (cf the Rent Acts, where the occupier’s security need only be achieved by protecting him and nobody else) that object does not have to be achieved by ignoring the practical problems that occur where there are chains of tenancies.
32. I am not persuaded by Mr Peacock’s submissions.
2. The defendant’s argument
33. Mr Polli’s primary submission is based upon section 6 of the Interpretation Act 1978, which includes the familiar provision that, unless the contrary appears, singular includes plural. So he says: (i) the context does so admit. For the reasons already given in commenting upon Mr Peacock’s submissions, I would agree with him so far; (ii) accordingly, you can read section 18 as meaning “a tenant of dwellings”. So, I think, you can, but this does not, of itself, get over the problem of the tenant being, as here, a tenant of something else in addition to the dwellings.
34. So Mr Polli turns his mind to that question. His answer lies in the already quoted definition of “dwelling”. What he says is that the common parts are, in effect, appurtenances to the individual dwellings, and are ” enjoyed therewith” in effect. It is an ingenious argument, but it has, I think, its problems:
(a) What the resident enjoys is a right to use the common parts, as opposed to the common parts themselves, whereas the tenants of the common parts have a demise of the physical structure.
(b) The roof simply does not fit into this at all, the more so the lower down the building you get.
(c) It is fairly evident, to my mind, that what the draftsman has in mind is the common conveyancer’s “all the estate” clause, primarily appropriate to houses.
35. I do not accept this argument. I do, however, find considerable significance in Mr Polli’s submissions based upon the practical consequences of limiting section 20 rights to actual individual residents, to which I have already referred.
3. My conclusion
36. I am strongly of the view that Mr Peacock’s arguments cannot be right, but one cannot construe a statute simply negatively. Section 18 says that a service charge is an amount payable by “a tenant of a dwelling”. So the question remains, is there anything that shows that Central or Camden is a tenant of a dwelling? Mr Pollis’ “policy” argument points in this direction, but does not necessarily alone answer the question.
37. First of all, I note that there is nothing in the sections that requires a tenant of a dwelling to be in actual occupation. (This is where this legislation differs completely from the Rent Acts.) Furthermore, although a dwelling may be let with other property, it is (because of the way the statute defines it) easily identifiable as a physical entity that can be distinguished from other parts of the subject matter of the demise.
38. I think the answer is to be found in an argument not originally put by Mr Polli, and pre-emptively met by Mr Peacock in his skeleton submissions, which is this: that, in relation to any individual flat/dwelling, Central or Camden is the tenant of that dwelling. It may be a tenant of other things as well, but, of that dwelling, it is, under its lease, the tenant. I cannot for my part see why, where a lease contains a mixed estate of properties, you cannot properly call yourself the tenant of one of the properties if they can be individually identified (as here they can be). Thus, why can you not properly be defined under the same lease as the tenant of Wuthering Heights and the tenant of Wildfell Hall, if they are identifiably different parcels? Mr Peacock’s counter to this is that this is absurd because the Act envisages the subject matter of the tenancy as a dwelling, not premises that include a dwelling. But this is not what the Act says; it says “tenant of a dwelling” not “tenant of a dwelling and of nothing else”.
39. In my judgment, this is the short and, in the end, very simple answer. It also completely solves the main practical question of the unenviable position of the tenant who is bottom but one in the pile, and who has, on the claimant’s argument, to pay the service charge upwards but cannot recover it downwards; something that I am unpersuaded is a necessary part of the policy of the Act.
40. Accordingly, I propose to answer the preliminary issue in favour of the defendants and declare that section 20 applies. I apprehend this will mean that the claim will be dismissed.
4. Practical consequences
41. This judgment will, of course, have to be handed down in public, but it may help if I give an indication as to certain matters, which may obviate the need for counsel to attend (I am quite happy if a solicitor representative for both parties attends if there is nothing to argue):
(i) As I have said, I assume that the claim will be dismissed.
(ii) Costs would ordinarily follow the event unless there is some special argument (or Part 36 matter) of which I cannot know.
(iii) Although I do not doubt the conclusion I have formed, it is a peculiar problem of construction where there is no authority.
42. I conceive that when a judge considers permission to appeal, he ought to ask himself whether there is a reasonable prospect that however firm his view is others might say he was wrong. I think this is one of those cases where, on that basis, permission to appeal should be given if it is sought.
