Service charges – Management fee – Terms of lease requiring respondent lessee to contribute to costs incurred by appellant landlords in providing specified services – Leasehold valuation tribunal finding landlords not entitled to charge management fee as part of service charge – Whether such entitlement contained in express or implied provisions of lease – Whether entitlement confined to management costs incurred in providing specified services – Appeal allowed
The respondent held a long lease of a flat that he acquired from the appellant council under the right-to-buy legislation. He applied to the leasehold valuation tribunal (LVT), under section 27A of the Landlord and Tenant Act 1985, for a determination of his liability for service charges for certain years, in particular whether the appellants had the right to levy a management fee of £40.
Provisions in the lease required the respondent to pay a percentage of the appellants’ reasonable expenditure in complying with their obligations under clause 6(1), (2) and (9) of the lease; clause 6(1) and (2) contained general obligations relating to repair and maintenance of the structure and exterior of the building, while (9) required the appellants “to ensure so far as practicable that the services to be provided by the Council as specified in Schedule D are maintained at a reasonable level and to keep in repair any installation connected with the provision of such services”. The services listed in Schedule D were the provision of lighting to communal areas and the planting and maintenance of communal gardens. The LVT held that the lease had made no express provision for the recovery of management expenses and that such a provision could not be implied. It concluded that the appellants could lawfully include any costs of management or administration within their annual service charge. The appellants appealed.
Held: The appeal was allowed.
The respondent was obliged to pay a fair share of the appellants’ reasonable expenditure in complying with their obligations under clause 6(1), (2) and (9). In complying with those obligations, supervision and management costs would inevitably be incurred. Such costs were recoverable by reference to the appellants’ obligations under those clauses. Moreover, the obligation in clause 6(9), “to ensure so far as practicable that the services to be provided by the Council as specified in Schedule D are maintained at a reasonable level”, was in essence a direct requirement to exercise a management function. The appellants were entitled to include in the service charge the costs of management reasonably incurred for the specific services referred to in clause 6(1), (2) and (9). As a matter of construction, such management costs were provided for by the lease and there was no need to imply term: Brent London Borough Council v Hamilton and Wembley National Stadium Ltd v Wembley (London) Ltd [2007] EWHC 756 (Ch); [2007] 2 EGLR 115 applied; Gilje v Charlgrove Securities Ltd [2001] EWCA Civ 1777; [2002] 1 EGLR 41; [2002] 16 EG 182 considered. What was reasonable would be a question of fact for the LVT.
However, no entitlement could be implied to charge for any other management costs. Some items charged by the appellants, such as the costs of employing leasehold officers to deal with breaches of covenant, enforcement action, repair orders and permission applications, plainly fell outside the scope of the obligations in clause 6(1), (2) and (9). The matter would be remitted to the LVT for a determination on the correct legal basis.
Annette Cafferkey (instructed by the legal department of Norwich City Council) appeared for the appellants; the respondent appeared in person.
Sally Dobson, barrister
