Landlord and tenant – Service charges – Apportionment – Respondent given discretion to apportion charges amongst leaseholders who “have the use of” certain services – Appellant leaseholder appealing against decision of First-tier Tribunal (FTT) that appellant required to pay contribution towards cost of proposed works to refurbish lift – Whether appellant liable to contribute to cost of replacing lift which he did not use – Appeal dismissed
Oakwood Court in Eastbourne was a large three-storey Victorian house which was converted to create eight self-contained flats, with two on the ground floor and three on each of the two upper floors. The appellant owned the leases of three of the flats. The appellant made no use of the lift which served the upper floors of the building.
The interest of the landlord was vested in the respondent which had also assumed responsibility for the obligations to be performed by the management company.
Clause 1 of part 2 of the fifth schedule to the lease provided that “In respect of any parts of the main structure of the building (for example the lift, flat roofs or balconies) and the driveway leading to the garages at the rear which are the responsibility of the [respondent] … but of which only a tenant or certain tenants have the use [the respondent] may charge such tenant or those tenants either the whole or such part as [the respondent] thinks fit of the cost of maintenance of those parts to reflect such use … Any doubt difficulty or dispute as to the apportionment of the total service cost … shall be resolved and settled by the respondent whose decision shall be final and binding on all the tenants”.
The respondent demanded that the appellant pay £3,870 on his account as contribution towards the cost of proposed works to refurbish the lift. The appellant refused to pay the costs. The First-tier Tribunal (FTT) decided that he was liable to pay the amount demanded. The appellant appealed.
Held: The appeal was dismissed.
(1) Each of the leases had to be interpreted according to its own terms in the circumstances which existed when it was granted. At that time, the only access to flat 5 was by using the communal stairs or the lift. As one would expect of a lease of a flat on the first floor, the lease of flat 5 included an express grant of the right to use the lift, as well as a right of way over the porch, hallways, staircases and landing of the building for the purpose of obtaining access to the flat itself.
It also included an obligation on the respondent to keep the structure and any parts of the building used in common by the tenants in good and substantial repair.
The normal expectation where a building was fully let on long leases would be that each leaseholder would contribute towards the cost of keeping the whole of the building in repair (with the exception of the interior of individual flats).
That normal expectation was reflected in the definition of “service charge” which specified a percentage of the total service cost, meaning the cost of performing the respondent’s obligations, including the repair of the lift and common parts.
(2) The intention of the parties was clearly that clause 1 and the definition of the service charge would both have effect. The practical consequence was that the leaseholder’s obligation to pay 7.338% of the costs incurred by the management company was qualified when clause 1 applied.
Clause 1 was concerned only with costs of maintenance (and not, for example, costs of insurance or cleaning) and only with particular parts of the building, namely, those parts of the main structure and the driveway (including the lift, flat roofs or balconies) of which only one tenant or certain tenants had the use.
Most importantly, it gave the respondent a discretion, and did not impose an obligation; it provided that the company “may” charge the tenants who had the use of the relevant part of the building “such part as the company thinks fit of the cost of maintenance”, not that it “must” or “will” do so.
Finally, if the respondent chose to make use of that power it was for it to determine how much each leaseholder was to pay. It was not required to apply a particular method of apportionment (although, on general principles, it must not exercise its power capriciously or for an inappropriate purpose).
(3) Without clause 1, the leaseholder of flat 5 was to pay the agreed percentage of the actual cost incurred by the management company in repairing the lift and communal areas. The effect of clause 1 was therefore that it allowed the management company to charge a different proportion than the fixed percentage for certain works.
The key to identifying which works might be the subject of a different apportionment was the phrase “have the use of”. Where only one tenant, or only certain tenants, “have the use of” part of the building, the respondent might, if it chose, make use of the power in clause 1.
In that context, the ordinary meaning of “the use” was that it referred to the right or ability to use, and that a person “has the use of” a staircase or a lift if in practice and as a matter of entitlement they were able to use it. Whether in fact they used it or not was neither here nor there; they still “have the use” of it.
(4) The inclusion of the words “to reflect such use” did not require a different interpretation of clause 1. The respondent might charge the relevant tenant or tenants the whole or such part of the cost as it thought fit “to reflect such use”.
“Such” use meant such use as had previously been identified – the charge was to reflect the right to use, not the quantity of use. How the right to use was to be reflected in the charging structure was a matter for the discretion of the respondent and need not be based on actual usage.
The respondent was free to choose whether to charge more or less than the 7.338% specified in the definition of service charge for costs of maintenance of those building components within clause 1, including the lift.
It had decided that the appellant should pay the same proportion as the other leaseholders with flats on the upper floors and access to the lift.
The appellant’s complaint that that approach was unfair was unsustainable.
The appellant appeared in person; Jonathan Wragg (instructed by PDC Law solicitors) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Reekie v Oakwood Court Residents Association Ltd