Landlord and tenant – Lease – Construction – Dispute arising over apportionment of costs of roof repair – Whether roof part of demised premises – Whether tenant liable to contribute 75% or 50% of costs of repair – Appeal allowed in part
The respondent was the tenant of the ground, first and second floors of a property known as 49 Conningham Road, London W12 under a 99-year lease dated 6 June 1991 paying a rent of £100 pa rising by £100 pa every 33 years. The property was a Victorian terrace house in the Shepherd’s Bush area of London and comprised a basement, ground floor and two upper floors. The roof was above the second floor and in need of repair. The appellant was the owner of the property and held the reversion under the lease.
The lease contained provisions requiring the respondent to pay a service charge amounting to three quarters of the cost of the appellant fulfilling the obligations in the third schedule. Those obligations included the repair and renewal of the roof. Clause 6(1) contained a declaration deeming the roof and the foundations to be party matters and repaired at the joint expense of the respondent and the tenants or occupiers of the remainder of the building.
A dispute arose between the parties concerning contributions to the roof repairs. The first-tier tribunal (FTT) held, among other things, that the roof was within the demise of the property but that the deeming clause had the effect of reducing the tenant’s obligation to the costs of repair to 50%. The appellant was granted permission to appeal on the ground that there was room for argument over the proper construction of the lease, which the FTT described as badly drafted, and it was in the interests of both parties to have a definite conclusion on the status of the roof and the extent of the parties’ respective liabilities to contribute to its repair.
Held: The appeal was allowed in part.
(1) When interpreting a written contract, the court was concerned to identify the intention of the parties by reference to what a reasonable person with all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean. When considering the centrally relevant words to be interpreted, the less clear they were or the worse their drafting, the more ready the court could properly be to depart from their natural meaning. However, that did not justify the court embarking on an exercise of searching for, let alone constructing, drafting infelicities in order to facilitate a departure from the natural meaning. While commercial common sense was a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appeared to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight. It was not the function of a court when interpreting an agreement to relieve a party from the consequences of his imprudence or poor advice. Accordingly, when interpreting a contract, a judge should avoid re-writing it in an attempt to assist an unwise party or to penalise an astute party: Arnold v Britton [2015] EGLR 53 applied.
(2) In the present case, the landlord demised all the property described in the first schedule to the lease. The tribunal did not accept that the natural meaning should be rejected because there was no express reference to the roof in schedule 1, and clauses 5(5), 2(9) and 2(3) suggested that the roof was not included. There was nothing in clause 2(3) inconsistent with the natural interpretation of the parcels clause in the first schedule which began with the words: “All that the whole of the building excepting the basement floor”. The natural meaning of those words was unambiguous and included the roof. Subject to clause 2(9), clause 2(3) required the tenant to repair the demised premises. It said nothing about what was included in the demised premises; that was in the parcels clause. Clause 2(9) had to be read with the third schedule and clause 5(5) which imposed an obligation on the landlord to maintain repair and renew the roof. Under clause 2(9) the tenant had to contribute 75% of the cost. However, that obligation was not inconsistent with the roof being included within the demise. It was a matter for the parties how they allocated the repairing responsibilities under the lease. There was nothing unusual with an arrangement such as that contemplated by the present lease. There was nothing to displace the natural meaning of the words in the parcels clause. On the proper construction of the lease, the roof was included in the demise.
(3) There was an inconsistency between the carefully drafted scheme imposed by clauses 2(3), 2(9), 5(5) and the third schedule on the one hand and the declaration in clause 6(1) on the other. To that extent, this was a poorly drafted lease. The question was what a reasonable person having all the background knowledge which would have been available to the parties in 1991 would have understood those clauses in the lease to mean. Clause 6(1) was a declaration and thus did not necessarily imposing a contradictory obligation. It was not a declaration as to the rights between the landlord and the tenant. The rights were as between the respondent on the one hand and tenants and/or occupiers of the remainder of the building (i.e the basement flat). Those tenants or occupiers were not party to the lease and it was difficult to see how they could be bound by it. Furthermore, the expression “at the joint expense” was silent as to the division of the expense between the respondent and the tenant/occupiers of the basement. The demised premises comprised three of the four floors. Thus, while the roof clearly benefitted all four floors, the respondent would appear to get greater benefit. Clauses 2(3), 2(9) 5(5) and the third schedule created a coherent logical scheme which imposed a liability on the respondent to contribute 75% of the cost of the roof repairs. That scheme was not overridden by the poorly drafted declaration in clause 6(1). It followed that the landlord was entitled to recover 75% of the costs of the roof repair.
(4) Accordingly, the tribunal would dismiss the appeal on the issue of whether the roof was included in the demise and declare that it was; and allow the appeal on the issue of the percentage contribution and hold that the landlord was entitled to recover 75% of the costs of the roof repair under clause 2(9) of the lease.
Justin Bates (instructed by Northover Litigation) made written representations on behalf of the appellant; Stan Gallagher (instructed by direct access) made written representations on behalf of the respondent.
Eileen O’Grady, barrister
