Lease — Maintenance charges — Cost of heating — Lessees’ contributions — Proper construction of clause — Declaration in favour of lessees
In each of these cases, the respective plaintiffs are lessees under 21-year leases held from the defendant lessors of premises at 249-289 Cricklewood Broadway, London NW2. The plaintiffs sought, by way of originating summons, declarations as to the proper construction of a covenant, common to the leases, by which the respective lessees pay by way of additional rent sums relating to the supply of central heating.
Clause 2(ii) of each lease provides: “To pay to the Lessor as further rent … as shall next follow the expenditure by the Lessor … (b) a fair proportion (being not less in any event than the rate of One shilling and three pence per square foot on the floor area of the first demised premises) of the cost of supplying central heating to the Units 2, 3 and 4 of the building such proportion to be calculated in accordance with the ratio of the floor area of the first demised premises to the total lettable floor area in Units 2, 3 and 4 and 5 … regard being had to the working hours of the Lessee of each Unit … PROVIDED that the sum payable may be increased proportionately at any time by the Lessor if the cost of fuel for supplying such heating shall at any time exceed the cost thereof at the date of this Lease …”.
In the past the lessor has demanded sums based on increasing the minimum sum of 1s 3d by a fraction using as a multiplicand the unit cost of heating oil for the year in question, and a denominator based on the unit cost of heating oil at the date of the lease. This has resulted in sums being recovered that have been substantially in excess of the cost of providing central heating, as the formula takes no account of the volume of heating oil consumed.
The lease between the Secretary of State and the lessor gave rise to a further problem, an inconsistency between clause 4, which provided that the lessee should contribute towards the maintenance of the boilers, and clauses 4 and 5 of a deed of variation, entered into in 1976 in respect of the installation of a third boiler, which extended the maintenance charges under the lease to cover the new boiler and provided for an additional rent of £2,000 for the new boiler.
Held 1. In the absence of any evidence as to how the 1s 3d was calculated, the reference to “expense” in other related provisions of the lease support the construction that clause 2(ii)(b) of each lease is intended to reimburse the lessor its actual expenses in providing central heating. However, the clause presents a problem in construction by reason of the proviso, as one cannot apply to the unit cost of 1s 3d a fraction that requires unit costs and volume to be taken into account. The words in the proviso, “the sum payable”, mean whichever is the greater of the fair proportion and the minimum sum; once that sum is determined, the proviso can operate. The word “may”, and not shall, suggests that the proviso is not automatically applied, but operates, for example, where there is a disparity between working hours of the lessees, as the proviso follows such a reference.
2. The lessor is entitled to charge the Secretary of State a contribution towards the maintenance of the boilers, as well as the additional rent of £2,000, because the latter sum was in respect of the installation of the new boiler, and its depreciation, and not only its maintenance.
Arthur Charles (instructed by the Treasury Solicitor) appeared for the plaintiff in the first cases; Alastair Norris (instructed by Fremont & Co) appeared for the plaintiffs in the second case; and David Oliver QC and Michael Nield (instructed by D M Landsman & Co) appeared for the defendant in both cases.
