84 flats in five blocks initially intended to be disposed of by uniform long leases – Landlord subsequently granting long lease of one block on terms giving rise to shortfall in charges recoverable for expenditure for benefit of estate as a whole – Landlord seeking to recover shortfall by varying percentage payable by individual lessees – Whether adequate power given by terms of uniform lease.
The plaintiff landlords owned five blocks of flats, each with its own grassed area, located on the previous site of a football ground. The landlords’ policy was to sell each flat on uniformly worded 199-year leases which as regards expenditure on the common parts of the estate provided for a service charge based on a percentage cost determined in most cases by the number of bedrooms. The landlords agreed to bear so much of the total cost as was attributable to flats as yet unlet. By early 1990 some 26 flats (the existing leases) had been sold on these terms. In March 1990 the landlords sold one of the blocks, block B containing 24 flats, to a housing association which paid £1.2m for a 999-year lease. Over the next four years the landlords sold a further 58 flats (the new leases) in the blocks retained by them. In 1994 the landlords became aware that the provisions of the block B lease did not permit them to recover in full the amount they would have recovered if they had sold the 26 flats separately. In order to recover the resulting 26.5% shortfall, the landlords served a notice on the 58 owners of the new leases purporting to increase their prescribed percentages as from March 1990 and claiming the right to do so under clause 12.5 of the uniform lease. That clause permitted a recalculation of the percentage if in the opinion of the lessor it became ” . . . necessary or desirable to do so by reason of any of the premises in the Estate ceasing to exist or to be habitable or being compulsorily acquired . . . or in the number being increased or for any other reason“. After laying down the procedure for notifying the lessee, the clause provided that “in such case as from the date of such event the new percentage shall be substituted for that [shown in the lease]”. In proceedings commenced by the landlords the tenants claimed that the sale of block B, being an event brought about by the landlords, did not afford a relevant reason for amending the percentages alternatively, if it did, there was no power to back-date the operation of the notice.
Held The notice was valid
1. The construction advanced by the tenants militated against the principle, to be derived from various provisions in the lease, that the landlords should be able to recover the relevant expenditure in full. Furthermore, that construction could not be applied without the unintended consequence of restricting the landlords to only one method of disposing of unsold flats and creating anomalous differences in the treatment of existing and new leases.
2. On balance the expression “the date of such event” referred more naturally to the causative event, here the disposal of block B, rather than the date of notification of the tenants. However this ruling did not preclude an individual tenant from disputing a back-dated claim on grounds not directed to the true construction of clause 12.5.
John Eidinow (instructed by Tringhams) appeared for the plaintiff; Joanne Wicks (instructed by Law Hurst & Taylor, of Westcliff-on-Sea) appeared for Yvette Bains and Clare Warr, selected representatives of the 58 defendants
