Landlord and tenant – Covenants – Service charges – Lease providing for certification of service charges by borough treasurer of council lessors – Whether finance director of new landlord entitled to certify service charges – Liability for refuse collection – Liability for management fees
The claimant acquired the freehold reversion to premises in the Edmonton Green shopping centre that were occupied by the defendant under a lease granted by the borough council, as the claimant’s predecessors in title, for a term of 99 years from September 1973. The lease provided for the payment of service charges to “the Council” in an amount to be certified annually by “the Council’s Borough Treasurer”. A dispute arose between the parties as to the payment of service charges following the claimant’s acquisition of the freehold. Both parties accepted that references to “the Council” should in future take effect as though they referred to the claimant. However, they disagreed over the proper person to certify the service charges. The claimant brought proceedings to establish its entitlement to: (i) service charges certified by its finance director in place of the borough treasurer; (ii) a contribution to the costs of refuse collection for other tenants, in circumstances where the defendant disposed of its own refuse; and (iii) a 10% management fee. The defendant submitted that: (i) the borough treasurer was a public officer owing duties to the public at large and was not comparable to the finance director of a company owing duties to its shareholders; (ii) refuse collection was not covered by the landlord’s covenant to keep the common parts clean, or by a proviso permitting extensions to the services provided by the landlord, since those provisions related only to unlet parts of the building, and individual tenants were responsible for maintaining tidiness in their own premises; and (iii) a management fee of 10% bore no relation to the cost of providing the services in question.
Held: The claim was allowed in part. (1) The parties had not anticipated, at the time the lease was granted, that the power to issue a certificate creating a legal liability to pay should be given contractually to whoever might happen to have that financial role in the organisation of some future assignee. The borough treasurer was a person of known and well-established status in whom the parties placed their confidence to produce a proper certificate that should be accepted at face value; in the absence of the borough treasurer, the mechanism provided for by the lease no longer took effect. The new landlord retained its contractual right to recover service charges, but, with no contractual mechanism for doing so, it had to bring its claim in a court, subject to the arbitration provisions of the lease. The certificates issued by the claimant had no contractual force but served the practical purpose of setting out the sums for which it now sued. (2) In removing waste from the common parts of the centre, the claimant was acting within the provisions of the lease that related to keeping the common parts clean, notwithstanding that the presence of the waste might arise from a breach by a different tenant under another contract. Moreover, the removal of waste for the purpose of the overall management, cleanliness and control of the buildings came legitimately within the scope of the proviso. (3) Although the addition of 10% for management fees was a common practice, the landlord’s right to charge such fees was determined by the terms of the lease; as a matter of construction, the claimant was not entitled to a figure of 10% that was taken from the air in the absence of any investigation into the costs of providing the services in question.
Jonathan Seitler QC (instructed by Mayer, Brown, Rowe & Maw) appeared for the claimant; Martin Rodger QC (instructed by Dewar Hogan) represented the defendant.
Sally Dobson
