Landlord granting lease – Service charge calculated by reference to rateable value – Tenant appealing against rateable value – Landlord calculating service charge by reference to wrong rateable value – Whether landlord entitled to shortfall of re-calculated service charge – Whether rateable value resulting from appeals applied – Landlord not entitled to shortfall – Service charge to take account of result of first appeal only
A lease dated March 31 1987 was made between Telford Development Corporation, as landlord, and the defendant, as tenant. The plaintiff was the landlord by successor. Under the lease the landlord was to provide the tenant with a certificate of the total amount of the year’s expenditure. The lease also provided that the tenant was to pay a service charge each financial year, ending on March 31, calculated as a proportion of the total expenditure which the rateable value of the tenant’s premises bore to the total rateable value of the Telford centre at that time. The tenant was entitled to challenge the amount of the service charge within 42 days, and was also entitled to be given credit if the rateable value was successfully appealed against, subject to the proviso “that once the rateable value has been first assessed . . . or has been assessed and determined by an appeal then no allowance . . . shall be made it the tenant shall make a second or subsequent appeal . . .”.
For the years 1992, 1993, 1994 and 1995 the defendant paid the sums demanded in advance, and subsequently paid further amounts for 1992 and 1993 in respect of the balance found payable. The landlord discovered that it had miscalculated the sums claimed in 1992 and 1993 in that a rateable value of £348,600 had been used for the defendant’s premises rather than the rateable value specified in the valuation list on March 31 1992 and 1993, which was £484,600. The landlord re-calculated the amount of service charge which it claimed was payable. An order was made for the trial of preliminary issues. The first issue was whether the service charge for the years ending 1992 and 1993 could be re-opened to entitle the landlord to payment of the shortfall of the re-calculated service charge. The second issue was whether the rateable figure applied to the tenant’s premises for the calculation of service charges for the years 1992, 1993, 1994 and 1995 was to take account of the fact that the rateable value had subsequently been reduced by appeal.
Held Judgment for the defendant on the first issue; judgment for the plaintiff on the second issue.
1. The sending by the landlord of the service charge account payable was not mere machinery, in the sense that it did not matter if it contained an error or omission. It would be an odd construction of the lease if, although the tenant’s right to challenge the amount of the service charge had to be exercised within 42 days, the landlord was free to re-open its demand at any time after serving it. Therefore the landlord was not entitled to re-open the service charge for the years 1992 and 1993.
2. The rateable value for the tenant’s premises for the calculation of the service charges for 1994 and 1995 was to be £825,000 since the proviso only allowed downward adjustment of the first assessment of the premises’ rateable value as a result of the first appeal, and it did not allow for any downward adjustment resulting from subsequent appeals.
Timothy Fancourt (instructed by Lawrence Graham) appeared for the landlord; John Furber QC (instructed by SJ Berwin & Co) appeared for the tenant.
