In Dell and another v 89 Holland Park (Management) Ltd [2022] UKUT 169 (LC); [2022] PLSCS 113, the Upper Tribunal (Lands Chamber) has sent a salutary reminder to landlords and practitioners who advise them that the tribunal will not bring within the general words of a service charge provision anything which does not clearly belong there.
The appeal was a by-product of the long-running litigation between the architect Sophie Hicks and the respondent freeholder, 89 Holland Park (Management) Ltd, arising from her application to build an underground mansion with an above-ground glass cube on a plot of land to the south of 89 Holland Park, London W11 3RZ.
89 Holland Park was a detached Victorian villa split into five flats. The appellants were the long lessees of a flat within the building. Between 2014 and 2020 the freeholder incurred the sum of £2.7m in legal fees and planning costs related to its dispute with Ms Hicks. The UT described this sum as “eye-watering”. The appellants received a service charge demand in the sum of £430,411.50 as their contribution towards the costs. The appellants applied to the First-tier Tribunal for a determination of the payability and reasonableness of the same.
The respondent argued that costs were recoverable in accordance with the service charge provisions of the appellants’ lease, in particular clauses 4(4)(g)(ii) and 4(4)(l)(ii).
Pursuant to clause 4(4)(g)(ii) the respondent covenanted “[t]o employ all such surveyors builders architects engineers tradesmen solicitors accountants or other professional persons as may be necessary or desirable for the proper maintenance safety and administration of the Building.”
Pursuant to clause 4(4)(l) the respondent covenanted “[w]ithout prejudice to the foregoing to do or cause to be done all such works installations acts matters and things as in the reasonable discretion of the Lessor may be considered necessary or advisable for the proper maintenance safety amenity and administration of the Building.” This clause was categorised by the UT as a sweeper clause.
The FTT found that the service charges claimed were recoverable under the lease and reasonable in amount. The appellants appealed.
In construing the service charge provision of the lease, the UT relied on the principles of contractual interpretation laid down by the Supreme Court in Arnold v Britton [2015] UKSC 36; [2015] EGLR 53. In particular, the UT observed that there was no special rule of interpretation that applied to service charge provisions. Additionally, the UT could not bring within the general words of the provision something that did not clearly belong there.
The UT found that the focus of clause 4(4) was on managing and maintaining the building. It was not focused on litigation or the objection to a planning application. Clause 4(4)(l) was a sweeper clause and should not be regarded as extending the scope of what the respondent landlord could do under the lease.
Further, the UT found that it did not make commercial common sense for the lease to contain an obligation on the part of the landlord and lessees to commit “to potentially ruinous costs”. Such a clause would affect the marketability of the lease and the freehold.
Elizabeth Dwomoh is a barrister at Lamb Chambers
