Pursuant to the terms of a tenant’s lease, the landlord is required to serve a notice on the tenant giving full particulars of the gross cost of: (a) the insurance premium, excluding commission; (b) the date by which the gross premium is payable to the insurers; and (c) how the insurance rent is calculated (the insurance rent requirements). Does a landlord’s failure to comply with the insurance rent requirements render the demands for payment of insurance rent invalid? This was one of the issues on appeal in Assethold Ltd v Jonathan and others [2022] UKUT 173 (LC).
The appellant landlord was the freeholder owner of two flats on St John’s Road in Epping, Essex. The flats were attached to a house and shared a communal entrance with the same. The respondents were the long leaseholders of the flats. Paragraph 2.2 of schedule 6 to their leases contained the insurance rent requirements set out above.
In October 2015, the landlord entered into a deed of easement with the freeholder of the house, whereby the freeholder was granted, among other things, access to the front door of the house through the shared entrance.
A dispute arose between the lessees and their landlord in respect of the payability of the insurance rent for the years 2018, 2019 and 2020. The lessees argued that the demands they received for those years were invalid as the landlord failed to comply with the insurance rent requirements. Accordingly, they were not obliged to pay the insurance rent for those years. The lessees applied to the First-tier Tribunal for a determination of the same.
The FTT found that the demands for all the years in issue failed to comply with the insurance rent requirements. It found that the demands were defective and were not payable until they were validly re-served.
On appeal, the landlord argued that the insurance rent requirements were not preconditions for the validity of the demands. The Upper Tribunal (Lands Chamber) agreed. It found that the FTT’s decision on this point was irrational. The UT determined that paragraph 2.2 of schedule 6 was a free-standing obligation. A failure to comply gave the lessees the right to sue their landlord for breach of covenant and claim damages for any loss suffered.
The lessees also challenged the payability of the demands on the basis that the landlord had failed to inform the insurer of the deed of easement. The FTT found that the landlord had omitted to inform the insurer of the deed of easement, which was likely to cause the insurance to be repudiated or reduced. The landlord appealed this finding as there was no evidence before the FTT that the insurance policy had been invalidated or repudiated for a failure to disclose – this was pure speculation. The UT agreed and the decision of the FTT was also set aside on this ground.
Elizabeth Dwomoh is a barrister at Lamb Chambers
