Patricia Fairbairn v Etal Court Maintenance Ltd (2015)


30th November 2015


Barristers:

Jonathan Rodger


PATRICIA FAIRBAIRN v ETAL COURT MAINTENANCE LTD (2015)

[2015] UKUT 639 (LC)
UT (Lands) 30/11/2015
LANDLORD AND TENANT
COSTS : DISREPAIR : FEES : LEASES : LEGAL ADVICE : SERVICE CHARGES

 

A landlord could not recover the costs of unsuccessfully defending a claim for damages for breach of its repairing covenant by relying on a clause in the lease entitling it to recover the costs of acts done for the proper management, maintenance and administration of the block of flats. The landlord's costs had nothing to do with the management and administration of the building. The landlord had incurred them in protecting itself from the consequences of its own previous omissions.

 

A tenant appealed against a First-tier Tribunal decision that her landlord could include in her service charge the legal costs and sums it paid in settlement of proceedings brought against it by another tenant for the enforcement of its repairing obligations.

The tenant had a 999-year lease of a flat in a development of three blocks. The landlord, which was lessee of the development under a headlease, was a company in which all members were leaseholders of flats in the development. The lease provided that the service charge was to cover the expenditure incurred by the landlord for the proper management, administration and maintenance of the blocks of flats. When the second tenant brought proceedings against the landlord, it incurred fees of £12,176 in instructing its own solicitors and, in settling the claim, agreed to pay the second tenant's costs of £13,358. The landlord subsequently sought to add those sums to the service charge on the basis that they were part of the expenditure it had reasonably incurred in respect of performing its obligation to maintain the blocks of flats. The first tenant disputed her liability to pay and the landlord commenced proceedings against her. The tribunal concluded that each element of the legal and professional fees identified by the landlord had been incurred in accordance with its obligation under the lease to maintain the blocks and that the costs were therefore recoverable.

The landlord submitted that the Upper Tribunal should be slow to conclude that the costs of unsuccessful litigation should be irrecoverable through the service charge, especially as it was a company which undertook no commercial activity, existed only to manage the blocks on behalf of its members, and had no assets of its own.

HELD: The tribunal's task was to interpret the language of the standard form of lease and to ascertain whether the costs sought to be included in the service charge fell within the scope of expenditure incurred for the proper management, administration and maintenance of the blocks of flats. The fact that the landlord was a leaseholder-owned company did not justify a radical departure from the natural meaning of relatively standard words. Nor was it of practical significance to the interpretation of the lease that the landlord was a company without means other than those available to it directly from its members in that capacity or through the service charge from the same people in their capacity as leaseholder. Whilst a general charging provision was, in principle, wide enough to cover expenditure on legal advice or even, in an appropriate case, on the conduct of litigation, the difficulty with fitting the expenditure in issue in the instant case into such a charging covenant was that the steps required to be taken by the landlord were the result of its breach of its own obligations under the lease. It was because the proper management and administration of the building had been neglected that proceedings were commenced by the second tenant. The landlord's payments had nothing to do with the management and administration of the building. They were costs incurred by the landlord in protecting itself from the consequences of its own previous omissions. The tribunal had therefore erred in concluding that the settlement sum and the legal costs incurred in securing the settlement could form part of the service charge (see paras 38, 41-47 of judgment).

Appeal allowed

Counsel:
For the appellant: Alan Ridley
For the respondent: Jonathan Rodger

Solicitors:
For the respondent: Hay & Kilner 

 

LTL 8/12/2015

 

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