“The cost of employing such professional advisers and agents as shall be reasonably required in connection with the management of the Building”
“an amount payable by a tenant of a dwelling as part of or in addition to the rent which is payable, directly or indirectly— (a) for or in connection with the grant of approvals under his lease, or applications for such approvals, (b) for or in connection with the provision of information or documents by or on behalf of the landlord or a person who is party to his lease otherwise than as landlord or tenant, (c) in respect of a failure by the tenant to make a payment by the due date to the landlord or a person who is party to his lease otherwise than as landlord or tenant, or (d) in connection with a breach (or alleged breach) of a covenant or condition in his lease.”
“A landlord may not, in relation to premises let as a dwelling, exercise a right of re-entry or forfeiture for failure by a tenant to pay a service charge or administration charge unless— (a) it is finally determined by (or on appeal from) the appropriate tribunal or by a court, or by an arbitral tribunal in proceedings pursuant to a post-dispute arbitration agreement, that the amount of the service charge or administration charge is payable by him, or (b) the tenant has admitted that it is so payable.”
“(1) A landlord under a long lease of a dwelling may not serve a notice undersection 146(1) of the Law of Property Act 1925 (c. 20) (restriction on forfeiture) in respect of a breach by a tenant of a covenant or condition in the lease unless subsection (2) is satisfied. (2) This subsection is satisfied if— (a) it has been finally determined on an application under subsection (4) that the breach has occurred, (b) the tenant has admitted the breach, or (c) a court in any proceedings, or an arbitral tribunal in proceedings pursuant to a post-dispute arbitration agreement, has finally determined that the breach has occurred. … (4) A landlord under a long lease of a dwelling may make an application to the appropriate tribunal for a determination that a breach of a covenant or condition in the lease has occurred ….”
“(1) A tenant may make an application for an order that all or any of the costs incurred, or to be incurred, by the landlord in connection with proceedings before a court, residential property tribunal or leasehold valuation tribunal or the First-tier Tribunal, or the Upper Tribunal, or in connection with arbitration proceedings, are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the tenant or any other person or persons specified in the application. … (3) The court or tribunal to which the application is made may make such order on the application as it considers just and equitable in the circumstances.”
“(1) A tenant of a dwelling in England may apply to the relevant court or tribunal for an order reducing or extinguishing the tenant’s liability to pay a particular administration charge in respect of litigation costs. (2) The relevant court or tribunal may make whatever order on the application it considers to be just and equitable ….”
“24. Yet no consideration was given by the FTT, nor by the parties in their arguments to the FTT or on the appeal, as to why the clause 4(2)(x) should be construed as if time was of the essence. Why should it be the case that if notice of the revised amount of the interim service charge was not given no less than a month before the commencement of the financial year, it could not be given at all? 25. [Counsel for Ms Boakye’s] response to my suggestion that there is no indication that time is of the essence was to point to the words ‘specifically provided’ and the words ‘so revised and adjusted.’ In my judgment those words go nowhere near to indicating that time was of the essence (it is well-established that clear words, or a necessary implication, are required, see for example United Scientific Holdings Limited v BurnleyBorough Council[1978] AC 904 ). The draftsman obviously envisaged that interim charges would be calculated early, before the year started, but there is no indication at all that the parties intended the interim charge to revert to its initial (and now wholly inadequate) amount if the demand was sent late. Obviously if the tenant suffered any loss by the late service of the notice she would have a potential claim in damages, but that should be the only consequence of late notice. 26. Accordingly there is no basis for the construction that the FTT put on clause 4(2)(x) or for its conclusion that the clause had not been complied with. That aspect of its decision is set aside and I substitute the Tribunal’s decision that clause 4(2)(x) was complied with. The FTT made no other finding about the interim service charges; submissions were made, it said at paragraph 65 of its decision, as to whether some of the items in the budgets for the interim service charges fell within the Seventh Schedule to the lease (see paragraph 4(2)(i) of the lease … ), but made no decision on them because it had reduced the charges to£360 . There was no cross-appeal about the failure to decide those points and I take it they are not pursued; if there is any substance in them they will have to be taken up as a challenge to the final service charges in any event. Accordingly the interim service charges that were the subject of the application to the FTT are payable as demanded.”
“Quite apart from the fact that he can get a pretty good idea of what the market rent is from his own surveyor or can himself offer to enter into negotiations with the landlord before the stipulated time for serving a lessor’s notice has expired, so soon as that time has elapsed he can give to the landlord notice specifying a period within which he requires the landlord to serve a lessor’s notice if he intends the market rent to be determined and payable instead of the former rent for the ensuing seven years. The period so specified, provided that it is reasonable, will become of the essence of the contract.”
“If the stipulation in the schedule requiring the rack rent to be ascertained ‘during the year’ is to be strictly enforced the result would be that if, owing to some accident for which the landlord was not responsible or to the illness or dilatoriness of the arbitrator, the rack rent had not been ascertained until a month or even a day after the end of the year, the review would be abortive and the former rent would continue in force for another 10 years. That result would seem to be inequitable and I do not believe that the parties can have intended it, yet it would follow from the decision of the Court of Appeal that time was of the essence, and that, because the new rent had neither been agreed nor determined by arbitration (nor even referred to arbitration) by the end of the tenth year, no review could now be made.”
“For these reasons I am of the opinion that the equitable rule against treating time as of the essence of a contract is applicable to rent review clauses unless there is some special reason for excluding its application to a particular clause. The rule would of course be excluded if the review clause expressly stated that time was to be of the essence. It would also be excluded if the context clearly indicated that that was the intention of the parties - as for instance where the tenant had a right to break the lease by notice given by a specified date which was later than the last date for serving the landlord’s trigger notice.”
“There is nothing to prevent parties agreeing that time should be of the essence, thereby defeating the presumption, provided that that agreement is clearly indicated in the lease.”
“The plaintiffs were obliged under the lease to arrange for the preparation and audit each year of accounts relating to the costs, charges and expenses incurred in maintaining the flats and to serve on the lessees within two months of the date of the accounts a notice of the proportionate sum due. In fact, the plaintiffs did not have accounts prepared for the years 1970, 1971, 1972 or 1973. Accounts were not prepared until 1974, when the defendants were notified of the amounts they owed for the four preceding years.”
“The service charge provisions of leases are practical arrangements which should be interpreted and applied in a businesslike way. On the other hand, precisely because the payment of service charges is a matter of routine, a businesslike approach to construction is unlikely to permit very much deviation from the relatively simple and readily understandable structure of annual accounting, regular payments on account and final balancing calculations with which residential leaseholders are very familiar. When entering into long residential leases, the parties must be taken to intend that the service charge will be operated in accordance with the terms they have agreed. Leaseholders should be able to work out for themselves whether a sum is due to be paid by reading the lease and comparing the process it describes with the information provided in support of the demand by the landlord, without the involvement of lawyers or other advisers.”
“33. … It might be said that since time is not of the essence it is artificial to have a cut-off date and to say that the landlord cannot recover an estimated charge after the final quarter day. But it appears to me that that is the intention of the draftsman of this lease, because the whole point of the provision of estimated charges—both for the landlord's benefit and for the tenant's—is to require payment by instalments on the quarter days. That gives the landlord a cash flow and the tenant a steady payment obligation …. The estimate is to relate to service charges payable ‘in that year’, and the lease specifies the payment days; but in this case the notice was served after the last of the payment days. In those circumstances what the draftsman of the lease appears to have intended was that the landlord would instead issue a final demand after the end of the financial year, and therefore make an adjustment to the payments for the forthcoming quarter. Late service of the para.2(1) notice, after 1 January, does not enable the landlord to take the estimate all at once on 1 April. 34. It was argued for the appellant that that approach would make time of the essence. I disagree. Time is not of the essence, and so the landlord has flexibility within the year; but that flexibility does not mean that time can be extended indefinitely …. 35. It was held in Woelke that the service of a notice under para.2(1) of Sch.3 is an obligation of the landlord, although failure to fulfil it will not usually give rise to more than a liability for nominal damages (at [52] of Woelke). The late service of the para.2(1) notice insofar as it related to 2012–2013 seems to me to have the effect that the landlord has failed to give such a notice for those charges in that year and therefore lost the opportunity to have that estimate paid in the way envisaged by Sch.3. It is free to make a final charge for the major works incurred in 2012–2013 in accordance with cl.4(1); it may not be able to do so immediately after the end of that financial year, as the appellant points out, but it can do so later (subject to the provisions of s.20B) of theLandlord and Tenant Act 1985 , enacted to operate in just these circumstances).”
“I take the view that the clauses in question in 69 Marina, Barrett, Willens and the present appeal were all doing the same thing; they were all ensuring that the landlord could recover from the tenant the costs of serving a section 146 notice and of everything that the landlord had to do in order to serve that notice. Since the amendment of theHousing Act 1996 by the addition of section 81(4A) that has included the obtaining of a determination of payability by the FTT, as the appellant did here.”
“67. As a matter of ordinary language I see no difference in this context between ‘for the purpose of’ and ‘in contemplation of’. 68. Nor do I see any difference between costs incurred for the purpose of, or in contemplation of, the preparation and service of a section 146 notice and costs incurred in contemplation of or for the purpose of proceedings under section 146; the only point of serving a section 146 notice is to enable the bringing of proceedings under section 146. Anything done for the purpose of serving the notice is also done for the purpose of taking the proceedings. As I observed above, leases are beset by torrential drafting, and the use, out of caution or of habit, of more than one expression often does not mean that more than one thing is meant.”
“With regard to the facts and circumstances known to the parties at the time they entered into the Lease, [counsel for the tenants] pointed out that in the 1970s it was standard practice for the payment of service charges to be enforced by proceedings in the County Court for forfeiture of the lease. Forfeiture would be avoided only by the leaseholder (or their mortgagee) paying what was owed and indemnifying the landlord against its costs of the proceedings. Nor, in 1978, would the parties have contemplated that the [landlord] might be required to incur expenditure in establishing the quantum of the service charge before a statutory tribunal operating in a largely costs-free jurisdiction; service charge disputes were determined in the County Court, where the successful party would recoup its costs from the unsuccessful party. The joint expectation would therefore have been that (barring any change to those ground rules) the appellant would not find itself out of pocket if it proved necessary to collect service charge contributions by legal action, and so would have no need to recoup its legal expenses through the service charge. The only exception to that expectation might have been where the claim was defeated or had to be compromised without full recovery of costs ….”
“While such questions of construction are very fact sensitive, the tribunal considers that both the clauses and the factual matrix in the present case are materially similar to Sella House. The tribunal does not consider that the language used in paragraphs 5 and 9 can be said to show a clear or unambiguous intention to extend to legal costs incurred in obtaining a determination of service charges. On the contrary, on a natural reading neither clause appears to be intended to legal costs.”
“Reverting to the clause in question in the present appeal, I find its construction difficult. The purpose in the relevant clause is the management of the building. Of the cases cited by counsel, it comes closest to the one in Iperion, although it is arguably wider because of the words ‘in connection with’. I do not think that the different form of the legal action in Iperion, involving a claim for an injunction, makes any difference to the construction of the clause as [counsel for Ms Boakye] argues. I take the view that the landlord’s legal costs incurred in the 2017 and 2019 proceedings were incurred in connection with the management of the building and are therefore recoverable as part of the service charge.”
“[Counsel for the defendant landlord] in my opinion was right to submit that the definition of the landlord’s costs was not drawn by reference to the costs of successful (as opposed to unsuccessful) action taken by the landlord in its management of Broadwalk House. All costs properly incurred in the proper and reasonable management of the property were included and they will include costs of unsuccessful proceedings properly brought in managing the property. Throughout the defendant was acting with legal advice. A landlord faced with a tenant who had acted in flagrant breach of covenant is always likely to bring forfeiture proceedings against the tenant even if relief from forfeiture is likely to be granted on terms at the end of the day. I find it difficult to draw a satisfactory line between the costs of enforcing tenant’s covenants and of claiming an injunction on the one hand and the costs of forfeiture proceedings on the other. All such costs may be described as costs incurred in managing the property, and it matters not whether the rights enforced are rights under covenants prohibiting certain acts by the tenant or rights conferred by the condition for re-entry …. The judge, although ruling against the defendant on most issues did not say that it had acted improperly or unreasonably in the litigation. I would therefore hold that the costs incurred by the defendant in the litigation were costs which are included in the landlord’s costs and so recoverable from underlessees by way of the service charge.”
“(i) To employ at the Lessors’ discretion a firm of Managing Agents and Chartered Accountants to manage the Building and discharge all proper fees salaries charges and expenses payable to such agents or such other person who may be managing the Building including the cost of computing and collecting the rents and service charges in respect of the Building or any parts thereof (ii) To employ all such surveyors builders architects engineers tradesmen accountants or other professional persons as may be necessary or desirable for the proper maintenance safety and administration of the Building.”
“I add only a few words on the issue whether legal fees can be included in the service charge under this lease. Nowhere in Clause 5(4)(j) is there any specific mention of lawyers, proceedings or legal costs. The scope of (j)(i) is concerned with management. In (j)(ii) it is with maintenance, safety and administration. On the respondents argument a tenant, paying his rent and service charge regularly, would be liable via the service charge to subsidise the landlord’s legal costs of suing his co-tenants, if they were all defaulters. For my part, I should require to see a clause in clear and unambiguous terms before being persuaded that that result was intended by the parties. Accordingly, I agree with my Lord that the terms of paragraph (j) of clause 5(4) do not extend to cover legal costs in the service charge.”
“The reasonable and proper fees and disbursements … payable by the Lessor to procure the proper management of the Residential Premises as contemplated by the provisions of this Underlease, the provision of services, the calculation of service charges and the provision of service charge accounts ….”
“I consider that, mutatis mutandis, the same points may be made about the provisions with which we are now concerned.”
“… [R]eference was made in argument to service charge clauses being construed ‘restrictively’. I am unconvinced by the notion that service charge clauses are to be subject to any special rule of interpretation. Even if (which it is unnecessary to decide) a landlord may have simpler remedies than a tenant to enforce service charge provisions, that is not relevant to the issue of how one interprets the contractual machinery for assessing the tenant’s contribution. The origin of the adverb was in a judgment of Rix LJ in McHale v Earl Cadogan[2010] HLR 412 , para 17. What he was saying, quite correctly, was that the court should not ‘bring within the general words of a service charge clause anything which does not clearly belong there’.”