LONGMINT LIMITED v MR MICHAEL RYE MRS ANGELA RYE (FORMERLY GREEN) LRX/88/2005

UPPER TRIBUNAL

LANDS CHAMBER

LRX/88/2005

Case No LRX/88/2005

Between

LONGMINT LIMITEDApplicant

MR MICHAEL RYE MRS ANGELA RYE (FORMERLY GREEN)Respondent

Before

His Honour Judge Huskinson

Mr M Andrews of Juliet Bellis for Appellant

Co for Appellant

solicitors for Appellant

Venue Procession House, 110 New Bridge Street, London EC4V 6JL

Date 27 April 2006

Hearing 24 April 2006

Property: Flat 1, 48 Broad Green Avenue, Croydon CRO 2ST

Catchwords: SERVICE CHARGES – Landlord and Tenant Act 1985 section 27A – construction of lease – whether obligation on tenants of basement flat to contribute towards landlord’s costs of providing an entry phone

[1]This is an appeal to the Lands Tribunal from the decision of the Leasehold Valuation Tribunal for the London Rent Assessment Panel (hereafter “the LVT”) dated 20 June 2005. The LVT granted leave to appeal to the Lands Tribunal by a decision dated 1 August 2005.

[2]The case concerns whether or not Mr and Mrs Rye (who are the respondents to this appeal and who are hereafter called “the Tenants”) are obliged to pay a sum of £400.36. This is the amount claimed by Longmint Limited (the present appellant who is hereafter referred to as “the Landlord”) as allegedly being due to the Landlord from the Tenants as their share, over the years 1993 to 2003, of the cost of renting and maintaining the entry phone system in the building at 48 Broad Green Avenue, West Croydon Surrey (“the Building”) of which the Tenants’ flat forms part. The Tenants hold the basement flat pursuant to a lease dated 10 February 1984 between Cophil Properties Limited as lessor and David Tanner and Deborah Rachel Williams as lessees. It will be seen that the Landlord is the successor of the original lessor and the Tenants are the successors of the original lessees.

[3]The answer to this question turns in my judgment solely upon the construction of the Tenants’ lease. This is a lease which both the Landlord and the Tenants accept is ill-drafted so far as concerns the payment of service charges.

[4]Before the LVT there were other matters in dispute between the parties so far as concerns the recoverability of service charges. However the only part of the LVT’s decision which is the subject of this appeal to the Lands Tribunal is that part of its decision whereby it concluded that the Landlord was not entitled to recover from the Tenants the disputed sums of £400.36 in respect of the cost of the entry phone system. The jurisdiction of the LVT arises under section 27A of the Landlord and Tenant Act 1985. An application was made to the LVT for a determination of the amount of the service charge payable by the Tenants to the Landlord.

[5]The LVT’s decision so far as concerns the entry phone charges can be summarised as follows:

[1]The LVT concluded that on a literal reading of the lease the Tenants were obliged to contribute one-third of the cost of the entry phone system which is installed in the building, though not in the Tenants’ flat. The LVT made this observation regarding certain wording in Part 6 of the Schedule to the lease:

“The clause was clearly inserted in the lease in error in the opinion of the Tribunal, as it would result in the Landlord receiving four thirds of the cost of the rental and maintenance of the system. The clear intention of the lease is that each of the four flats should contribute equally to the general services and repairs of the building, but that the responsibility for the rental and maintenance of the entry phone would be borne by the 2 lessees of the three upper flats each bearing a third of the cost. This is a provision which must have been overlooked by the lessees’ solicitor at the time when the lease was executed.”

[2]The LVT observed that the Tenants could apply to the LVT for a variation of the lease, but that such variation would only operate from the date of the order. The LVT also noted that there was power in the county court (but not in the LVT) to entertain an application for rectification of the lease. The LVT stated:

“However in the absence of any such applications the clause remains valid and regulates the right between the parties, which would produce a manifest injustice to the lessees.”

[3]The LVT went on to conclude that, despite the interpretation which the LVT had placed upon the provisions in the lease, the Landlord was not entitled to recover the disputed sum in respect of the entry phone by reason of considerations arising on the basis of(a) quasi contract,

(b) unjust enrichment, and

[6]The LVT granted leave to appeal to the Lands Tribunal on the basis that the appeal raises a point of law concerning the application and construction of these 1999 Regulations and whether their provisions were excluded by virtue of there being privity of estate rather than privity of contract between the parties. On behalf of the Landlord Mr Andrews asked that leave to appeal be extended so as to entitle the Landlord to challenge the other strands of the LVT’s decision based in quasi contract and unjust enrichment and also to raise the point that in any event, having regard to the date of the present lease, the 1999 regulations could not apply. The Tenants have served a reply to the Landlord’s statement of case in which they raise the question of what is the proper construction of the relevant provisions in the lease. The Facts

[7]The Building contains a ground floor and two upper floors, which are accessed through a front door which is controlled by the entry phone system which can be operated by these three flats. The Building also contains a separate basement flat the entrance to which is at the rear of the Building and which does not use the ground floor entrance and which does not have any control of or use of the entry phone system to the front door. It is this basement flat that which is demised to the Tenants.

[8]The Tenants’ lease made clear that the intention was to grant leases in effectively the same terms to the lessees of the other flats in the Building. The LVT proceeded upon the basis that this had occurred. Mr Andrews did not seek to dispute that this was the correct factual position. I proceed therefore on the basis that the three leases of the other three units in the Building contain provisions so far as concerns the payment of service charges in the same terms as those to be found in the Tenants’ lease and include in particular the terms in Part 6 of the Schedule which I set out below. 3

[9]Clause 2(f)(i) of the lease contains a covenant by the Tenants:

“(i) To contribute and pay the due proportion of the costs and expenses of the Service Obligations …”

[10]The recitals in clauses 1(h) and (i) of the lease are in these terms:

“(h) ‘the due proportion’ means the percentage or proportion specified in Part 6 of Schedule hereto (i) ‘the Service Obligations’ means the obligations to provide services (if any) and other things undertaken hereunder.”

It may be noted that the definition of “due proportion” leads one to expect that Part 6 of the Schedule will merely give a percentage or proportion rather than any additional text. It may also be noted that the Service Obligations are not specifically defined by reference to the obligations of the lessor under the lease, but plainly this must have been intended.

[11]Part 6 of the Schedule is in the following terms:

“The due proportion:- One quarter plus one third of the rental and maintenance of any entry phone system from time to time installed in the Building”

[12]The following provisions may also be noted in the lease, namely that clause 3(b) comprises a covenant on the part of the Landlord “To maintain repair, redecorate and renew the Common Parts and Service Conduits and the Estate and so far as applicable and practicable to keep the same reasonably lighted and in good condition and cultivation PROVIDED THAT the lessor shall not be liable for any temporary or accidental breakdown of any service” Service Conduits are defined in the recital in clause 1(f) in the following terms:

“The Service Conduits means the gas and water pipes drains and electricity and telephone cables and wires and other media for the transmission of the facilities in under and upon the Building and/or the Estate so far as the same are enjoyed or used by the Lessee in common with the owners and lessees of the other flats in the Building including any communal aerial for radio or television reception and any electrical or mechanical door opening system from time to time installed in the Building.”

The Parties’ Arguments as to the Construction of the Lease

[13]At the hearing I raised with Mr Andrews the question of what is the proper construction of the lease as it stands (i.e. leaving wholly aside any question of potential rectification or variation of the lease) so far as concerns the extent of the Tenants’ obligation to contribute towards the cost of the entry phone. In particular I asked Mr Andrews whether he contended 4 that, properly construed, the cost of the entry phone formed part of the costs of the Service Obligations or whether the entry phone costs stand outside the Service Obligations costs.

[14]Mr Andrews initially was inclined to think that the entry phone was outside the Service Obligations, but upon further consideration he submitted that the provision of the entry phone was part of the Service Obligations. In consequence he submitted that, properly construed, the lease imposed the following obligations upon the Tenants, namely to pay the due proportion (ie one quarter) of the costs of the Service Obligations (ie including the costs of the entry phone) and in addition (see the word “plus” in Part 6 of the Schedule ) to pay one-third of the cost of the entry phone. He accepted that the other lessees of flats in the Building would be required to make similar payments, such that the result would be that the Landlord would recover one- quarter of the cost of the entry phone from each of the four separate lessees (because each of the four separate lessees have to pay one-quarter of the costs of the Service Obligations which include the cost of the entry phone) and in addition the Landlord would be entitle to recover from each of the four separate lessees a further amount being one-third of the cost of the entry phone. The result he argued on the proper construction of the lease was that the Landlord was therefore entitled to recover one-quarter plus one-third (ie seven-twelfths) of the cost of the entry phone from each of the four separate lessees in the Building, such that the Landlord was entitled in total to recover two and one-third times the costs of the entry phone to the Landlord. Mr Andrews pointed out that the Landlord had in fact only sought to recover one-quarter of the cost of the entry phone (not one-third nor seven-twelfths) from each of the four separate lessees, but if one asked what was the proper construction of the lease the answer, he argued, was as set out above involving an obligation in effect to pay seven-twelfths of the cost of the entry phone (one-quarter plus one-third). The Tenants would of course, he argued, also be obliged to pay one-quarter of all of the other matters falling within the Service Obligations.

[15]In answer to this argument Mr Rye raised the following point. He argued that if the lease was to be precisely construed then all that the Landlord was entitled to recover was precisely what was set out in Part 6 of the Schedule, namely “one-quarter plus one third” of the cost of the entry phone system, such that the Landlords may indeed be entitled to receive from the Tenants seven-twelfths of the cost of the entry phone system but are not entitled to any other costs of other matters which might otherwise have fallen within the Service Obligations. Conclusion

[16]In my judgment neither of the foregoing constructions is correct. It is clear that this is not a well drafted lease and the lease is, at best, ambiguous as to whether the cost of the entry phone is included within the costs of Service Obligations or stands separate from them. This ambiguity arises from:(a) The wording of Part 6 of the Schedule, which appears specifically to identify the cost of the entry phone for separate treatment;

(b) The words of the definition of the Service Conduits, which are unclear as to whether the “electrical or mechanical door opening system” forms part of the Service Conduits for the purpose of this lease whether or not this facility is “enjoyed or used by the Lessee in common with the owners and lessees of the 5 other flats in the Building” and whether or not the entry phone can be said to be “communal”; and

(c) The absurdity of adopting either of the literal interpretations as put forward by, respectively, Mr Andrews and Mr Rye (as to which see above).

[17]I have regard to the general approach to the construction of covenants in leases as set out in Woodfall’s Law of Landlord and Tenant Vol 1 at paragraph 11.007. I have regard to the factual matrix against which the lease was executed, which includes the facts as set out above. I note that Woodfall records in subparagraph (5) of paragraph 11.007: “On the other hand, if one would conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had”.

[18]In my judgment one cannot on the proper construction of the lease include the cost of the entry phone as part of the cost of the Service Obligations having regard to the wording of Part 6 of the Schedule, to the wording of the definition of Service Conduits, and to the absurdity of doing so. The absurdity is of course the one identified above, namely that if the cost of the entry phone is included together with the cost of all the other matters comprised within the Service Obligations, then the Tenants apparently are required to pay one-quarter plus a further one-third of these costs.

[19]I therefore return to Clause 2(f)(i) of the lease and apply that having regard to my conclusion that the Service Obligations do not include the cost of the entry phone. This covenant in Clause 2(f)(i) is to pay “the due proportion of the cost and expenses of the Service Obligations”. If, as I conclude, the costs of the Service Obligations do not include the cost of the entry phone, then there is no express covenant on the part of the Tenants to pay any proportion of the cost of the entry phone – they have only covenanted to pay the due proportion of the cost of the Service Obligations.

[20]That of course leaves the wording in Part 6 of the Schedule which makes reference to one-third of the rental and maintenance of any entry phone system from time to time installed. However the purpose of Part 6 is merely to set the due proportion. It does not purport to be an express covenant on the part of the Tenants. There being no express covenant to pay this one- third of the cost of the entry phone, the question arises as to whether any such covenant can be implied. The question of the leases of the three upper flats (which have the advantage of the entry phone) is not before me and clearly anything I say cannot decide the position as between the Landlord and these other Tenants. However as at present advised it would seem to me that there would be no difficulty in implying into the present lease (supposing it were held by one of the tenants of the upper flats) a covenant to pay this one-third of the cost of the entry phone – ie to pay this in addition to paying one-quarter of the cost of the Service Obligations (which does not include the cost of the entry phone). Such a covenant would appear necessary to give business efficacy to the contract and would appear to satisfy the officious by-stander test of being a covenant so obviously needed that it goes without saying. However, in the present lease, namely of the basement flat which does not make use of the front door or the entry phone system, I can see no justification for implying a covenant by the Tenants to pay one- 6 third of the cost of the entry phone. Such a covenant is not needed to give business efficacy to the contract, nor is it a covenant which would satisfy the officious by-stander test – indeed if the hypothetical lessees had been asked by the officious by-stander whether they should contribute one-third of the cost of the entry phone they did not use (the other three Tenants already paying one-third each) the answer would surely have been no of course we will not agree to do so.

[21]I therefore conclude that on the proper construction of the lease there is no express covenant by the Tenants to pay any proportion of the cost of the entry phone and no such covenant can be implied. I therefore agree, although for different reasons, with the LVT’s conclusion that the Landlord is not entitled to recover £400.36 from the Tenants in respect of the entry phone.

[22]This being my conclusion upon the proper construction of the lease, it is not necessary nor would it be appropriate for me to consider the various grounds on which the LVT found in favour of the Tenants. These grounds simply do not arise. In the result the Landlord’s appeal from the LVT’s decision is dismissed.

[23]So far as concerns costs, Mr Rye represented himself. No application was made to me for costs. In any event I would not have concluded that this was case where any costs should be awarded against the Landlord because I do not consider that the Landlord has “acted frivolously, vexatiously, abusively, disruptively or otherwise unreasonably” in connection with the appeal. Dated 27 April 2006 His Honour Judge Huskinson 7