United Kingdom Upper Tribunal (Lands Chamber)

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URL: http://www.bailii.org/uk/cases/UKUT/LC/2011/LRX_106_2009.html
Cite as: [2010] UKUT 347 (LC)

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UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2010] UKUT 347 (LC)

UTLC Case Number: LRX/106/2009

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

LANDLORD AND TENANT – service charges – premises divided into flats - share of costs attributable to each flat – construction of provisions in leases – appeal allowed in part

IN THE MATTER AN APPEAL AGAINST A DECISION OF

A LEASEHOLD VALUATION TRIBUNAL FOR

THE SOUTHERN RENT ASSESSMENT PANEL

BETWEEN (1) JOAN PHILOMENA ANTOINETTE LARDY Claimants

and

(2) LINKA LEIF LARDY

and

RENE VAN GYTENBEEK Respondent

Re: Flats 2 and 6 Rockstead

18 West Overcliff Drive

Bournemouth

Before: The President

Sitting at 43-45 Bedford Square, London WC1B 3AS

on 17 August 2011

Miss Tanja Suessenbach for the appellants

Mr Vincent Teo for the respondent

No cases referred to

DECISION

Introduction

1. This appeal arises from an application to a leasehold valuation tribunal under section 27A of the Landlord and Tenant Act 1985 in respect of Flats 2 and 6 Rockstead, 18 West Overcliff Drive, Bournemouth. The respondent holds a lease of this property from the freeholder, Robert George Gates, for a term of 99 years from 24 June 1991. It consists of a large Edwardian house, divided into 5 flats (numbers 1 to 5), standing, together with an adjacent building (Flat 6), in grounds of perhaps three-quarters of an acre. The first appellant holds Flat 2 on the second floor of the main building on an underlease, granted on 7 August 1992 for a term of 99 years less three days from 24 June 1991. She acquired the underlease in 2002. The appellants together hold an underlease of Flat 6, granted on 10 May 2005 for the same term as Flat 2.

2. The four other flats have all been leased on similar (but not identical) long underleases, Flat 4 on 4 August 1992, Flat 3 on 13 August 1992, Flat 5 on 9 January 1993 and Flat 1 on 25 May 2000. By a further underlease (referred to as the seventh lease) dated 25 May 2000 certain areas of the curtilage were leased to Monaliesa Van Gytenbeek.

3. On 15 October 2001 planning permission subject to conditions, on an the application having been made by the respondent, was granted for works to Flats 1 and 6 (or, as it was referred to, the Coach House). At that time, it appears, the underlease of Flat 1 was held by the respondent’s wife, Monaliesa Van Gytenbeek, and Flat 6 had not been the subject of an underlease. The development was described as “Alterations to ground floor flat and formation of coach house – Reconsideration”. Building Regulations approval was also sought, the work being described as “Alterations to existing flats to form new two storey dwellinghouse”.

4. On 16 May 2005 (some 6 days after the grant of the underlease of Flat 6 to the appellants) a deed of licence was executed between the freeholder Mr Gates, the lessee Mr Van Gytenbeek, and Monaliesa Van Gytenbeek, who was described in the deed as “the Flat 6 Lessee”. The lease recited the lessee’s covenant in the headlease that he would not without the written consent of the lessor make any alterations to the plans, designs or elevations or architectural decorations of the demised premises; and it granted consent to the lessee under the covenant to the extent necessary to enable the Flat 6 Lessee and their successors in title to commence, execute and complete the alterations to the ground floor of Flat 6 and all incidental works necessary to form a second floor in accordance with the grant of planning permission and the approval of building plans, subject to any minor alterations previously agreed by the lessor.

5. At the time of the grant of the underlease to the appellants, it appears, the respondent had begun some works, but the construction of the building was substantially carried out by the appellants. It stands precisely on the footprint of the old building but does not incorporate any part of the previous structure.

6. On 18 January 2007 the respondent wrote to the Head of Building Control at Bournemouth Borough Council, referring to the planning permission:

“In 2005, after the sale of the two properties in or around 2003, it was agreed by the Council, the Head Lessor and the respective lessees, that the two properties referred to in the plans (flat 1 & the Coach House, @ 18 West Overcliff Drive, now with it’s separate owners) could proceed independently to completion of their own works as described in the planning permission. This was agreed to allow each new owner to finalise their works independently and obtain their works certifications with the council without waiting for the other party to complete. It was understood at the time the same applied under Building Control.

In the event, we regret that Building Control were not made aware of this agreement, and respectfully ask that Building Control allows final certification independently for each property.”

7. On 13 March 2007 the council certified to Mrs Lardy that the works had been completed in accordance with the requirements of the Building Regulations. On 5 September 2007 a planning officer of the council, having visited the property in order to inspect the building works, wrote to “Mr J and Mrs A Lardy”, stating that the conditions in the planning permission had been complied with.

8. The application to the LVT under section 27A was made by the appellants in respect of items of the service charge set out in a detailed budget for the period from 1 January 2008 to 31 March 2009. Of the matters raised before the LVT in relation to these by the appellants, two were resolved – the historical neglect of the property, an issue that the appellants withdrew; and items related to the seventh lease, both parties accepting that the service charge provisions did not extend to the lessee’s obligations under that lease. That left the following matters in contention:

(a) The liability of the lessee of Flat 2 in respect of the cost of works carried out to the roof of Flat 1. The appellant, Mrs Lardy, contended that under the terms of her lease she was not liable for any contribution to these and that she would not be liable for the cost of any works of maintenance to Flat 6 (although there was not, I think, anything in the budget for works relating to Flat 6). The respondent contended that she was liable for the cost of all such works.

(b) The liability of the lessees of Flat 6 for the cost of works carried out to the main building. Mrs Lardy and Ms Lardy contended that under the terms of their lease they were not liable for these. The respondent contended that they were.

Flat 2 lease

9. The relevant provisions in the lease of Flat 2 are as follows. The “Demised Property” is defined as “Second Floor Flat 2 18 West Overcliff Drive Bournemouth Dorset and lock up shed”; and “the Premises” are defined as “the land and buildings of which the Demised Premises form part”, being “Rockstead, 18 West Overcliff Drive”, “demised to the Lessor by the Superior Lessor under the terms of the Head Lease”. “The Other Units” are defined as “the flats on the ground first and second floors and known as Flats 1 3 4 5 and 6 and forming part of the Premises and not comprised in this underlease.” The recitals are in these terms:

“(1) By a Lease dated the 11^th day of December 1991 (‘the Head Lease’) the Lessor holds the Premises which are divided into six separate units and

(2) The Lessor has or intends to grant Leases of the other five units in substantially the same form as this Lease or as near thereto as circumstances will admit to the intent that any Lessee of any flat may be entitled to enforce (so far as possible) the performance and observance of such covenants and provisions contained in any such Lease as may affect such Lessee of the flat to which he shall be entitled as Lessee”.

10. There is provision for the payment for insurance –

“…as a further rent or rents the sum equal to one sixth of the amount the Landlord expends in effecting or maintaining the insurance of the Premises and any addition thereto against loss or damage by fire and other risks as hereinafter mentioned such rent or rents to be paid on such of the usual quarter days as shall happen next after the expenditure of such sum by the Landlord”.

11. The grant of the lease is made subject to “the Included Rights” set out in the Third Schedule and “the Excepted Rights” set out in the Fourth Schedule. The Included Rights include this:

“1. The right for the Lessee and all persons authorised by him in common with others enjoying the like right at all times for all purposes incidental to the occupation and enjoyment of the Demised Property to use (i) the area of garden edged green on plan C…(ii) the front driveway hatched black on plan C (and to park not more than one motor car thereon)…and (iii) the internal hallways stairways and landings leading from the outside of the building to the door of the Demised Property as edged blue for identification purposes on Plans B and D…”

12. The Excepted rights include this:

“2. The right for the Superior Lessor and the Lessor and any person or persons authorised by any of them at any time or times to rebuild reconstruct modify or alter the Premises or any part thereof (except the Demised Property) or any building adjoining or adjacent to the same or to erect a new building or buildings on any part of the Premises…”

13. The lessee covenants (i) with the lessor to observe and perform the covenants set out in Part I of the Fifth Schedule and regulations set out in the Eighth Schedule and (ii) with the lessor and the lessees of the Other Units to observe and perform the covenants set out in Part II of the Fifth Schedule. The lessor covenants to observe and perform the covenants set out in the Sixth Schedule.

14. Part I of the Fifth Schedule contains the following covenants:

“2. To pay to the Lessor one sixth of the total amount incurred (whether actually expended or not) by the Superior Lessee and/or the Lessor in insuring the Premises in accordance with the covenant contained in the Sixth Schedule such proportion to be payable within fourteen days of demand

3. To pay one sixth of any other cost to the Lessor…of the maintenance repair upkeep renewal decoration and services of the Premises shared by the Demised Property and the rest of the Premises to include (but without prejudice to the generality of the foregoing) the maintenance and repair of the roof and foundations of the Premises and as referred to in clause 6 of the Sixth Schedule

4. To pay one third of the cost to the Lessor of the maintenance and upkeep of the shared area of garden shown edged green on Plan C…

14. Not without the previous consent of the Lessor to erect any additional buildings walls or fences or …make any alterations in the plans designs elevations or architectural decorations of the Demised Property or to cut maim injure or alter any of the roofs ceilings walls floors or timbers thereof…”

15. Part II of the Fifth Schedule contains the lessee’s further covenants (with the lessor and the other lessees), including this:

“3. To pay on demand to the Lessor one sixth as referred to in Clause 2 of Part I of the Fifth Schedule of the cost incurred by the Lessor for the work procured in repairing cleansing maintaining and renewing any part or parts of the Premises the support shelter or protection or use of which is common to the Demised Property and the Other Units and in particular the matters set out in Clause 6 of the Sixth Schedule hereto”.

(The reference to “Clause 2 of Part I” is clearly intended to be to paragraph 3 of Part I.) In addition paragraph 14 of Part I is substantially reproduced as paragraph 10.

16. The Sixth Schedule contains the lessor’s covenants, and they include the following:

“4. In every lease of any part of the Premises hereafter granted by the Lessor being a long lease at a low rent and reserving a premium the Lessor shall impose regulations to be observed by the lessee in terms similar to those contained in the Eighth Schedule hereof…and also covenants similar to those contained in the Fifth Schedule hereof…

6. The Lessor shall:-

6.1 maintain repair redecorate and renew (or procure the same) in a good and substantial manner (a) the structure of the Premises and in particular the foundations main walls roof drains gutters and rainwater pipes of the Premises (b) the gas and water pipes drains and electric cables and wires in under or upon the Premises used by the Lessee in common with the owners and Lessees of the Other Units and enforce the covenants against the owners Lessees or occupiers of the Other Units (c) the timbers joists and beams of the ceilings and roofs and the slabs of the floors of the Premises (d) the conduits in under and upon the Premises not exclusively serving the Demised Property or other demised parts of the Premises (e) all those parts of the Premises not exclusively enjoyed by lease licence or otherwise by the Lessee or by the occupiers of the Other Units including the gardens and grounds at the Premises

6.2 enforce against the owners Lessees or occupiers of the Other Units the covenants with the Lessor on the part of such owners Lessees or occupiers

6.3 keep the parts of the Premises referred to in paragraph 6.1(e) above clean tidy and reasonably lighted…”

Flat 6 lease

17. The lease of Flat 6 contains provisions in the same terms or to the same effect as those of the Flat 2 lease set out above with the following exceptions. In the Third Schedule (the Included Rights), instead of paragraph 1 there is conferred simply the right to use the front driveway. There is thus no right to use a defined part of the garden (as in sub-paragraph (i) in the Flat 2 lease), or to park a car on the driveway (as in sub-paragraph (ii)), or to use the internal hallways, staircases and landings (as in sub-paragraph (iii)). Paragraph 3 of Part I of the Fifth Schedule is in these terms:

“3. To pay one-sixth of any other cost to the Landlord (whether on account of the cost to be incurred or incurred directly or by payment to the Superior Landlord) of the maintenance repair upkeep renewal decoration and services of the Premises shared by the Demised Property and the rest of the Premises to include (but without prejudice to the generality of the foregoing) the maintenance and repair of the roof and foundations of the Premises”

and paragraph 3 of Part II of the Fifth Schedule provides (in words that are effectively the same as those in the Flat 2 lease):

“3. To pay on demand to the Landlord one-sixth as referred to in Clause 3 of Part I of the Fifth Schedule of the cost incurred by the Landlord for the work procured in repairing cleansing maintaining and renewing any part or parts of the Premises the support shelter or protection or use of which is common to the Demised Property and the Other Units and in particular those matters set out in Clause 6 of the Sixth Schedule hereto”

18. Paragraph 6 of the Sixth Schedule contains the same wording as sub-paragraph 6.1 in the Flat 2 lease down to the end of sub-sub-paragraph (b), but the rest of paragraph 6 is omitted.

The LVT’s decision

19. In a decision that addressed with considerable care the difficult problems of interpreting these lease provisions and explained its conclusions clearly, the LVT determined as follows:

“1. Flat 2 is liable to pay one-sixth of the disputed service charges incurred or to be incurred by the Respondent in respect of Rockstead as a whole, save to the extent that:

a. they relate to parts of Rockstead which are demised premises as defined by the leases of the six of flats (as interpreted by the Tribunal);

b. they relate to that part of Rockstead which contains Flat 6.

2. Flat 6 is liable to pay one-sixth of the disputed service charges incurred or to be incurred by the Respondent in respect of Rockstead as a whole save to the extent that:

a. they relate to that part of Rockstead which contains Flat 6; or

b. they relate to parts of Rockstead which are demised premises as defined by the leases of the six flats (as interpreted by the Tribunal).

3. Flat 6 is solely liable for the cost of repair, maintenance etc of the structure, main walls and roof of Flat 6.”

The decision identified the disputed service charges referred to in 1 and 2; and it went on to determine that the charges for insurance were payable within 14 days of demand and that all other service charges were payable on demand, whether in advance or otherwise. It made an order under section 20C of the Act that the respondent’s costs incurred in connection with the proceedings were not to be regarded as relevant costs for the purposes of the service charge.

20. The LVT gave permission to appeal. In doing so it quoted the following words from its substantive decision:

“We are bound to say after very full consideration of the leases of Flats 2 and 6 that interpretation of them is difficult; they have differences and the whole scheme of provision for payment of services required to be provided by the Respondent under the leases is not suited to the property as it exists. The conclusions that we have come to probably will not resolve all issues satisfactorily and may, indeed, raise problems and concerns. However, we are required in law to interpret the leases and not rewrite them.”

The matters that had been the subject of the LVT’s substantive decision were those identified in paragraph 8 above, so that the grant of permission to appeal must be taken to be limited to those matters. Mrs Lardy, however, was anxious to raise a large number of issues in relation to individual items of the service charge that had not been in contention before the LVT. A Registrar held a case-management hearing about this and ordered that the issues in the appeals were those identified above. Nevertheless Miss Suessenbach, who appeared for the appellants, at the hearing before me, produced a skeleton that addressed the individual items of service charge that Mrs Lardy wished to dispute, but she accepted that it was not appropriate for me to consider these.

21. In its decision the LVT, having said what it did in the passage it later quoted when granting permission to appeal, went on:

“22. If one aspect is clear, it is that the basic scheme for payment of service charges for the whole of Rockstead was that they would be divided in 6 equal shares – by all flats in the main building and Flat 6 together. Bearing in mind that Flat 6 is essentially a self contained entity outside the main building and only attached by a common wall, there may be little logic to Flat 6 being required to pay one-sixth part of the cost of the main building. But that is what the basic scheme seems to suggest. However, we had to consider the more detailed wording of the leases to decide what is actually provided for.”

22. The LVT then went on to consider the Flat 2 lease. It recorded the appellants’ contention that the use of the word “shared” in paragraph 3 of Part I of the Fifth Schedule and “in common” in paragraph 3 of Part II of that schedule applied to all the items referred to, so that the lessee of Flat 2 was not liable in respect of those items the use of which she did not share with the other lessees. Thus it was contended that the flat roof of Flat 1, some parts of the hallway/staircase and the whole of Flat 6 were not shared by Flat 2, so that no contribution was due from Flat 2 in respect of them. The LVT rejected this contention. It said that “shared” did not imply shared use: if use was implied, it could lead to endless argument as to what specific parts of the building or its services were used by Flat 2. It went on:

“The ‘shared’ parts are stated to include ‘the roof and foundations of the premises’. Those items are also specifically referred to in clause 6 of Schedule 6, so it would seem they might serve no purpose by specific mention in the Part I covenant. They do however, have some purpose in that covenant when considering the further words in that covenant: “and as referred to in Schedule 6 clause 6”. To make sense of the covenant, we found that the word ‘shared’, whatever it may mean, could only apply, at most, to the words ‘the maintenance and repair of the roof and foundations of the premises’ as otherwise their inclusion was, as we have previously stated, of no purpose. Even then they are of little purpose because of the full terms of Clause 6 Schedule 6. We found that the use of the word ‘and’ was an extension of that to which the lessee was required to contribute one sixth, rather than any limitation to the ‘shared’ items. In doing so it seems to us this is the right approach consistent with the overall intention of all units paying one sixth each rather than leaving the landlord with any part to pay.”

23. With regard to the cost of the upkeep of the roof to Flat 1 the LVT said that it had been in situ since well before the lease were granted and was “part of the roof of the premises – Rockstead as a whole”. It said that it had no evidence that the lessee of Flat 1 had failed to comply with any obligation of a planning permission or licence for alterations, but, even if he had, that would not relive Flat 2 of the covenant to contribute. It went on:

“Although it is not essential to liability that any flat benefits from it, in any event the integrity of the flat roof is important to the main building as water ingress could adversely affect the foundations of the main building as a whole as well as the parts of Flat 1 that are beneath the main roof.”

In the light of its earlier conclusion the LVT therefore determined that Flat 2 was obliged to contribute one sixth to the cost of upkeep of the Flat 1 roof.

24. Turning to Flat 6 the LVT set out the relevant provisions in the lease, and then said (in paragraph 27):

“d. In some ways these provisions are more clear than those relating to Flat 2. In the 5^th Schedule Part II provision, once again we took the use of the word ‘and’ to denote an extension going beyond the preceding wording so that the lessees are required to contribute one sixth towards those items set out in the Sixth Schedule provision. Paragraph 6(a) of which provided for the upkeep of what we would regard to be the main structure and fittings of all the Rockstead buildings as they existed at the time the original leases were granted. That includes, for the same reasons as above, the flat roof of Flat 1 and it is again consistent with the overall scheme that all 6 units pay the cost of the upkeep of the whole of Rockstead.”

25. Then in paragraph 29 the LVT said this:

“c. We have set out above the service charge covenants for Flat 6. In principle it would seem as a consequence that the main structure, etc, in respect of Flat 6 also, are maintained, etc, by the landlord who is entitled to recoup 1/6^th from each of the 6 units.

d. However, so far as we are aware, the leases of all the five units in the main building were granted prior to 10^th May 2005 when the photographs were taken. Therefore when the 5 main building flats were let, their service charge covenants, so far as they related to the upkeep of what is now Flat 6, related to the then existing building. On 16^th May 2005 a Licence was granted to Monaliesa Van Gytenbeek (MVG). The respondent was a party to the grant of that licence. In terms it authorised MVG to complete the alterations to the ground floor and all incidental works and to form a second floor. MVG also indemnified the Respondent against any liability which might result from the grant of the licence or from doing the authorised work. The result of that work is the present unit which as compared with the photographs and our inspection is completely different from that previously existing; indeed we were told that the previous building was demolished and that it was necessary to construct entirely new foundations to support the replacement building.

e. There seem to be three consequences:

i. The Respondent is in breach of his covenant with the other lessees to maintain all of the premises in accordance with his covenant in the Flat 2 lease (Sixth Schedule Paragraph 6);

ii. Flat 6 is liable to indemnify the respondent from liability;

iii. The Flat 6 lessee covenanted to contribute service charge in respect of a building which since 2005 has not existed.

f. We decided the result was that the lessee of Flat 2 had no remaining liability to contribute to the cost of a building which no longer existed and could not be taken to have accepted financial liability for the existing building of Flat 6; that the Respondent has no liability for its upkeep and therefore, as the Applicants thought, they alone as lessees of Flat 6 are liable for its entire upkeep.

g. But it must also be stressed that as referred to above, the Flat 6 lessees nevertheless also additionally remain liable for their 1/6^th service charge liability for the main building (see Para 25 above), as well as external common parts. This will, we are sure, seem unfair to the lessees of Flat 6, but this is the only conclusion we feel is open to us on the facts of the case and the documents.”

26. The decision then went on to conclude that insurance premiums were due, according to paragraph 2 of Part I of the Fifth Schedule in each lease, within 14 days of demand. Other service charges were due, it said, under paragraph 3 of Part II, on demand, and under paragraph 3 of Part I of the Fifth Schedule they might be payable for items incurred or to be incurred. Finally in relation to section 20C, this was said:

“The Tribunal found that the provisions of the Flat 2 and 6 leases do not allow the respondent to recover as service charge his costs in connection with these proceedings, but in case it is wrong about that, in all the circumstances of the case as noted above, it made an Order preventing the Respondent from doing so.”

Discussion: the Flat 2 lease

27. There were two main strands to the LVT’s reasoning in relation to the Flat 2 lease. The first was that “the basic scheme for payment of service charges for the whole of Rockstead was that they would be divided in 6 equal shares – by all flats in the main building and Flat 6 together”. The second was that, although paragraph 3 of Part I of Schedule 5 used the word “shared”, the words at the end of the paragraph “and as referred to in clause 6 of the Sixth Schedule” meant that the lessee was liable for one-sixth of the cost of the landlord’s compliance with all the obligations set out in paragraph 6 of the Sixth Schedule.

28. As far as the first proposition is concerned, it is to be noted that, although paragraph 3 of Part I of the Fifth Schedule provides for a one-sixth payment in respect of the costs to which it refers, paragraph 4, immediately following, provides for a one-third payment in respect of the costs of “the shared area of garden”. This might suggest that the basic scheme, rather than as stated by the LVT, is that the costs of services are to be divided between the flats according to the number of flats that share them. The area of garden is shown on the plan as being shared by flats 2, 4 and 5: so the contribution of Flat 2 is one third. The services referred to in paragraph 3 are said to be “shared by the Demised Property and the rest of the Premises” (or, as it is put in paragraph 3 of Part II, “is common to the Demised Property and the Other Units”); so the costs fall to be divided into sixths. I do not myself consider that the LVT’s first proposition, although no doubt generally correct, can be accurately stated without qualification, and for this reason I do not see that it assists in construing the disputed provisions of the lease of Flat 2 and the different provisions of the lease of Flat 6.

29. Paragraph 3 in Part I and paragraph 3 in Part II of the Fifth Schedule are obviously unsatisfactorily drafted. In paragraph 3 of Part I the requirement is to pay one sixth of “any other cost to the Lessor…of the maintenance repair upkeep renewal decoration and services of the Premises shared by the Demised Property and the rest of the Premises”. Badly worded though this is, the cost referred appears to be that of maintaining etc those parts of the Premises the use or benefit of which is shared by the lessees of each of the six flats. But then the paragraph goes on, “to include (but without prejudice to the generality of the foregoing) the maintenance and repair of the roof and foundations of the Premises.” It is clear, however, that no parts of the roof and foundations of the Premises are shared by the Demised Property and the rest of the Premises. The roof and foundations of the main building are not shared by Flat 6, and the roof and foundations of Flat 6 are not shared by the flats in the main building. But the express reference to the roof and foundations evinces the clearest intention that the provision should have effect so as to place liability for the cost of their maintenance and repair on the lessees. As a matter of construction this can be achieved, and can only be achieved, by treating the words “to include” as extending, if necessary, what has gone before. Thus the lessee is required to pay one sixth of the cost of the maintenance of the roofs and foundations of buildings that form part of the Premises, whether or not she shares them with all the other lessees.

30. The final words of paragraph 3 in Part I of the Fifth Schedule “and as referred to in clause 6 of the Sixth Schedule”, being part of what follows the words “to include”, similarly have the effect of extending what has gone before in the paragraph. I agree, therefore, with the second proposition of the LVT, that the lessee is liable for one sixth of the cost of the lessor’s compliance with the obligations set out in the Sixth Schedule, although I reach this conclusion on a different approach to the construction of the paragraph.

31. Paragraph 3 in Part II (which contains the lessee’s covenants with the lessor and the other lessees) is, for no obvious reason, worded differently from paragraph 3 in Part I (which contains the lessee’s covenants with the lessor alone). It relates to the cost of “repairing cleansing maintaining and renewing any part or parts of the Premises the support shelter protection or use of which is common to the Demised Property and the Other Units”. The roof and foundations do not provide support, shelter and protection for both Flat 2 and all the Other Units. There is no justification, however, for cutting down the effect of paragraph 3 in Part I by reference to this provision; and in any event the final words of the paragraph, “in particular those matters set out in Clause 6 of the Sixth Schedule hereto”, since they echo similar words in the earlier paragraph, should be taken to extend the lessee’s one-sixth liability to the costs relating to all the matters in paragraph 6 of Schedule 6.

32. I would add that I was provided with copies of the leases of Flats 1, 3, 4 and 5 (in addition to those of Flats 2 and 6). These leases were not before the LVT. They differ in that there is no Sixth Schedule extension (by which I mean no reference to the Sixth Schedule at the end of the paragraph) in either paragraph 3 of Part I or paragraph 3 of Part II of the Fifth Schedule to the lease of Flat 4. The leases of Flats 1 and 3 include the extension in paragraph 3 of Part II but not in paragraph 3 of Part I. The lease of Flat 5, like that of Flat 2, contains the extension in both paragraphs. On the basis of the reasoning that I have set out above my conclusions in relation to the Flat 2 lease would hold good also in relation to Flat 5. All 5 flats, including Flats 1, 3 and 4, would be liable to pay one sixth of the cost of maintaining and repairing the roof of the Premises (both the main building and Flat 6). The LVT’s conclusion, based as it was on the Sixth Schedule extension, would not have applied to Flat 4. To the extent that the paragraph 6 of the Sixth Schedule includes matters (other than the roof and foundations) that are not shared by the other flats, Flat 4 would not be liable for any part of the cost of these, and the same is arguably the case for Flats 1 and 3.

33. The principal objection of Mrs Lardy, as the lessee of Flat 2, was that she should have to pay a one-sixth contribution to works done to the roof of Flat 1. In the light of the interpretation of the lease that I have given, however, the conclusion of the LVT in this respect (see paragraph 23 above) was in my view correct.

34. The remaining question in relation to the liability of the lessee of Flat 2 is whether she is liable for the lessor’s costs in maintaining the structure, main walls and roof of Flat 6. The LVT dealt with this when addressing the Flat 6 lease, and its conclusions can most conveniently be considered if I do the same.

Discussion: the Flat 6 Lease

35. The LVT’s determination that the tenants of Flat 6 were solely liable for the cost of repair, maintenance etc of the structure, main walls and roof of flat 6 was based on two earlier conclusions. The first was that the tenant of Flat 2 was not required to contribute to that cost since her liability to contribute in relation to Flat 6 was in respect of a building that no longer existed. The appellants contended that this conclusion was not correct. I agree with them on this point. The costs to which the tenant of Flat 2 is liable to contribute are those referred to in paragraph 3 of Part I and paragraph 3 of Part 2 of the Fifth Schedule, as read with paragraph 6 of the Sixth Schedule. They are costs in relation to “the Premises”. She would only avoid liability, in my view, if Flat 6 as it is now does not constitute part of “the Premises”. “The Premises” are defined as the land and buildings known as Rockstead, 18 Overcliff Drive. That would indeed, in my view, mean the land and the buildings as existing when the lease was granted, were it not for the right given by paragraph 2 of the Fourth Schedule “to rebuild reconstruct modify or alter the Premises or any part thereof”. The decision of the LVT did not address itself to this provision. It is necessarily implicit in it that any part of the Premises so rebuilt, reconstructed, modified or altered would constitute part of the Premises. The works that were carried out were the rebuilding and alteration of Flat 6. The footprint of the building remained the same and Flat 6 did not lose its identity. I can see that a new building constructed on a new site within the Premises might not constitute part of the Premises for the purpose of the service charge provisions in the lease, but in my judgment Flat 6 remains part of the Premises notwithstanding its new form. Thus the liability of the lessee of Flat 2 to pay one-sixth of the costs incurred by the respondent (other than in relation to the shared garden) in maintaining the roof and foundations of the Premises and in fulfilling his obligations in relation to the Premises under the Sixth Schedule extends to such of these costs as may be incurred in relation to Flat 6.

36. The second conclusion on which the LVT based its determination that the tenants of Flat 6 were solely liable for the cost of repair, maintenance etc of the structure, main walls and roof of Flat 6 was that under the licence of 16 May 2005 they were liable to indemnify the respondent against any liability which might arise from the grant of the licence or doing the authorised work. That conclusion is plainly wrong, in my judgment, because the deed of licence (between the freeholder and Mr and Mrs Van Gytenbeek) was made 6 days after the grant of the lease to the appellants on 10 May 2005. The appellants were not parties to the licence and are not bound by it. (I would add, although the point does not arise for decision, that, even though no formal licence was given to the appellants to carry out the works, there appears to have been the clearest acquiescence on the part of the respondent in their doing so.)

37. Since the licence does not create any liability on the part of the lessees to reimburse the respondent for the cost of work carried out by him in the performance of his duties under the lease, the consequence of the LVT’s first conclusion – that the other lessees are not liable for any part of the cost of such works to Flat 6 because it is a new building – would be that such cost would fall to be borne by the respondent. As lessor, having failed to make the necessary provision in the lease for the recovery of such costs, he would have to bear them himself. However, as I have said, I think that the LVT was in error in its first conclusion and there is no reason why the lessee of Flat 2 should have no liability in respect of Flat 6 under the two paragraphs 3 in the Fifth Schedule.

38. The LVT was therefore, in my view, wrong in concluding that the tenants of Flat 6 are solely liable for the cost of repair, maintenance etc of the structure, main walls and roof of flat 6. It is also the case, contrary to what I take to have been the LVT’s conclusions, that the tenants of Flat 6 are not required to contribute to the cost of maintaining, for instance, the staircase and landings in the main house. The reason for this is that those parts of the premises are not shared by Flat 6 (within paragraph 1 of Part I) or used in common by Flat 6 and the Other Units (within paragraph 3 of Part II), nor is the maintenance of them one of the matters set out in paragraph 6 of Schedule 6 to the lease of Flat 6. The liability of the lessees under paragraph 3 of Part I of the Fifth Schedule is to pay one-sixth of the cost of the maintenance etc of the driveway and the common external paths (included as shared rights under paragraph 1 of the Third Schedule) and the gas, electricity, water and soil pipes (included as shared rights under paragraph 2 of the Third Schedule); and of the roof and foundations of the Premises (including, therefore, the roof and foundations of the main building and of Flat 6 itself). Their liability under paragraph 3 of Part II, as read with paragraph 6 of the Sixth Schedule, is identical. The liability of the tenant of Flat 2, for her part, is as explained in paragraph 35.

39. The result is that between them the lessees of the six flats are liable under the terms of their leases to pay the whole of the lessor’s costs in carrying out his obligations as set out in each of the leases at paragraph 6 of Schedule 6. There are three exceptions to this. The first is that they are not all liable for the cost of maintaining the shared part of the garden, and those that are liable to do this contribute one-third and not one-sixth of the cost. The second exception is that the lessees of Flat 6 are not liable to contribute otherwise than as I have explained in the previous paragraph. The third exception is that the liability of the lessee of Flat 4 is limited, and the liability of the lessees of Flats 1 and 3 may be limited, in the way I have set out in paragraph 32. The consequence of the second exception is that for such matters as the maintenance of the hallway, staircase and landings in the main house the respondent is only entitled to be reimbursed for five-sixths of his outlay. It would appear in these circumstances that it is open to him to make application to vary the leases of Flats 1 to 5 under section 35(2)(f) and (4) of the Landlord and Tenant Act 1987 so as to make each of the lessees liable for one-fifth of these costs. That, however, is a matter for him to consider.

When service charge payments are due

40. The LVT determined, as I have said, that insurance premiums were due, according to paragraph 2 of Part I of the Fifth Schedule in each lease, within 14 days of demand; and it said that other service charges were due under paragraph 3 of Part II, on demand, and under paragraph 3 of Part I of the Fifth Schedule they might be payable for items incurred or to be incurred. The appellants contended that charges other than insurance could only be requested after the costs had been incurred. That, however, is plainly wrong, since paragraph 3 of Part I of the Fifth Schedule (as it appears in each of the leases), which creates the duty to pay, refers to “the cost to be incurred or incurred”.

Section 20C, fee reimbursement and costs

41. Under section 20C of the 1985 Act a tenant may make an application for an order that all or any of the costs incurred by the landlord in connection with proceedings before an LVT or this Tribunal are not to be regarded as relevant costs for the purposes of the service charge. The LVT concluded that the provisions of the Flat 2 and 6 leases did not allow the respondent to recover as service charge his costs in connection with the proceedings before it, but it said that, in case it was wrong about that, it made an order preventing the Respondent from doing so. The respondent does not appeal against that order. The appellants seek an order under section 20C in relation to the present proceedings, but I can see no justification for this. The respondent was fully justified in opposing the appeal.

42. The appellants also seek an order under regulation 9 of the Leasehold Valuation Tribunal (Fees) Regulations 2003 that the respondent should reimburse their fees in respect of the proceedings before the LVT. It does not appear that any such application was made to the LVT, but in any event there could be no reason for such an order in view of what was a substantially unsuccessful application.

43. Finally each party seeks an order for costs against the other. Under rule 10(7)(c) of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010 the Tribunal may award costs, not exceeding £500, if it consider that the party ordered to pay costs has acted unreasonably in bringing, defending or conducting the proceedings. It is clear, in view of the considerable problems that there were in interpreting the provisions of the leases, that neither party could be said to have acted unreasonably in bringing or defending these proceedings. The only question, therefore, is whether either party has acted unreasonably in conducting the proceedings. For the appellants Miss Suessenbach said that the appellants had sought to reach agreement but the respondent had refused to engage with them on this. That assertion was not accepted, and I have no material on which I could conclude that it was justified. I can therefore see no basis for an award of costs against the respondent.

44. For the respondent Mr Teo said that Mrs Lardy had behaved unreasonably in filing a statement of case that went into very great detail on irrelevant matters. It had taken days and days to go through this in advance of the hearing. Although I see some force in this, and the statement of case was for the most part unhelpful in the great number of detailed matters that it canvassed, it is clear that Mrs Lardy believed that all the matters that she sought to advance were material to her case. In the circumstances I am not disposed to make an order of costs against her. In any future proceedings, however, given the power to award costs, she would be well advised to take care to confine her contentions to those that are in fact material.

Conclusion

45. I determine as follows:

(a) Service charges are payable by Mrs Lardy in respect of Flat 2 as to one-sixth of the costs incurred by the respondent (other than in relation to the shared garden) in maintaining the roof and foundations of the Premises and in fulfilling his obligations in relation to the Premises under the Sixth Schedule. The Premises for this purpose includes Flat 6 as it has been rebuilt and altered.

(b) Service charges are payable by Mrs and Ms Lardy in respect of Flat 6 as to one-sixth of the cost of the maintenance etc of the driveway and the common external paths (included as shared rights under paragraph 1 of the Third Schedule) and the gas, electricity, water and soil pipes (included as shared rights under paragraph 2 of the Third Schedule); and of the roof and foundations of the Premises (including, therefore, the roof and foundations of the main building and of Flat 6 itself). Service charges are not payable by them, however, in relation to costs other than these.

(d) The case is remitted to the LVT for it to determine, in the light of the above, the amounts payable by the appellants. The amount of what the LVT identified as the disputed costs cannot be reopened, only the attribution of those costs to the service charges payable.

Dated 5 September 2011

George Bartlett QC, President