In 89 Holland Park (Management) Limited v Dell, the Court of Appeal had to determine whether the appellant freeholder could recover from its tenants legal and planning costs incurred during a dispute with a neighbouring landowner.
The landlord brought the appeal relying on two paragraphs of the lease described as, “Sweeper Provisions”. The appeal centred on the interpretation of the two clauses and whether the costs sought were within the scope of the service charge provisions.
The Court dismissed the Appeal in agreement that the clauses focused on ‘the management and maintenance of the building’ and it would be stretching the wording to include these forms of costs.
Background
The case involved the freehold owner of a block of flats who was seeking to recover £2,763,521 from its leaseholders for legal and planning costs relating to disputes with a neighbouring architect, Sophie Hicks.
The lease provisions under scrutiny were:
- Clause 4(4)(g)(ii): “To employ all such surveyors builders architects engineers tradesmen solicitors accountants or other professional persons as may be necessary or desirable for the proper maintenance safety and administration of the Building“; and
- (l): “Without prejudice to the foregoing to do or cause to be done all such works installations acts matters and things as in the reasonable discretion of the Lessor may be considered necessary or advisable for the proper maintenance safety amenity and administration of the Building.“
In first instance, the First-tier Tribunal held the sums were recoverable.
This was then overturned in the Upper Tribunal by Judge Cooke in finding that the costs could not be recovered by the provisions in clause four as their purpose was to maintain the building. Further, Judge Cooke determined that the result was a matter of commercial common sense as an obligation to fund extraordinary costs could be ruinous.
The landlord appealed this decision.
The Appeal
The Court of Appeal dismissed the appeal emphasising that while the landlord’s concerns were related to structural and aesthetic issues, the purpose of the expenditure was to prevent the neighbour’s proposed development rather than maintain the building or ensure its safety.
Additionally, the court noted that where litigation costs were mentioned in another part of the lease, if they had been recoverable under the Sweeper Provisions, then this would have been made explicit in those provisions.
Significance of the case
In this instance, and after all parties accepted the process for interpretation was those set out in Arnold v Britton [2015] AC 1619 the reach of Sweeper Provisions was restrictively construed.
This decision may impact future drafting practices, reminding parties of the importance to consider specific context and purpose of any lease provisions. There will likely be further conversation on what amounts to acting ‘in the interest of the safety of the building’ and distinguishing it from ‘aesthetic concerns’.
Further, with the Leasehold and Freehold Reform Bill looking to limit recoverability of legal costs, it will be interesting to see how the growing number of cases relating to recoverability of costs through service charges develop and also whether freeholders will be more hesitant in entering litigation if there is no ability to recover those costs from their tenants.
It should of course be remembered that not all leases are drafted the same; while the tenants were successful here, other leases may not have been so favourable. As such, it may be prudent to obtain advice before presuming the same outcome.
Contact our Litigation and Dispute Resolution team
If you would like to speak with a member of the Dispute Resolution team, contact Bishop & Sewell by email to: litigation@bishopandsewell.co.uk or call +44(0)207 631 4141
The above is correct as at 29 February 2024. The information above may be subject to change.
The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.
