A reminder that the costs provisions in leases are narrowly construed despite collective enfranchisement having occurred.
The Respondent had (through collective enfranchisement in about 2003) acquired the freehold of two blocks containing 50 flats. It was owned by leaseholders and run by volunteers none of whom were experts in building management. Much time had been spent seeking to get Mr Greening (a lessee of one flat - “the Lessee”) to pay his service charge. The Respondent had sought professional legal advice, commenced proceedings and ultimately (following referral from the County Court) obtained a decision in the LVT against the Lessee that he was liable for unpaid service charges. His appeal now concerned the narrow point as to whether the LVT had properly allowed legal fees to be included as part of that outstanding service charge.
The Upper Tribunal acknowledged that the effect of a successful appeal would be that “...the amount in question could not be charged to the service charge account.
Except to the extent that it might constitute costs of the county court claim and might become the subject of an award of costs against [the Lessee]...the amount would have to be absorbed by the company. It could seek this amount from its shareholders, [almost all of the other lessees]”.
Nevertheless the wording of the service charge obligations of the Lease was on all fours with that in Sella House v Mears  1EGLR 65. It was not wide enough to allow legal costs to be included (contrast with Iperion Investments Corporation v Broadwalk House Residents LTD  2 EGLR 47). The collective enfranchisement was an event occurring after the date of the Lease and could not change the meaning that was given to its provisions. The appeal succeeded.
Elizabeth Haggerty / 1st Dec 2011
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