[2024] UKUT 193 (LC)

Finally, we turn to the definition of Total Expenditure. I set out the relevant provisions again, without the wording that appears in only two leases and that I have explained is irrelevant to what I have to decide:

So the term “Total Expenditure” indicates the entire sum of which each leaseholder pays a proportion. It is defined as what it costs the landlord to carry out its obligations under clause 5(5) of the lease – of which we have encountered three already, and of which the rest are not of assistance – and “any other costs and expenses reasonably and properly incurred in connection with the Building.”

So again we have a sweeping up clause. Again therefore it is not appropriate to read it literally as including absolutely anything that the landlord might reasonably and properly do in connection with the building, for the reasons set out above; we are required by Arnold v Britton to look at the context of the clause, which here includes its function, which is a definition. It clearly takes the scope of the service charge beyond what the landlord is obliged to do under clause 5(5), but how much wider does it go? It recognises that the landlord might reasonably and properly do more than it is actually obliged to do, and has the effect that if he does so the leaseholders must foot the bill; but could the parties have intended it to include the potentially open-ended and ruinously expensive obligation in question here? In my judgment clearly not.

And again, in signing up to covenants to repair and maintain, the original tenants knew that those terms excluded the remedying of structural defects. They would not have intended that potentially enormous liability to be included in the general wording of clause 5(5)(o); still less would they expect it to be derived from the words of a definition.

In my judgment the landlord cannot rely upon the definition of Total Expenditure to make the leaseholders liable for this work.