[2025] UKUT 160 (LC)

As I said above, the appellants’ challenge to the service charges in the years 2020 to 2024 was about whether they were payable, not whether they were reasonable in amount. Section 27A(1) of the Landlord and Lessee Act 1985 provides:

“An application may be made to [the FTT] for a determination whether a service charge is payable and, if it is, as to—

(a)

the person by whom it is payable,

(b)

the person to whom it is payable,

(c)

the amount which is payable,

(d)

the date at or by which it is payable, and

(e)

the manner in which it is payable.”

The appellants’ case was that certain charges demanded by the freeholder in the years in question related to the common parts, for which they were not liable under the terms of their lease. In summary the charges were for:

The FTT – a panel of three valuer or surveyor members - in its decision rightly focused on the construction of the lease. It said at its paragraph 15:

“… it is the Tribunal’s function to interpret the lease in a way that is most in line with the overall intention of the original parties to the lease and in a manner that allows practical application.”

That is not an accurate summary of the law relating to the construction of leases and other documents, as to which the modern authority is the Supreme Court’s decision in Arnold v Britton [2015] UKSC 36. Lord Neuberger said at paragraph 15:

“15.

When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to “what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean”, to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38 …, para 14. And it does so by focussing on the meaning of the relevant words, in this case clause 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions. 

So it is not for the tribunal to decide what was the intention of the parties and then interpret the lease in line with that. The tribunal must discern the intentions of the parties from the words of the lease in light of the provisions of the lease as a whole, as well as the facts and circumstances known to the parties at the time – which is why the provisions of the lease of Flat 3 are relevant. The appellants have also provided a copy of a new standard form of lease under which, they say, most of the flats are now held and – if I have understood correctly – all soon will be; I have had no regard to that document since it cannot shed light on the intentions of the parties to the lease of Flat 2 in 1971.

The FTT began the exercise of construction by stating that the lease of Flat 2 does not define the term “Mansion”. As we have seen, it does. The FTT went on to say that the parties agreed that the term means the whole building, including the north wing. The appellants now say that that is not what was agreed; but it will be apparent from the terms of the lease that I have set out above that that is the correct interpretation of the word. I acknowledge that the actual definition in the recital (paragraph 4 above) is ambiguous as to whether the north wing is included; but other provisions make it clear that it is, in particular: clause 5 requires the Lessor to decorate the exterior of “the Mansion but not the Flat”, and the exclusion would be unnecessary if the Flat were not part of “the Mansion”; and the Second Schedule gives the lessee of Flat 2 rights over “other parts of the Mansion”, whereas if Flat 2 were not part of the Mansion the rights would be simply over “the Mansion”. However the fact that Flat “ is within the definition of “the Mansion” does not mean that the lessee of Flat 2 is liable for the common parts inside the main building, as we shall see.

The FTT correctly found, at paragraph 16, that the lease of Flat 2 does not require the Lessor to maintain the structure of Flat 2, and went on to say that the lease contemplated that the lessee of Flat 2 would pay “some of the wider ‘Mansion Costs’”. The difficulty with that statement is its imprecision; the lease does not use the term “Mansion Costs”, and more importantly the lease carefully limits the costs in respect of the Mansion to which the lessee of Flat 2 is to contribute. That is clear from the wording of the lease itself, and is even clearer when it is compared with the provisions of the pre-existing lease of Flat 3. The FTT failed to understand that limitation of the lessee’s covenants in the lease of Flat 2 and, as we shall see, as a result reached an incorrect conclusion about some (but not all) of the charges. It is easiest to see that by addressing the charges in issue, in turn; in doing so I set aside the FTT’s decision on the items where it misunderstood the provisions of the lease and substitute the Tribunal’s decision.