[2025] UKUT 232 (LC)

The litigation over the management of Northwood Hall is depressingly extensive. There is no need for me to replicate the lengthy accounts of the facts that have had to be provided in a number of judgments in various proceedings. In this appeal, the background facts are irrelevant save insofar as they shed light on the construction of clause 5(11) of the lease, which is the only issue in this appeal.

Suffice it to say that Northwood Hall is a purpose-built residential block built in around 1935 comprising 194 flats of which 159 are held under long leases on near-identical terms, and 35 by the appellant (34 out of its freehold interest and one as a long leaseholder). Over the past decade litigation has raged, between the present parties, an RTM company, the former tribunal-appointed manager Mr Bruce Maunder Taylor, and others. Since September 2019 responsibility for management of the building has been back in the hands of the appellant, and it has appointed its own managing agents.

The present proceedings began in 2022 when 68 individuals, being the leaseholders of 56 of the flats, applied to the FTT for a determination about service charges pursuant to section 27A of the Landlord and Tenant Act 1985, which gives the FTT jurisdiction to determine whether service charges are payable under a lease and, if so, in what amount, to whom and so on. The application related to the service charge years 2011 to 2022. The FTT’s decision dated 24 May 2024 set out the FTT’s findings on a number of issues of principle, and then went through the various items in dispute set out in the parties’ Scott Schedule.

One of the issues of principle, and the only one relevant to this appeal, was whether the landlord’s legal costs in the sum of £55,492.23 in the year 2020/21 could be recovered under clause 5(11) of the long leases. The costs were said by the appellant to include general legal advice on the management of the building, advice about the recovery of rent and service charge arrears, litigation costs incurred in recovering rent and service charge arrears, and the costs incurred by the landlord in proceedings against third parties (including Mr Maunder Taylor) where such costs were reasonable or necessary for the management of the building.

By clause 4(2) of the lease the lessee covenants to pay a percentage of the landlord’s expenditure in carrying out its obligations under clause 5, and clause 5(11) which reads as follows:

“The Lessor will themselves or alternatively at their discretion employ a firm of Managing Agents to manage the Building and discharge all proper fees salaries charges and expenses payable to themselves or to such agents or such other person who may be managing the Building including the cost of computing and collecting the rents in respect of the Building or any parts thereof and the ancillary costs in connection therewith.”

Clause 5 also contains the following obligation on the landlord:

“5(12) - Enforce (if so required by the Lessee) the covenants similar to those mentioned in Clause 2 hereof and set forth in the First Schedule hereto and those mentioned in Clauses 3 and 4 hereof entered into or to be entered into by the lessees of the other flats comprised in the Building on the Lessee indemnifying the Lessors against all costs and expenses in respect of such enforcement and providing such security in respect of costs and expenses as the Lessors may reasonably require.”

By clause 3(7) the lessee covenanted to:

“Pay all reasonable and proper costs charges and expenses (including Solicitors costs and surveyors fees) incurred by the Lessors or the Superior Lessors incidental to the preparation and service of a notice under Sections 146 and 147 of the Law of Property Act 1925 notwithstanding forfeiture is avoided otherwise than by relief granted by the court and including fees and expenses incidental to the inspection of the flat and the preparation of a Schedule of Dilapidations.”

The FTT took the view that clause 5(11) is directed at the routine costs of management and does not enable the landlord to recover any legal costs; therefore none of the costs the landlord sought to recover could be charged to the leaseholders through the service charge. Clause 5(11), said the FTT, “does not extend even to routine legal advice”. That is the decision now appealed.