Kensquare Limited vs Boakye: the interpretation of leases
15 December 2021
The recent Court of Appeal case of Kensquare Limited v Boakye concerned the interpretation of a lease and how its clauses dealt with increases in maintenance contributions, the recoverability of costs in relation to tribunal proceedings and a s146 notice and whether costs of the current proceedings could be recovered via service charge provisions.
The appellant holds a long lease in a flat, where the freehold owner is the respondent, a tenant owned company in which the appellant is a shareholder. The lease still has 80 or so years left to run. In 2017 the respondent applied to the First Tier Tribunal (FTT) for a determination as to the validity of interim service charges from 2011-2017, the FTT found for the respondent. The respondent then filed a s146 notice owing to her failure to pay, the appellants mortgagee paid the service charges.
In August 2019 the respondent sent a letter to the appellant seeking payment of interim service charges for 2018 and 2019 in the sum of £2103.52 and further administration costs in respect of legal costs from 2017. The respondent applied to the FTT to seek determination as to the above and was largely rebuffed by the FTT. The respondent appealed to the Upper Tribunal (UT) and the Judge came to a wholly different conclusion.
The case was then appealed to the Court of Appeal. The lease contained clauses which provided that the lessor would pay costs incidental to preparation and service of s146 notices. Furthermore, the lessee is to pay maintenance contributions (essentially service charges) twice yearly and if the lessor wishes to change the value of the contributions for the next financial year it must notify the lessee at least one month before the next financial year. The final clause of particular relevance is was that costs of employing professional advisors and agents in relation to management of the building can be recoverable via the contributions.
The Court of Appeal held that litigation costs in relation to s146 were recoverable as the lease allowed for them to be recoverable. Further, they held the timing of the notice was clearly of the essence and the lessor should have complied with the stated intentions included in the lease. Finally, litigation costs cannot be recovered as part of the service charge provisions as there was no reference to lawyers or legal costs, the clause was quite clearly focused on housing management.
This case did not turn on any niche point of law and nor did it develop any new legal principle, it is just another example in a long line of examples of judges giving wording within leases their natural and ordinary meaning. It is a further reminder that leases and legal documents need to be drafted effectively to avoid these issues and this often requires effective legal advice to try and predict what issues can arise. Courts will generally not add words or change meanings (save for quite exceptional situations) as the lease is viewed as the agreed position of both parties.
The primary takeaway of this case is that it is paramount for parties to be clear on what wording the lease contains and what the ordinary meaning is, if you intend it to mean something else than that should be made clear.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at December 2021.