Service Charges: Whether a freeholder was responsible for repairs and whether costs were recoverable through service charge (Tann v Bhundia and another – 2022)
Where a freeholder did not use a roof structure of a property demised to leaseholders, could the freeholder be responsible for repairs to the structure and were costs of such repair recoverable by way of service charge?
In Tann v Bhundia and another , the appellant owned a lease of a maisonette (no. 187) on the ground floor of a property. The first respondents were the freeholders of the building, and the second respondent the leaseholder of the first-floor maisonette (no. 187A) in the building.
A lower ground floor extension reached beyond the first floor. No. 187 had an additional room at the rear of the property, and the roof of the extension, comprising a concrete slab with an asphalt surface, formed a balcony for no. 187A. The slab required repairs and the freeholder sought a determination in the First-tier Tribunal as to whether it was responsible for the repairs and, if so, whether the costs of such repair could be recovered through the service charge from the two leaseholders.
The freeholders stated that they were not required to repair parts of the building which were demised to the leaseholders, arguing that the concrete slab was included in their demises and the leaseholders were therefore responsible for repairs. The appellant argued that, under the terms of her lease, the freeholders were required to repair the maisonette’s common and structural parts including its ‘roofs’, which included the roof of the main building but also the roof of the extension. The appellant had agreed to pay a contribution towards such works.
The FTT found that the freeholders’ repair obligations extended only to the parts of the building which were ‘used or capable of being used by the lessor and the lessee’. The leaseholders were to contribute towards the freeholders’ costs in carrying out repair obligations. The FTT concluded that the freeholders did not use, and were not capable of using, the concrete slab and were not therefore responsible for its repair. The leaseholders should share responsibility equally for the costs of repair works to the slab. The appellant appealed.
The Upper Tribunal considered whether the works were to be carried out by the freeholders and, if so, whether service charges were payable by the leaseholders in respect of the costs of such works.
Both leases contained repairing covenants on the part of the leaseholders. The appellant was responsible for repairs to “all party and other walls and fences…”, amongst other parts of the structure. The freeholders were to repair parts of the building that ‘belonged’ to them or if the freeholders used those parts in common with the leaseholders.
The freeholders were not able to use the concrete slab and were not therefore obliged to repair it. The inclusion of the word ‘roofs’ in the appellant’s lease did not change this view; because the freeholders did not share use of the slab, they did not have to repair it. The UT considered the original parties’ intentions, finding that it made commercial sense for the concrete slab to belong to no.187’s demise and allowing the appellant to control the repair process with a contribution towards costs being made by the second respondent.
The UT found that the appellant leaseholder was responsible for the concrete slab repairs and was to share its associated costs with the second respondent. The slab was demised with no.187 and the appellant was therefore liable for carrying out the repair; the costs were to be shared with the second respondent, and the appellant was able to require the freeholders to enforce the covenant.
Advice and action for landlords
This decision serves as a useful reminder that the demise of a property must be accurately defined in lease wording and plans in order for service charge provisions to be properly applied.
The shared use point is interesting; under the lease terms, the freeholders were only responsible for the repair of parts which they could use in common with the leaseholders. Without access to or use of the concrete slab, the freeholders could not be found to be responsible for its repair.
The UT’s judgment also continues to reinforce the importance of considering the original parties’ intentions at the time the contract was entered into, finding in this case that to impose any different interpretation of the provisions would leave an unduly heavy burden on the leaseholder of no. 187A which could not have been the intention at the time.
The Upper Tribunal found that the appellant was responsible for the concrete slab repairs and was to share its associated costs with the second respondent. The slab was demised with no.187 and the appellant was therefore liable for the repair.