Service Charges: Whether costs incurred in objecting to a planning application were recoverable through service charge (Dell v 89 Holland Park Management Ltd -2022)

Where the freeholder of a block of leasehold apartments objects to a planning application made in respect of a neighbouring property, can the costs incurred in making the objection be recovered through the leaseholders’ service charge?

The background

Dell v 89 Holland Park Management Ltd [2022] is a further litigation outcome arising in respect of a wider and more complex dispute regarding proposals to develop a valuable parcel of land in central London. For more on the background to Hicks v 89 Holland Park Management Ltd [2021], see our case report.

The freeholder and landlord of 89 Holland Park, a building containing 5 flats let to leaseholders, has been engaged in disputes with Hicks for around 10 years. Hicks proposed to develop an underground mansion with an above-ground glass cube on land adjacent to 89 Holland Park, and the freeholder’s objections to the planning application during that time have incurred significant costs.

The leaseholders were required to pay service charges to the landlord, who covenanted to provide services including:

• Clause 4(4)(g)(ii)—To employ all such … solicitors accountants or other professional persons as may be necessary or desirable for the proper maintenance safety and administration of the Building
• Clause 4(4)(l)—… to do or cause to be done all such … things as in the reasonable discretion of the Lessor may be considered necessary or advisable for the proper maintenance safety amenity and administration of the Building

The freeholder wished to recover its costs from leaseholders through the service charge. The First-tier Tribunal held that costs could be recovered from leaseholders, finding that the freeholder’s planning objections related to ‘safety’ and ‘amenity’ of the building. The leaseholders appealed.

The decision

The Upper Tribunal (“UT”) found in favour of the leaseholders, agreeing that costs could not be recovered through the service charge.

The UT referenced the interpretation considerations in Arnold v Britton [2015], holding that the stated lease clauses did not extend to legal and expert witness fees incurred in litigation or in making objections to planning applications by third parties. Interpretation of service charge provisions should not be restrictive, but the court may use its discretion when interpreting general obligations such as those stated as to what may be included within the meaning. That said, costs which clearly shouldn’t be included should not be brought within the meaning of general obligations.

The court found that the stated service charge provisions related to management and maintenance of the building and not actions or litigation taken by the landlord against third parties or in respect of neighbouring property. Importantly, the leases stated specific litigation which the landlord was to undertake and which would be paid for by the leaseholders; litigation relating to objections to planning applications was not included.

Advice and action for landlords

This decision is helpful when reviewing the effectiveness of general ‘sweeper’ provisions in service charge clauses, determining that litigation relating to the objection to third party planning applications was not considered activity related to the management and maintenance of the building.

Another judgment referencing the landmark Arnold v Britton case, the UT took a pragmatic view in limiting the effect of the sweeper provision. Although the obligations were founded on concerns for the building’s structural integrity, safety and amenity, the sweeper provision did not extend so far as to encompass any and all litigation or action taken by the landlord and relating to such matters.