Denise Green v 180 Archway Road Management Co Ltd [2012] UKUT 245 (LC)
RRAdmin Administration Charges, Service Charges 0
It is a truth universally acknowledged – even if not always evidenced in practice – that the lease is the starting point when considering the recoverability of an item of service charge expenditure. This decision is an apt illustration of the importance of the terms of the lease in service charge disputes.
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The dispute centred on Ms Green’s liability to pay buildings insurance.
The building in which her flat was located comprised a ground floor shop with three flats above. Ms Green was the long lessee of flat B, and was liable under her lease to contribute payment of one quarter of the buildings insurance premium.
Clause 4(ii) of the lease required the landlord to “insure and keep insured with a reputable insurance company in the joint names of the lessor and the lessee each and every part of the Building…”
Ms Green’s interest was specifically noted on the 2005-6 policy with that of the other lessees in the building. Since 2006 however her name had been omitted, even though the interest of the ground floor shop and flat A were specified.
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The LVT held that Ms Green was liable to pay the insurance premia for the years 2005-2010.
Ms Green appealed. Her argument was that she was not liable to contribute to the cost of the insurance because the landlord had failed to comply with the terms of the lease: it had failed to take out insurance in the joint names of the lessor and lessee.
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The landlord, through its managing agent Prickett & Ellis Management Ltd, had persuaded the LVT that Ms Green was adequately protected by her interest being noted in the “general interest” clause of the insurance policy.
In the Lands Chamber, HHJ Huskison disagreed. He said, at paragraph 14:
“… the question was not whether insurance had been placed which, on the balance of probabilities, would have been sufficient for the appellant if she had made a claim. The question instead is whether the respondent complied with its obligation under clause 4(ii) of the lease. The appellant’s covenant is a covenant to pay one quarter of the sum expended for insuring the building “in accordance with Clause 4(ii) hereof”. Accordingly in order to be entitled to seek payment from the appellant under her covenant the respondent must show that it has placed insurance in accordance with clause 4(ii). This clause requires the respondent to insure the building “in the joint names of the Lessor and Lessee”.
He referred to a useful passage from Woodfall Landlord and Tenant (§11.093):
- A covenant by the tenant to insure in the name of the landlord is broken if the insurance is made in the names of both landlord and tenant;
- A covenant by the tenant to insure in the name of the landlord and the tenant is broken if the tenant insures in the name of the tenant alone;
- A covenant by the tenant to insure in the name of the landlord and the tenant is not broken if the tenant insures in the name of the landlord alone;
- A covenant to insure in the names of A and B is broken if insurance is taken out in the names of A, B and C.
In conclusion therefore, notwithstanding the landlord’s arguments, including the practical difficulty of including the names of all of the lessees on insurance where the policy covers a block containing many flats with regular changes of lessee, the Lands Chamber held that Ms Green was liable to pay the insurance premium only for the year in which the insurance policy had been obtained in both her and her landlord’s name. There was no liability to contribute for the years 2006-2010.
