Ryan v Villarosa  UKUT 466 (LC)
8th January 2018
In a conflict between a clear scheme of covenants and complimentary service charge machinery, and ambiguous declarations as to the relationship between one of the parties to the lease and a third party, (both contained in the same lease) the scheme takes precedence and is binding on the parties – coherence trumps uncertainty where provisions are in conflict.
The appellant landlord owned the reversion of a three-storey Victorian house with a basement. The respondent tenant held a 99-year lease of the ground, first and second floors. The roof was in disrepair.
The lease was described as badly drafted. Under the lease, it appeared that the roof was demised to the tenant. The tenant was obliged to repair the demise, yet the landlord was obliged to repair the roof. The tenant was required to pay a service charge in respect of the repairs carried out by the landlord equal to 75% of the associated cost. However, the lease also contained a clause declaring the roof and foundations party matters, to be repaired at the joint expense of the tenant and the tenants/occupiers of the remainder of the building (i.e. the basement).
The inconsistences were therefore manifest. The dispute was in relation to the amount of the service charge payable to the landlord by the tenant in respect of the landlord’s cost of repairing the roof.
The First-tier Tribunal (“FTT”) concluded that the roof was indeed within the tenant’s demise, but the foundations were not. However, as both of these benefitted both parties, they should be maintained as party matters at joint expense. The FTT considered that a reasonable reader would understand “joint expense” to mean a 50/50 split.
It followed that the tenant was liable to pay for only 50% of the cost of the repairs to the roof, not 75%. The landlord’s costs were limited under Section 20C of the Landlord and Tenant Act 1985 to 50%.
Permission to appeal was granted on the basis that the poor drafting of the lease rendered room for argument over its proper construction inevitable. It was considered in the best interests of both parties for a definitive conclusion to be reached on the status of the roof and the parties’ respective liabilities in respect of its repair on appeal.
Decision on Appeal
The Upper Tribunal (“UT”) agreed that the roof was within the tenant’s demise. The UT did not consider the demise of the roof to the tenant to be inconsistent with the landlord being obliged to repair it, and the tenant being obliged to contribute 75% towards those repairs.
The UT further agreed with the FTT that the above obligation was inconsistent with the roof being declared a party matter, and for costs in respect of the repair of the same to be at joint expense.
However, the UT did not consider that declaration to override the other obligations in the lease. A declaration is not necessarily the imposing of an obligation, and in any event the particular declaration was in respect of the relationship between the tenant and any other tenants/occupiers, not between the landlord and the tenant. Further, “at joint expense” is silent as to the apportionment of expense. Clearly, as the tenant had the benefit of 75% of the floors in the house, it could be said that the tenant reaped 75% of the benefit of the roof.
The explicit repair obligations and service charge machinery between landlord and tenant created a coherent logical scheme, not to be overridden by a more ambiguous declaration that would be difficult to assert as binding on any other tenants/occupiers.
The landlord was held to be entitled to 75% of the cost under the service charge.
As the landlord was successful on all points, he would be entitled to his costs, subject to argument that the lease did not in fact entitle him to recover them. The appeal under Section 20C of the 1985 Act was adjourned pending further submissions.
A sharp distinction should be drawn between a scheme of obligations under a lease, and any other declarations made under it. Certainly, where those declarations are in respect of any third parties, they are unlikely to affect the effect of the lease’s covenants.
Even where those declarations do relate to all of the parties under the lease, if they are not clear and equivocal enough in any departure from the scheme of obligations, it is likely that the scheme of obligations will trump the declarations. Cogency of one part may result in its having priority over more ambiguous, inconsistent provisions.