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89 Holland Park (Management) v Dell: Court of Appeal on Service Charge Sweeper Clauses

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14th December 2023

Mark Loveday reviews the recent judgment in 89 Holland Park Management Ltd v Dell [2023] EWCA Civ 1460 where the Court of Appeal found £430,000 of service charges were not covered by the general words of the lease.

Mark Loveday, instructed by Howard Kennedy, succeeded in the Court of Appeal in what is believed to be the largest individual residential service charge claim to come before the courts.

In the case, the freehold owner of a block of flats in London’s Holland Park incurred £2,763,521 legal and planning costs in disputes with a neighbour, the architect Sophie Hicks, over a piece of adjoining land. The landlord sought to recover a contribution to these costs from the leaseholders by way of service charges. The respondents disputed liability for part of their bill, amounting to £430,411, on several grounds. This included an argument that the service charge provisions in the lease of their flat did not cover (1) litigation costs relating to restrictive covenants over the neighbouring land, or (2) the cost of opposing planning applications for building on the land.

The landlord relied on arguments related to two paragraphs of the lease, described as general words or “sweeper provisions”:

• Clause 4(4)(g)(ii), which allowed the landlord “to employ all such surveyors builders architects engineers tradesmen 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), which stated that “without prejudice to the foregoing to do or cause to be done all such works installations acts matters and 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“.

In Dell v 89 Holland Park Management Ltd [2022] UKUT 169 (LC); [2022] L. & T.R. 27, the Upper Tribunal (Lands Chamber) decided these provisions did not enable the landlord to recover a contribution to the disputed costs from the leaseholders. In the Court of Appeal, the landlords relied on both provisions, as well as on para (6) of the definitions clause in the lease which covered:

“… any other costs and expenses reasonably and properly incurred in connection with the Building including without prejudice to the generality of the foregoing…… any other costs and expenses reasonably and properly incurred in connection with the Building”.

The Court of Appeal found that:

• The overall focus of clause 4(4) was on the maintenance and management of the building. It would strain those words to read them as extending beyond costs incurred in maintaining and running the building, and keeping it safe.
• Concerns over structural integrity could involve safety issues, but the building was under no immediate threat of being rendered unsafe. More importantly, the object of the expenditure was to prevent Ms Hicks from being permitted to implement her proposals for the Site. In reality, the purpose of the expenditure was to stop Ms Hicks’ proposed development rather than to maintain 89 HP or keep it safe.
• Other provisions of the Lease specifically contemplate litigation. The existence of these provisions provides some indicator that professional costs incurred in disputes are the sort of exceptional expenditure which might generally be expected to be explicitly provided for where it is intended to be covered.
• The factual matrix at the date of the lease included the existence and nature of the Site, the restrictive covenants in respect of it. and the fact that they had already led to litigation. Against that background, the absence of any specific provision in the Lease governing the process of giving or refusing consent, and any resultant dispute, is telling.
• Although it was assumed the Upper Tribunal decision in Assethold Ltd v Watts [2014] UKUT 537 (LC), [2015] L & TR 15 was correctly decided, each case must be decided on its own facts. The court does not need to attempt the difficult task of determining where the precise dividing line should be drawn, but only what the correct treatment of the particular item is. Even if the costs of disputes with neighbours can in some circumstances be brought within a “sweeper” clause like clause 4(4)(l), it does not follow that the same applies to planning-related disputes.
• For largely similar reasons, there was no real merit in the new argument about para (6) of the definitions.

Apart from the sheer costs involved, this is an important decision about the meaning of general words and sweeper clauses in leases. It places a limit landlords’ rights to use such provisions to recover costs on matters not directly relating to the management of a building.

You can view the judgement here.

If you would like more information, please contact Richard Powell.

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