Service charges: Variations to leases when the sums do not add up

Variations to leases when the sums do not add up

The background

In Triplerose v Stride [2019], a house was divided into 4 flats, each let on long leases. Triplerose was the tenant of the basement flat, with other floors let to Stride and other tenants (also owners and directors of the landlord). The Triplerose flat did not share any common parts with other flats.

The service charge provisions in the leases differed, with Triplerose only obliged to pay for external painting. Triplerose did not contribute towards repair or renewal of the structure of the property, or for the engagement of personnel by the landlord, such as agents. The lease provisions allowed the landlord to recover costs in proportion for insurance, external painting and decorating, external structural repair and maintenance, management costs and internal decoration of common parts.

Triplerose’s application asked the FTT to determine whether service charge was payable under its lease and, if so, in what sum. The landlord made a further application to vary the terms of Triplerose’s lease. The FTT dealt with both simultaneously, varying the lease to require Triplerose to contribute towards wider costs but not requiring the tenant to contribute for sums accrued prior to the date of the variation.

The landlord contended that the variation was necessary because the original terms drafted did not make satisfactory provision for aspects including the repair or maintenance of the flat or the building, the insurance or the building or other essential repair or maintenance requirements of a property.

The decision

On appeal, the Upper Tribunal found in favour of Triplerose and held that, although the proposed variation was standard, this did not mean that the terms of the lease were unsatisfactory so as to require or justify a statutory variation.

The lease contained a repairing covenant, and, even if service charge contributions resulted in a shortfall, this could only be found to be unsatisfactory where evidence was presented to require a major structural repair which the landlord could not otherwise pay for itself.

Advice and action for landlords

The Triplerose case is a clear warning for landlords that service charge provisions must be carefully drafted to allow for full recovery from all tenants of service charges.

Landlords are unable to rely on an argument that a lease is ‘unsatisfactory’ where there is a shortfall and/or where terms are simply drafted poorly, and the UT emphasised the importance of proper checking and proofreading of drafts to ensure that all leases contain appropriate provisions.