E-flash: Kensquare Limited v Mary Adwoa Akyaa Boakye [2021] EWCA Civ 1725
Kensquare Limited v Mary Adwoa Akyaa Boakye
[2021] EWCA Civ 1725
Newey, Stuart-Smith and Andrews L.JJ
The Court of Appeal has held that the presumption time is not of the essence may more readily be excluded in relation interim service charge notice requirements set out in a lease, than it may be in relation to any such lease requirements applicable to rent reviews, or final service charges.
Ms Boakye was the long leaseholder of a flat in a residential block. The lessor, and the freehold reversioner, was a tenant-owned company, Kensquare Limited (“Kensquare”). In 2017, Kensquare issued proceedings in the First-tier Tribunal (FTT) in which it secured a determination, 10 July 2017, against Ms Boakye that its interim service charges for 2011-2017 were payable. Shortly afterwards, Kensquare, in the exercise of its right to forfeit, served a notice under s.146, Law of Property Act 1925. By 81(1), Housing Act 2996, a landlord may not, in relation to premises let as a dwelling, exercise a right of re-entry or forfeiture for failure by the tenant to pay service or administration charges unless it has first been determined by the FTT or a court, or an arbitral tribunal, that the charges are payable, or the tenant has admitted that they are payable.
The terms of the lease obliged Ms Boakye to pay (i) an agreed percentage of costs incurred by the lessor in each service charge year on matters specified in the seventh schedule of the lease in carrying out its obligations under the lease – “the maintenance charge”, (ii) a Maintenance Contribution of £360 per annum (specified in Particulars to the Lease) towards the maintenance charge, such sum to be paid by equal half yearly payments in advance on 1st of April and 1st October each year, or such revised sum as the lessor deemed necessary in light of the expenditure reasonably anticipated. The lease further provided that notice of any such revision had to be given to the leaseholder “not less than one month prior to the commencement for the forthcoming financial year [1 April to 31 March]”.
On 15 August 2019, Kensquare sent Ms Boakye a letter requesting payment of the half-yearly estimated interim service charges for three periods, 1 April 2018 – 30 September 2018, 1 October 2018 – 31 March 2019 and 1 April 2019 – 30 September 2019. Kensquare sought a determination from the FTT that the interim service charges (in total £2,103.52) were payable, and a determination that the costs of the previous 2017 FTT proceedings (£8,213.70) were payable as an administration charge.
For the most part, Kensquare’s application was rejected: the FTT determined that only £360 and £180 of the interim charges were payable for the years 2018-2019 and 2019-2020 respectively, and that £192.50 was recoverable as an administration charge, or were otherwise recoverable as service charges.
Kensquare’s appeal to the Upper Tribunal was allowed. In relation to interim service charges, Judge Cooke held that time was not of the essence and that Kensquare’s late notice of the revised Maintenance Contribution did not matter.
On the further appeal, the Court of Appeal considered the caselaw in relation to the presumption of time not being of the essence in relation to notices served under lease provisions. In United Scientific Holdings Ltd v Burnley BC [1978] AC 904, it was held that time was not of the essence in relation to the service of a landlord’s rent review notice. In so concluding, the considerable detriment to the landlord if strict compliance with the lease were required was noted: the right to have the rent review would be lost until the next rent review date arose. It was, however, said that the presumption would be excluded if the lease so provided, and that it could also be excluded if the context clearly indicated that this was the intention of the parties.
Having considered the Ms Boakye’s lease provisions, the Court held that whilst they may not have been sufficient to displace the presumption against time not being of the essence in relation to rent reviews and final service charges, the parties could more readily be taken to have intended time to be of the essence in relation to interim service charges. In arriving at this conclusion, the Court said that strict compliance with notice requirements for interim charges would be of little detriment to the landlord: it would not prevent the recovery of service charges, it would merely mean that interim service charges could not be recovered. Contrasted with this, advance notification to the leaseholder of the interim charges to be paid in the forthcoming year was of obvious benefit.
In relation to the legal costs of the 2017 FTT proceedings, Ms Boakye’s lease obliged her to pay “all costs charges and expenses (including Solicitors’ costs and Surveyors’ fees) incurred by the Lessor for the purpose of or incidental to the preparation and service of a Notice under Section 146 of the Law of Property Act 1925 notwithstanding forfeiture may be avoided...”. It was contended that, unlike decisions in previous cases, the clause in Ms Boakye’s lease did not refer to proceedings and the contracting parties could not have intended that litigation costs would be recoverable. Rejecting this contention, the Court held that the clause was wide enough to apply to the FTT costs which Kensquare had no choice but to bring if it wished to serve a s.146 notice.
The service charge provisions in the lease entitled Kensquare to recover by way of service charge “[the] cost of employing such professional advisers and agents as shall be reasonably required in connection with the management of the Building”. The Court held that this clause was not wide enough to cover the litigation costs incurred both in current and the 2017 FTT proceedings. While the reference to “professional advisers” is apt to apply to lawyers, they were not specifically mentioned in the clause. and nothing was said about legal proceedings.
