Cases - Kingswood Properties Development Limited v Assethold Limited

Record details

Name

Kingswood Properties Development Limited v Assethold Limited

Date

[2019]

Citation

UKUT 383 (LC)

Keywords

Service charges – construction of the lease – when have yearly service charge contributions due

Summary

A dispute arose between the appellant tenant and the respondent lessor over the date that estimated service charge payments in 2018 fell due.

Clauses 4(c)(ii) and (iii) of the tenant’s lease provided:

‘(ii) The contribution under paragraph (i) of this clause for each year shall be estimated by the managing agents for the time being of the Lessor (hereinafter referred to as “the Managing Agents”)… as soon as practicable after the beginning of the year and the Lessee shall pay the estimated contribution by two equal instalments on 24th day of June and 25th day of December in each year.

(iii) As soon as reasonable may be after the end of the year ending 24 December Two Thousand and Seven and each succeeding year when the actual amount of the said costs for the period ending on 24th December Two Thousand and Seven or such succeeding year as the case may be has been ascertained forthwith pay the balance due to the Lessor or be credited in the books of the Managing Agent or if none the Lessor with any amount underpaid by the Lessee.’

Before the First-tier Tribunal (FTT) the tenant argued that in accordance with these clauses, given that the service charge year end was 24 December, it was clear that the first instalment of the estimated service charge fell due on 25 December and the second on 24 June; if it were the other way around the second instalment would be due outside the service charge year. The respondent contended that the first instalment of the estimated service charge fell due on 25 June and the second on 25 December.

The respondent submitted that the words ‘for each year’ should be interpreted as meaning each calendar year rather than each service charge year. Accordingly, on the respondent’s case, the first instalment of the 2018 interim service charge did not fall due until 24 June 2018 and it was not outstanding when the proceedings were issued in April 2018. The FTT found in favour of the lessor and the tenant appealed.

In allowing the appeal, the Upper Tribunal (Lands Chamber) (UT) had regard to the dicta of Neuberger LJ in Arnold v Britton and Others [2015] UKSC 36. In particular, the UT noted that although commercial common sense was a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appeared to be a very imprudent term for one of the parties to have agreed. The purpose of interpretation was to identify what the parties agreed, not what the court thinks that they should have agreed.

The wording of clause 4(c)(ii) was quite specific. It stated that the service charge for a particular year will be estimated ‘as soon as practicable after the beginning of the year’ (emphasis added). Although no year was specified, if it is treated as a calendar year that meant the estimated service charge for a calendar year will be determined after 1 January in that year. If, by reference to clause 4(c)(iii), the year was to be treated as the year ending on 24 December, then again the estimated service charge will be determined after 24 December in that year, not before. That was consistent with the provision in clause 4(c)(ii) for half-yearly payment on 24 June and 25 December rather than on 25 December and 24 June.