Thanet Lodge (Mapesbury Road) & Anor v Mirchandani (LANDLORD AND TENANT – SERVICE CHARGES – recovery of legal and mediation expenses as service charges) (2024) UKUT 205 (LC)

This was an appeal on a leaseholder’s challenge to the payability of legal costs that the RTM company had sought to put through the service charge. The costs were for

1. Solicitors’ costs for advice about the membership and constitution of the RTM company, and about a proposed EGM.
2. Solicitors’ costs in relation to a dispute with another leaseholder and the consequences of the settlement of a dispute about service charges.
3. Legal costs incurred in relation to a compensation claim brought by the respondent.
4. Legal costs (solicitors and barrister) for advice in connection with a mediation of the respondent’s compensation claim.
5. The appellant’s share of the mediation fee.

The issue was the construction of the lease and whether such charges fell under relevant lease clauses.

The RTM co argued that the costs fell under a clause allowing

“(i) To employ at the Lessors’ discretion a firm of Managing Agents and Chartered Accountants to manage the Building and discharge all proper fees salaries charges and expenses payable to such agents or such other person who may be managing the Building including the cost of computing and collecting the rents and service charges in respect of the Building or any parts thereof

(ii) To employ all such surveyors builders architects engineers tradesmen accountants or other professional persons as may be necessary or desirable for the proper maintenance safety and administration of the Building”

or if not then under a ‘total expenditure’ clause that allowed for “any other costs and expenses reasonably and properly incurred in connection with the Building.”

The Upper Tribunal held:

Firstly, the cost of advice on the membership and constitution of the RTM company was clearly not contemplated by the lease and was not recoverable.

On the other costs, the lease clause was identically worded to that in Sella House Ltd v Mears (1988) 21 HLR 147. In that case, the C0urt of Appeal had held

Nowhere in Clause 5(4)(j) is there any specific mention of lawyers, proceedings or legal costs. The scope of (j)(i) is concerned with management. In (j)(ii) it is with maintenance, safety and administration. On the respondent’s argument a tenant, paying his rent and service charge regularly, would be liable via the service charge to subsidise the landlord’s legal costs of suing his co-tenants, if they were all defaulters. For my part, I should require to see a clause in clear and unambiguous terms before being persuaded that that result was intended by the parties. Accordingly, I agree with my Lord that the terms of paragraph (j) of clause 5(4) do not extend to cover legal costs in the service charge.”

It made no difference that some of the costs were inicurred in disputes with this particular leaseholder, as per the Court of Appeal in No. 1 West India Quay (Residential) Ltd v East Tower Apartments Ltd (2021) EWCA Civ 1119 and in  Kensquare Ltd v Boakye (2021) EWCA Civ 1725.

“a clause concerned with management, or with the provision of services, does not enable the landlord to recover through the service charge its legal costs in a dispute with any of its tenants.”

Unsdorfer v Octagon Overseas Ltd (2024) UKUT 59 (LC)

A sub-set of the apparently endless Canary RIverside litigation. The question was whether a Tribunal appointed manager was (or could be) an ‘accountable person’ under the meaning of section 72 Building Safety Act 2022. An important question because the role carries signifciant duties and the risk of criminal sanction. The relevant part of section 72 reads:

72 Meaning of “accountable person”

(1)  In this Part an “accountable person” for a higher-risk building is—

(a)  a person who holds a legal estate in possession in any part of the common parts (subject to subsection (2)), or

(b)  a person who does not hold a legal estate in any part of the building but who is under a relevant repairing obligation in relation to any part of the common parts.

The appointment of the manager here had happened before the Building Safety Act, and with it section 24(2E) and 24ZA, had come into force. S.24(2E) and 24ZA separate a building safety from the usual issues that can be raised for appointment of a manager, and instead make provision for a ‘special measures manager’.

The Upper Tribunal held

i) the manager did not have a legal estate, clearly.

ii) The managers duties and powers arose from the appointment by the FTT, not from the lease.

iii) That appointment did not mean that the manager had repairing obligations by reason of statutory enactment.

Once again, it is the order and not either the lease or the Act which imposed duties on the Manager.  The order itself is clearly not an enactment (by section 23(2), Interpretation Act 1978 an “enactment” means primary or secondary legislation).  I agree with Mr Morshead KC that this is mainly a reference to repairing obligations implied by statute into certain leases or tenancies of residential property, such as section 11, Landlord and Tenant Act 1985, which requires a landlord to maintain the structure and exterior of the property.  It is also apt to refer to the position of an RTM company.

The enactment of the BSA did not, however, strip existing Tribunal Managers of their powers to carry out works of building safety, even if these did overlap, for a period, with those of the ‘accountable person’.  This was down to a lack of transitional provisions.

It is possible, as in this case, that the section 24 order may prohibit the estate owner from carrying out functions which the order confers on the section 24 manager, but even if it does not do so expressly, there is potential for an uncomfortable and impractical overlap between the responsibilities of the manager and the landlord.  Some simple transitional provisions could have avoided the uncertainty which will inevitably be created by this overlap, but none have been provided.  I recognise that the objective of a clear division of responsibility and a single route for enforcement of building safety obligations is not achieved for so long as this overlap exists.  But the overlap is temporary and will continue only until management orders which pre-date the 2022 Act expire or the FTT makes another order in relation to the same building, which it may do either on the application of the manager, or of the landlord, or of another interested person. 

El Massouri v Omani Estates Ltd (2024) EWHC 534 (Ch)

Or the van Hoogstraten legacy…

Forgive the slightly tortured back history.

The claimant leaseholders had a lease of the second (and at that time top) floor flat in a terraced house. They took the lease in 1984. In 1990, the freehold to the building was acquired by Mrs Rosemary Baffour-Awuah.

At the time, Mrs Baffour-Awuah was known as Rosemary Hamilton and she had, in the 1980s, been in a relationship with the very well-known businessman, Nicholas van Hoogstraten, and had had two children by him, Maximilian Hamilton and Britannia Hamilton. In his evidence in this action, Maximilian Hamilton commented that his father liked to use the name Hamilton because it is the capital of Bermuda where, at one time, Mr van Hoogstraten had had interests. According to Mr Hamilton, his father would have had historical knowledge relating to the property at 93 Finborough Road from the time when the freehold was in the name of Mrs Baffour-Awuah (then Rosemary Hamilton).

In 1993, the claimants applied for planning permission for a new mansard to the third floor and extension over the second floor rear. This was granted but not taken forward at that time.

Between 1996 and 1998 there were had fought enfranchisement proceedings, with the freehold eventually being sold to the FMC in 1999. In the meantime, the claimants had renewed their planning application, in the same terms, in 1998. Works began in 2001, with no objection at all from the FMC.

However, unbeknownst to anyone else, in 1996 and after receiving the enfranchisement application, Mrs Baffour-Awuah had granted a lease “of space above the second floor flat and of air space to the rear of the building above the ground floor level” to a Francis Frimpong.

The claimants completed their works in 2002. It was not until 2006, when the Claimants sought further planning permission for railings around their new balcony, that they were told that they did not have a lease of the thrid floor and someone else did.

The claimants attempted to sell through ill health, but the ‘Frimpong lease’ made that impossible. Instead they let out rooms. No-one could find Mr Frimpong.

In 2017 Mr Frimpong apparently sold the lease to Omani Estates, as company controlled by Richard and Britannia Hamilton (van Hoogtarten’s children with Mrs Baffour-Awuah) and two half siblings. Then in 2020 Omani Estates objected to the claimant’s application to register title to the third floor through adverse possession. That application was withdrawn.

In 2022:

agents acting for Omani took a number of steps with regard to 93 Finborough Road:

a. Between 5 and 7 February 2022, they entered the property and removed the door at the bottom of the stairs that led up from the first floor together with its closing mechanism (presumably leaving the Claimant’s property unsecured).
b. Between 11 and 14 February 2022, they erected a partition across the half-landing between the ground to first floors, thereby obstructing access to storage cupboards there which were used by tenants in the building.
c. On 12 February 2022, Ms Kumar wrote to the residents of rooms on the third floor asserting that Omani (and not Mrs El Massouri) was the owner of the properties that they were occupying and stating that those properties “will now be repossessed”. The letter advised the tenants to remove all their belongings and to vacate the premises.
d. On 4 March 2022, an agent of Omani went up the stairs into the second floor flat. CCTV footage shows that, on this person’s way back down the stairs, he knocked down and removed the CCTV camera that Mrs El Massouri’s partner, Stefan Sell, had installed on the half-landing between the first and second floors.
e. The same happened on 28 or 29 March 2002 when a person wearing a hood and carrying a stave of wood again mounted the stairs, removed and took away a replacement CCTV camera that had been put up on behalf of Mrs El Massouri.
f. At some point, probably between March and early June 2022, Omani caused exterior scaffolding to be erected at the rear of the property. This went from the top of the ground floor terrace up to the third floor – providing access to the third floor roof terrace. Omani says that this scaffolding has been erected in air space that was part of the Frimpong Lease demise. Mr Rellis (a chartered surveyor called by the Claimant as an expert witness) referred to this as a “rudimentary scaffold” which, he said, is not secure and does not comply with safety regulations. He also commented that it is “a serious breach of privacy” as it passes the windows of the bathrooms on the upper floors of the building.
g. On 6 June 2022, two hooded people (one of them carrying a wooden stave) mounted the stairs to the second floor and knocked down yet another replacement CCTV camera that had been put up there and took it and some other items away with them.
h. On 9 June 2022, Omani’s agents entered the property and blocked access from the second floor to the third floor by means of a horizontal partition screwed to the walls of the stairwell between those floors. They also removed a handrail and balusters and screwed shut the doors to the rooms on the third floor. It is not clear how they accessed the premises but when they left, having installed the partition, they presumably did so via the scaffolding. Mr Sell and a friend, Ashraf Ibrahim (who helps look after Mrs El Massouri’s interests at 93 Finborough Road) removed the partitioning and the screws so that Mrs El Massouri’s tenants were able to access their rooms on the third floor.

These are all steps straight out of the Hamilton’s father’s playbook… (and all of no legality, even if Omani’s claim to the lease was sound, as the lease did not give rights of access to the claimant’s demise under the second floor flat lease, or to erect scaffolding on the now freeholder’s land.).

The claimant obtained an injunction and brought the present claim for a declaration that she was entitled to title of the third floor.

Remarkably, Mr Frimpong appeared at trial and gave evidence. This did not go well

Under cross examination, Mr Frimpong was truculent, evasive and argumentative and I formed the clear view that his evidence and his entire role in events was driven by the interests and needs of the Hamilton family. One example of this was the way in which his witness statement was drafted. He initially asserted categorically that its contents were not the result of any discussions with anyone, and that he had had no discussions with Mrs Baffour-Awuah. When it was pointed out that the statement referred to the supposed trespass into the loft space and the existence of two studio flats on the third floor about which he would have known nothing, he changed his evidence and accepted that he had been told this. Overall, Mr Frimpong was a thoroughly unreliable witness whose evidence on any matter must be treated with extreme caution.

The court held:

The Frimpong lease had been granted with no means of access to the third floor/roof area.

Mrs Baffour-Awuah had been aware of the planning applications.

The claimant did not succeed in adverse possession under the Land Registration Act 2002, as she had not found out about the Frimpong lease until 2006 and did not have 10 years occupation in knowledge of the other title before Omani made a claim for possession.

However, the defence to Omani’s possession claim succeeded on the basis of proprietary estoppel.

The starting point is that, despite knowing that planning permission for the creation of the third floor had been granted in 1993 and renewed in 1999, it was not until March 2020 that the Defendant finally asserted a right to possession of the third floor based on a lease granted in 1996. This was more than 27 years after Mrs Baffour-Awuah had been given notice of the first planning application, 24 years after the grant of the Frimpong Lease and more than 18 years after the third floor had been constructed and started being used as a residence for Mr El Massouri and for people letting rooms from him and Mrs El Massouri. In view of the close relationship between Mrs Baffour-Awuah, Mr Frimpong and Omani, I find that this lack of action is relevant to the question whether it is unconscionable for Omani now to assert its rights against the Claimant, even though it only acquired the Frimpong Lease in 2017.

But inaction itself was not sufficient.

The Frimpong lease, clearly intended to be used to advantage if the enfranchisement succeeded and/or if the claimant carried through the planning permission, had been kept secret.

Overall, the rights on which the Defendant relies were rights derived under a transaction that was clearly a device designed to be used against the tenants and, in particular, against Mr and Mrs El Massouri and to give the Hamiltons a claim in relation to the proposed third floor. The Hamiltons (Mrs Baffour-Awuah and Mr van Hoogstraten) knew that the opportunity to create a third floor in the property was potentially valuable to Mr and Mrs El Massouri, and were also well aware that it was an opportunity that Mr and Mrs El Massouri were planning to exploit and that, given the access issues, were uniquely positioned to exploit. Yet the Hamiltons did nothing to point out that to do so would be contrary to Mrs Baffour-Awuah’s rights as freeholder. Then, when it became apparent that Mrs Baffour-Awuah was likely to lose that freehold, she granted the Frimpong Lease creating new rights over the relevant land and she and Mr Frimpong then stood by in the knowledge that Mr and Mrs El Massouri were likely to carry out the extensive works needed to create the new third floor. They did nothing to inform Mr and Mrs El Massouri and the other tenants of the existence of the Frimpong Lease (beyond arranging for its registration).

The claimant had clearly believed that they were entitled to carry out the planning permission works until at least 2006, and the defendant had allowed this.

This gave rise to an estoppel preventing Omani from asserting its ownership under the Frimpong lease.

Omani had committed acts of trespass to the claimant’s demise, giving rise to special damages of £2,105.

A permanent injunction was granted restraining Omani from entering any parts lawfully occupied by the claimant.