Landlords have reason to pause for thought when it comes to service charge recovery following a recent decision*.
Q – What was all the fuss about?
A – Party wall notices
Party wall notices are a warning to an adjoining owner that works are intended to be carried out to a party wall by their neighbour. In this instance the adjoining landowner, Freetown, served just such a notice on Assethold.
However, before a party wall agreement was reached, Freetown controversially commenced works on its land, which included trial excavations for new foundations adjoining Assethold’s property.
Assethold issued proceedings against Freetown seeking an injunction to prevent further works. The Upper Tribunal ordered Freetown to pay Assethold’s costs of the party wall proceedings up to a certain date, but it decided that an application issued by Assethold to discontinue proceedings ought to have been made earlier and so Assethold should pay Freetown’s costs from that point onwards.
So who pays?
The total costs which Assethold demanded from its tenants by way of service charge in connection with the party wall award and in obtaining the injunction against Freetown was around £60,000. In comparison, the service charge demanded in the same year relating to all other items amounted to approximately £16,000.
The tenants objected to the recovery of these costs, but what did the lease say?
At first instance, the leasehold valuation tribunal held that Assethold’s legal costs were not recoverable via the service charge provisions under the lease.
However, this decision was overturned by the Upper Tribunal which was satisfied that the service charge provisions were sufficiently clear to enable Assethold to recover its legal costs associated with the party wall award under the service charge head of recovery relating to:
“all works installations act matters and things as in the reasonable discretion of the Landlord may be considered necessary or desirable for the proper maintenance safety amenity and administration of the development”
This highlights how important it is for landlords to have clear and carefully drafted service charge provisions to ensure that they can recover all service charge items and associated costs envisaged for a development.
*Assethold v Watts  UKUT 0537 (LC)