Case law - service charge and improvements

The recent case of Fluor Daniel Properties Ltd and others -v- Shortlands Investments Ltd considered an attempt by a landlord to pass on hefty substantial service charges to its tenants for works that were considered by those tenants to be both unreasonable and premature. The case involved an office block in Hammersmith constructed in 1980 with an air conditioning system.

The test of reasonableness of the sums involved was to be such as the tenants, having regard to the lengths of their leases, could fairly be expected to pay. The landlord cannot, because he has an interest in the matter, overlook the limited interest of the tenants who are having to pay by carrying out works which are calculated to serve an interest extending beyond that of the tenants. If the landlord wished to carry out repairs which go beyond those for which the tenants, given their more limited interest, can be fairly expected to pay, then the landlord must bear the additional costs himself, provided there is nothing in the lease to the contrary.

The moral of this case is that a landlord may not use a service charge to upgrade an existing service if it is not in disrepair unless there is very clear wording permitting this. Once it is established that repair is required, it is not for the tenant to require how the repair is to be undertaken, provided the landlord acts reasonably. The landlord must, however, consider the tenant's interest in the property when deciding how to perform its covenants.

www.workplacelaw.net