Today's post concerns something of crucial importance to Landlords and Tenants. It will review the case of Campbell v Daejan Properties Limited (Campbell). Campbell was a 2012 case. It illustrates the need for a well drafted service charge clause, at the outset, when the parties enter into a new Lease.
Campbell was the Tenant. Daejan was the Landlord. Campbell owned a Lease in a Maisonette in a 5 storey house. When Campbell entered into the original Lease, it was agreed that she would contribute 40% towards the maintenance costs of the 'premises.' This did not change when her Lease was renewed. Daejan later carried out some works to the property and stated that Campbell was liable to contribute 40% towards works carried out on the property as a whole and not just the Maisonette. Campbell argued that she was only liable in respect of works carried out on the Maisonette only and not the whole building.
The Court of Appeal eventually ruled that 'premises' meant the Maisonette and did not include the whole property. The court stated that the Lease should be taken as read and that the court would not interfere in what was, essentially, a private bargain made between contracting parties. The court would only intervene in circumstances where it was obvious that the parties had made a mistake. The court also ruled that Daejan could not recover their costs through the service charge.
What does this mean?
For Landlords- there is no presumption that the Landlord will be able to recover 100% of their costs through the service charge. The court is unlikely to correct any drafting errors in order to support the Landlord's commercial intentions.
For Tenants- the Tenant should be equally cautious of any drafting errors, at the outset, when entering into a new Lease with the Landlord.
The conclusion is that Lawyers should go through the Lease thoroughly with their clients. The service charge clause should be precisely defined depending on the intentions of the respective parties. A failure to get this right could (as was the case in Campbell) result in Litigation- a waste of time and money for both the Landlord and Tenant.
Precise drafting and establishing the parties' intentions will prevent the Lease becoming wide off the mark! It will also save a few pennies in the long run!
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