Property law reports

Landlord and tenant: Service charges

Second appellants overpaying service charges - respondent keeping overpayments in reserve account - whether such payments held on trust under section 42 of Landlord and Tenant Act 1987 - whether respondent entitled to use reserve account to fund legal costs against appellants - appeal allowed

St Mary's Mansions Ltd v Limegate Investment Co Ltd and others: CA: Lords Justice Ward, Mummery and Jonathan Parker: 11 October 2002

The second appellants were the leaseholders of flats owned by the respondent lessor.

Under the terms of their leases, they paid service charges to the respondent.

They were also charged a sum that was paid into a reserve fund to be used for improvements or repairs to the property, although no proper mechanism existed within the terms of the leases for the establishment of such a fund.

Payments into the reserve fund regularly exceeded expenditure; the outstanding balance was kept in the fund by the respondent and used to ameliorate any cash-flow problems relating to the ordinary service charges.

The appellants claimed that the overpayments at year end should be repaid to them and that the respondent's failure to do so was in breach of section 42 of the Landlord and Tenant Act 1987.

They queried the respondent's retention of the interest paid on such sums and charged for the late payment of rent or service charges, and challenged the respondent's contention that it was entitled to utilise the reserve fund monies to finance legal action relating to that matter.

Neither party was satisfied with the first instance findings of Mr Justice Green in his judgment of 24 October 2001, and each appealed against that decision.

Gary Cowen (instructed by Memery Crystal) for the first appellant; Edward Cousins (instructed by Cawdery Kaye Fireman & Taylor) for the second appellants; Paul Letman (instructed by Morgan Cole) for the respondent.

Held: The appeal was allowed in part.

The terms of the lease allowed the landlord to establish and maintain a reserve fund.

However, detailed accounting of the way these monies were spent was to be provided to the lessees, and appropriate provision made for any overpayments to be repaid at the end of the year.

Section 42 of the Landlord and Tenant Act 1987 provided that service charge contributions were held on trust, and it was a breach of that provision for the landlord or lessor to retain monies overpaid in respect of one identified expense for other, unidentified, future expenses.

The appeal was thus allowed in part on this issue.

The interest on late payment of ground rent and service charges was to be paid to the respondent.

The natural and ordinary meaning of the words contained in the lease was that the respondent was entitled to such interest.

Therefore the appellants' claim on these grounds was dismissed.

On a proper construction of the lease, it was clear that the respondent was not able to charge legal costs as part of the service charge.

Therefore the appeal on this point was allowed and the cross-appeal dismissed.

Town and country planning: Condition

Planning appeal - condition - claimant operating takeaway under planning permission limiting opening hours - claimant refused permission on appeal to extend opening hours - whether inspector failing to take relevant matters into account - whether adequate reasons for decision given - claim dismissed

Karausta v Secretary of State for Transport, Local Government and the Regions and another: Queen's Bench Division: Administrative Court: Mr Justice Sullivan: 10 October 2002

The claimant ran a restaurant and hot-food takeaway outlet, located in a primarily residential area.

Planning permission for the operation was subject to a condition that the shop would not be open between the hours of midnight and 11.30am the following morning.

The claimant applied to the second defendant council for permission to continue operating until 1.30am on Saturday and Sunday mornings, but permission was refused.

The claimant appealed to the first defendant secretary of state, whose inspector dismissed the appeal, principally because of the effect that she considered the extended opening hours would have on nearby residents.

The inspector found that noise and disturbance would be caused, because hot-food takeaways encouraged people to linger in the area.

She considered another takeaway on the same road, for which planning permission was not subject to conditions as to opening hours, and recognised that the council had power under other regulations to limit its opening hours to control any problems.

However, she found that the serious planning objections to the late opening of the claimant's business could not be surmounted by any means other than the existing condition.

Furthermore, she found that the interference caused by that condition to the claimant's right to peaceful enjoyment of his property, under article 1 of the first protocol to the European Convention on Human Rights, was justified and not disproportionate, and she concluded that the claimant had shown no other compelling reasons for the variation of the condition.

The claimant sought to quash that decision, under section 288 of the Town and Country Planning Act 1990, on the grounds that the inspector had: failed to consider the possibility of extending the opening hours for a shorter period than that suggested by the claimant; singled out the claimant's business for restricted opening hours, thus failing to treat like cases alike; and taken the wrong approach to article 1 of the first protocol by requiring the claimant to provide 'compelling arguments' for the variation of the condition, when the burden should have been on the council to show that the condition was justified and proportionate.

Robert McCracken (instructed by Steele & Co, Norwich) for the claimant; Paul Brown (instructed by the Treasury Solicitor) for the first defendant; the second defendants did not appear and were not represented.

Held: The claim was dismissed.

- The inspector's approach to article 1 of the first protocol was impeccable.

She had recognised that dismissal of the claimant's appeal would result in interference with his rights under the article, but had none the less concluded that the serious planning objections to variation of the condition made the retention of that condition necessary in the general interest, and had found that the condition did not place a disproportionate burden upon the claimant.

That approach was consistent with the requirement in article 1 for the state to justify any interference with the claimant's right.

Only then had she gone on to ask whether there were any further 'compelling arguments' for varying the condition, and the claimant's criticism of her decision took that phrase entirely out of context.

- The inspector had not erred in failing to consider alternative conditions.

She had not been asked to consider any conditions apart from the existing one, and had, in any event, addressed the issue by finding that the planning objections to late opening could only be overcome by the retention of the existing condition.

- The inspector would not have been justified in varying the condition attached to the claimant's permission solely on the basis of the late opening of the other takeaway, since the opening hours of that takeaway might be curtailed in future under other regulations.

She had not treated like cases differently, since the other takeaway was not already subject to planning conditions.