Trowers' property litigation weekly update – 20 August 2021
This week's bulletin covers two interesting cases. The first considers ownership of a boathouse on the Serpentine Lake in Hyde Park and the other looks at the definition of 'service charge' under Section 18 of the Landlord and Tenant Act 1985. We also provide information on the Law Society's recently published guidance on building safety for flats.
Case Update – The Royal Parks Ltd and another v Bluebird Boats Ltd (2021) EWHC 2278 (TCC)
This case concerned the ownership of a boathouse located on the Serpentine Lake in Hyde Park, London which is owned by the Crown. Since 1998 the Defendant has operated boating facilities at the lake and in 2004 entered into a concession contract with the Second Claimant pursuant to which the Defendant agreed to replace the existing boathouse and jetties.
When the contract expired in 2020, the Defendant sought to remove the boathouse from Hyde Park and use it elsewhere. The Royal Parks Limited and the Secretary of State (together 'the Claimants') disagreed and applied to the court for a declaration that the boathouse formed part of the land and could not be removed by the Defendant.
The Defendant opposed the application on the basis that it had retained ownership of the boathouse as it was a chattel and was not a fixture to the land. In the alternative, the Defendant said that the Claimants were estopped from denying it ownership as the boathouse could be removed and it was indeed intended to be removable in the event that the concession ended.
The court found in favour of the Claimants and made the following findings:
- the boathouse comprised both the superstructure and substructure and there was a permanent connection between the two which could only be severed by breaking fixings;
- as the boathouse was permanently fixed to the land and removal of the superstructure would involve substantial destruction of the substructure, it formed part of the land;
- as the boathouse was built with the purpose of it being a permanent and substantial improvement of the land, it was part of the land;
- the subjective intention of the Defendants to built a boathouse that could be dismantled and removed was not determinative; and
- as there was no evidence that the Claimants had expressly (in the contract) or implicitly encouraged the Defendant to believe it would retain ownership rights in the boathouse once constructed, and once the concession ended, the Defendants argument of estoppel was dismissed.
By reason of the extent of annexation of the building to the land, and the purpose of its design and construction as a permanent enhancement to the land, the boathouse was found to have become part of the land and the Claimants were granted their declaration to that effect.
New building safety guidance published by the Law Society
The Law Society has recently issued new guidance relating to building safety in flats, please click here for further insight.
Although the guidance is not legal advice, it contains useful information for prospective buyers of flats and highlights many of the issues that need to be investigated prior to purchasing a flat.
In light of the Grenfell Tower tragedy, the landscape surrounding building and fire safety is ever changing and high on the political agenda. Landlords and property managers alike should therefore review the guidance to ensure they are familiar with the latest legal developments, including on the passing of the Fire Safety Act 2021 and the proposed changes containing the Building Safety Bill currently being considered by Parliament. Our summary of the Building Safety Bill can be downloaded by clicking here.
Does a charge fall within the meaning of 'service charge' for the purposes of section 18 of the Landlord and Tenant Act 1985?
In Aly and another v Wickham and another (2021) EW Misc. 12, on appeal the court was asked to consider whether a service charge fell within the definition set out in section 18 of the Landlord and Tenant Act 1985 (the Act) such that it attracted the protection of sections 18 to 30 of the Act.
Section 18(1) of the Act defines a "service charge" as follows:
"…an amount payable by a tenant of a dwelling as part of or in addition to the rent –
(a) which is payable, directly or indirectly, for services, repairs, maintenance, improvements or insurance or the landlord's costs of management, and
(b) the whole or part of which varies or may vary according to the relevant costs"
The appellants in this case were long leaseholders who held 999-year leases of holiday lodges in Devon. The respondents were the current landlord. Under the terms of their leases, the leaseholders were required to pay a service charge, as further and additional rent, being the greater of either:
(a) £250.00 per annum or, if greater, the sum of £250.00 per annum multiplied by the relevant RPI and divided by the amount of the index on 1 January 2003; or
(b) an amount of one-twentieth of the sum calculated in accordance with the fourth schedule of the lease. The fourth schedule provided a detailed service charge calculation.
The landlords chose to charge a service charge under limb (a) (£250.00 multiplied by RPI) and a dispute arose as to whether the estimate service charge was caught by the section 18 definition of "service charge" – the question being whether 'it varied or may vary in accordance to the relevant costs'.
The respondent sought to rely on the case of The Anchor Trust v Waby (2018) and argued that a charge could fall within the remit of a section 18 "service charge" one year and not the next. They argued that, under the provisions of the leases, payment of a "service charge" was demanded on 1 January by reference to limb (a) of the service charge clause and as a result this was a fixed charge not capable of variation by reference to the landlord's costs. They claimed that it therefore fell outside the definition of Section 18 and was not protected by sections 18 to 30 of the Act.
However, the court rejected this argument holding that, unlike the facts in Waby, the lease provide for only one estimated service charge and the amount of such charge was to be calculated in accordance with actual expenditure on services (i.e. limb (b) of the service charge clause). This was simply subject to a "floor" that the charge could not fall beneath.
His Honour Judge Matthews clarified that section 18(1)(b) of the Act does not require that a service charge must vary according to the landlord's relevant costs but rather that it may vary. On that basis, the court found that sections 18 to 30 of the Act did apply.
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