Gilje & Ors v Charlgrove Securities Ltd

Service-charge provisions are construed restrictively. A landlord may recover an item from tenants only where the lease clearly and plainly authorises recovery. Words requiring payment of monies expended do not naturally include income foregone or the notional rental value of accommodation provided to a caretaker. Specific references to expenses connected with the caretaker’s accommodation do not, without more, establish liability for the value of the accommodation itself. The absence of machinery for calculating or revising a notional rent is a further indication against recovery. The contra proferentem principle applies where the landlord drafted or proffered the lease.

Underlessees of flats were charged service charges including the notional rental value of a basement flat occupied by the landlord’s resident caretaker. The leases required the landlord to provide a resident housekeeper or porter and required tenants to contribute a proportion of monies expended on works, services, management and administration. The landlord altered the caretaker’s remuneration arrangements but continued to recover an equivalent sum through the service charge.

The County Court declared that the tenants were not liable for the notional rent. A related appeal from the Lands Tribunal arose because of uncertainty about jurisdiction. The central issue before the Court of Appeal was whether the lease wording authorised recovery of the notional cost of providing the caretaker’s accommodation.

1. Appeal dismissed. The tenants were not liable to contribute to the notional rent of the caretaker’s flat.
2. The obligation to provide a resident housekeeper in paragraph 8 of the fourth schedule included an obligation to provide accommodation. That did not determine whether the tenants’ contribution covenant extended to the notional cost of doing so.
3. The operative wording required payment of a proportion of monies expended. The landlord’s foregone rental income was not money expended. The lease therefore did not clearly authorise recovery of the notional rent.
4. The lease had to be read as a whole, but the heading to the fourth schedule and the general references to costs and expenses were insufficient to imply liability for an item not clearly covered by the operative covenant. The lease was proffered by the landlord and was construed contra proferentem.
5. Paragraph 9 of the fourth schedule, which identified particular expenses relating to the caretaker’s accommodation, did not conclude the issue. Those expenses might separately be borne by the caretaker, so the paragraph could operate independently of any liability for accommodation costs.
6. There was no material distinction between the earlier and later remuneration arrangements. In each case the £150 represented reasonable rent foregone by the landlord. The absence of contractual machinery for calculating or revising the notional rent was an additional difficulty.
7. The Lands Tribunal appeal fell away once the County Court appeal was dismissed. Costs were subject to detailed assessment.

• Court of Appeal (Civil Division): dismissed the appeal from the County Court decision and treated the related Lands Tribunal appeal as falling away.
• Central London County Court: His Honour Judge Rich QC granted declarations favouring the tenants on 11 August 2000.
• Lands Tribunal: His Honour Judge Rich QC dismissed or determined the related appeal on 15 August 2000; the Court of Appeal did not need to decide it separately.