Wembley National Stadium Ltd v Wembley (London) Ltd& Ors

On the proper construction of a commercial lease, an original lessor may remain bound by the lessor’s covenants and entitled to enforce the tenant’s payment covenants after transferring the legal reversion, particularly where it remains the beneficial owner. Service-charge expenditure may include properly incurred in-house staff costs, management costs and related overheads. It may also include costs connected with statutory, traffic or security meetings and costs incurred for an event that is later cancelled, provided the expenditure was properly incurred in performing the lessor’s obligations. Contractual advance payments remain payable whether or not accounts have been prepared or a demand has been made, unless the lease provides otherwise. Declarations may properly determine part of a present dispute even if they do not resolve every possible future dispute.

Wembley National Stadium Ltd occupied rights under a 125-year lease granted by Wembley Stadium Ltd, later renamed Wembley (London) Ltd. The freehold of surrounding land was transferred to nominee companies, Gideon 1–4 Ltd, although Wembley (London) Ltd remained the beneficial owner and continued providing the services contemplated by the lease.

The claimant disputed the identity of the lessor, the recoverability of various service-charge costs, liability for quarterly advance payments, the relevant financial years and the sufficiency of accounts. The defendants sought declarations and judgment for £120,000 in advance payments.

1. Identity of the lessor. The lease was a tenancy within the Landlord and Tenant (Covenants) Act 1995, notwithstanding that it granted incorporeal rights. Section 6(2) meant that Wembley (London) Ltd had not been released from the lessor’s covenants. As absolute beneficial owner of the reversion and rents, it remained entitled to enforce the tenant’s covenants. The court distinguished Schalit v Joseph Nadler Ltd [1933] 2 KB 79 and relied on the contrary approach in Scribes West Ltd v Resa Anstalt [2005] 1 WLR 1847. The alternative estoppel-by-convention issue would also have succeeded.
2. Service-charge expenditure. Clause 7.1.1 covered all costs properly incurred in complying with the lessor’s service obligations. It therefore included direct costs incurred through employees or contractors, management and reasonable overhead costs, and costs of relevant meetings with public authorities. Costs remained recoverable where an anticipated event was cancelled, provided they were properly incurred and were not caused by breach.
3. Advance payments. The obligation to make quarterly advance payments was independent of the later obligation to prepare expenditure accounts. It was not waived by the defendants’ interim invoices, was not discharged by delay in preparing accounts, and arose without a formal demand. The claimant was liable for £120,000 plus contractual interest.
4. Declarations. The court granted declarations concerning the lessor, recoverable expenditure, advance payments and financial years. Notification changing the financial year operated from 17 November 2006. It refused a declaration that particular appendices constituted a sufficient account because that would not resolve the real dispute about whether individual items were properly included.