Morris v Blackpool Borough Council & Anor

A residential lease may permit recovery of management costs for services that the landlord is not expressly obliged to provide. The question is one of objective construction: the lease must be read as a whole, with effect given to its wording and commercial purpose. A clause deeming costs of discretionary services to be incurred under the landlord’s service obligations can bring those services within the service-charge machinery, including associated management costs. The charge remains subject to the reasonableness controls in sections 18 to 30 of the Landlord and Tenant Act 1985. The contra proferentem presumption is a residual aid and does not apply where the court can reach a sure construction.

Ian Morris held a long lease of a flat acquired under the right to buy provisions. He challenged increased management charges included in the service charge claimed by the Council. The Land Valuation Tribunal held that the relevant lease provision did not authorise charges for discretionary services and assessed a reasonable management charge at £50.

The Upper Tribunal (Lands Chamber) allowed the Council’s appeal, holding that the provision permitted recovery of discretionary-service costs and associated management costs, and assessed the charge at £155.53 per lessee: [2013] UKUT 0377 (LC). The appeal to the Court of Appeal was confined to construction, particularly the effect of paragraph 14 of the Seventh Schedule and the Eighth Schedule.

Appeal dismissed. Lady Justice Gloster, with Lord Justice McCombe and Lord Justice Jackson agreeing, upheld the Upper Tribunal’s construction of the lease. The appeal concerned construction only; the quantification of the charges was outside the permission granted.

1. Clause 3(i) required the lessee to pay a proportionate amount of the Council’s reasonable expenses and outgoings concerning the matters in sub-clauses (a) to (d). The lease had to be interpreted objectively as a whole, applying ordinary meaning, commercial sense and the principle that every part should be given effect where possible.
2. The second part of paragraph 14 of the Seventh Schedule had independent effect. The words separating the listed activities showed that the provision was not dependent on the prior making of regulations. Services provided at the Council’s discretion could therefore be deemed properly incurred under the Eighth Schedule despite the absence of a specific covenant requiring them.
3. Those services fell within clause 3(i)(b), and the management costs involved in providing them were recoverable under clause 3(i)(d). Clause 3(i)(b) was not confined to the two additional services expressly identified in paragraph 4 of the Eighth Schedule. The Council’s obligation to maintain the Reserved Property also involved the provision of services and substantial management.
4. The contra proferentem presumption was a residual principle. It arose only where the court could not reach a sure construction on the material before it. The wording here was sufficiently clear, so the presumption did not apply. Gilje v Charlgrove Securities Ltd was distinguishable: [2002] L& TR 33.
5. The construction did not give the Council unrestricted charging power. Clause 3 remained subject to sections 18 to 30 of the Landlord and Tenant Act 1985 and to recovery only of reasonable expenses and relevant costs reasonably incurred. The prior order under CPR rule 52.9A meant that each party bore its own costs of the appeal.

1. Court of Appeal (Civil Division): dismissed the appeal and upheld the Upper Tribunal’s construction of the lease. The appeal was limited to construction and did not reopen quantification.
2. Upper Tribunal (Lands Chamber): allowed the Council’s appeal from the Land Valuation Tribunal, holding that discretionary-service costs and related management costs were recoverable, and assessed the charge at £155.53 per lessee: [2013] UKUT 0377 (LC).
3. Land Valuation Tribunal: held that paragraph 14 of the Seventh Schedule did not authorise charges for discretionary leasehold services and assessed a reasonable management charge at £50.