Assethold Limited v William Jonathan and Kirsty Lauren Hoye & Anor

Lease provisions requiring a landlord to provide particulars of insurance premiums are not, without clear wording, conditions precedent to the tenant’s liability to pay insurance rent. Failure to comply may give rise to a claim for breach of covenant and damages, but does not invalidate the demand.

A service charge challenge based on allegedly invalid insurance must be supported by evidence. A tribunal cannot find insurance charges unreasonable by speculating that undisclosed information was material to the risk or that the policy was likely to have been repudiated or reduced.

The landlord appealed against a decision of the First-tier Tribunal (Property Chamber) concerning service charges for two flats at 16b and 16c St John’s Road, Epping. The lessees had challenged insurance charges for 2018, 2019 and 2020 under section 27A of the Landlord and Tenant Act 1985.

The FTT held that the insurance demands were invalid because they did not provide all the particulars required by paragraph 2.2 of Schedule 6 to the leases. It also held that the insurance charges were unreasonable because the landlord had not demonstrated that the insurer knew of shared access created by a deed of easement. The appeal concerned whether those conclusions were legally and evidentially sustainable.

1. Validity of the demands. The requirements in paragraph 2.2 of Schedule 6 were a free-standing contractual obligation. The lease did not make compliance a condition precedent to liability for insurance rent. The FTT therefore erred in treating the demands as invalid. Non-compliance could support a claim for breach of covenant and damages for any loss caused, but did not prevent recovery of the insurance rent.
2. Reasonableness of the insurance charges. The insurance rent was a service charge within section 18(1) of the Landlord and Tenant Act 1985. Under section 19, the relevant costs had to be reasonably incurred and, where applicable, relate to services of a reasonable standard. The FTT’s conclusion that the charges were unreasonable depended on an evidential assumption that the shared access was material to the insured risk and that the policy was likely to have been repudiated or reduced.
3. There was no evidence that the insurer had repudiated or reduced cover, or that the shared access was material to the risk. The finding was therefore speculative and was not open to the FTT on the evidence.
4. The FTT’s findings on invalidity and unreasonableness were set aside. The Upper Tribunal substituted decisions that the demands were valid and that the charges were not unreasonable for the alleged failure to disclose the shared access. The FTT’s separate assessment of the reasonable insurance rent, £856.11 for each year, stood because permission to appeal had not been granted on that issue.

• Upper Tribunal (Lands Chamber): The FTT’s findings that the insurance demands were invalid and that the insurance charges were unreasonable were set aside and replaced. The separate assessment of the reasonable insurance rent remained undisturbed.
• First-tier Tribunal (Property Chamber): Decision dated 3 September 2021 on the lessees’ application for a determination under section 27A of the Landlord and Tenant Act 1985.