G & A Gorrara Limited v Kenilworth Court Block E

A lease must be construed as a whole and in its commercial and textual context. Where reading a defined singular term literally produces contradictions that make the service-charge scheme unworkable, while the lease expressly provides that the singular includes the plural, the term may properly be read in the plural. A single service-charge percentage may reinforce that construction.

An RTM company’s statutory management functions remain confined to its own building and its qualifying appurtenant property. Section 100 of the Commonhold and Leasehold Reform Act 2002 does not permit it to enforce tenants’ covenants concerning the management costs of other blocks. Agreements between RTM companies cannot enlarge that statutory field of operation.

The appellants, current and former lessees of a flat in Block E of a five-block estate, challenged the payability and reasonableness of service charges. The respondent was the RTM company for Block E.

The First-tier Tribunal determined preliminary issues arising from the 1997 lease and from the exercise of the right to manage under the Commonhold and Leasehold Reform Act 2002. It held that each lessee contributed to estate-wide maintenance costs and that, if the five RTM companies agreed to manage the estate together, the respondent could collect estate-wide charges through section 100.

The appeal concerned the proper construction of the lease and whether section 100 enabled that cross-block collection.

1. Appeal allowed in part. The appeal against the lease-construction ruling was dismissed, but the appeal against the First-tier Tribunal’s construction of section 100 was allowed.

2. The First-tier Tribunal’s preferred reason on the lease issue was flawed. It was wrong to say that all lessees would contribute to all costs merely because every item formed part of the maintained property. Nevertheless, its conclusion was correct.

3. Read as a whole, the lease required the lessee to contribute on an estate-wide basis to all maintenance expenses in the Fifth Schedule. The appellants’ construction, under which “the Building” meant only Block E, created unexplained and contradictory obligations concerning roofs, insurance, apparatus and statutory compliance. By contrast, treating “the Building” as meaning “the Buildings” created redundancy but left the scheme coherent and workable. Clause 1.10 expressly provided that the singular includes the plural. The single percentage in the Sixth Schedule and the lease’s express wording when a particular block was intended confirmed that construction.

4. The First-tier Tribunal misconstrued section 100 of the Commonhold and Leasehold Reform Act 2002. An obligation to contribute to costs of other blocks was not an untransferred tenant covenant which the respondent could enforce. The section concerns covenants owed to the landlord that remain outside the transferred management functions, such as user and nuisance covenants. It cannot enable an RTM company to manage or enforce payment for a different block.

5. The statutory scheme confines an RTM company to its own building and qualifying appurtenant property. Its powers of delegation cannot expand that field. An estate-wide arrangement would require agreement of the five RTM companies, all lessees and the landlord; that was not presently possible. The service-charge application was to continue in the First-tier Tribunal on that basis.

• Upper Tribunal (Lands Chamber): allowed the appeal on the statutory issue and dismissed it on the lease-construction issue.
• First-tier Tribunal (Property Chamber): decision of 17 June 2021. It determined preliminary service-charge issues and adjourned the remaining application.