Notting Hill Home Ownership Limited v N Samoail, R Issa & Ors

A lease may be corrected by construction only where there is a clear drafting mistake and the intended correction is clear. A landlord’s obligation to pay charges under a headlease does not, without clear words in a sublease, make leaseholders liable for services they cannot access. For the statutory threshold for varying a lease, a provision for recovery of costs incurred for the building or for the leaseholders’ benefit may be satisfactory even if particular charges could be disputed. Indirect amenity from neighbours’ inaccessible facilities does not itself amount to a benefit for which the lease must provide recovery.

Notting Hill Home Ownership Limited (NHHO), a housing association, held a headlease of Block V1, an affordable-housing block within an eight-block development. It sublet flats to the respondents under shared-ownership leases. NHHO’s headlease required it to contribute to costs across the development, including services such as the garden and concierge, which it and its sublessees had no right to use.

The First-tier Tribunal determined that most of the disputed charges were not payable under the subleases. It also rejected NHHO’s application to vary the leases because they did not fail to make satisfactory provision for service-charge recovery. NHHO appealed both decisions, arguing that the leases should be construed to allow recovery of all headlease costs or varied to achieve that result. It also challenged costs orders and sought clarification of the management-charge determination. The central questions were whether construction could correct the leases and whether they failed to make satisfactory provision for recovery of expenditure incurred for the leaseholders’ benefit.

1. Both appeals dismissed. The issue of the management-charge reduction was remitted to the same panel of the First-tier Tribunal. The Upper Tribunal had heard no argument or evidence on the amount of that reduction.
2. No correction by construction. The sublease defined the Estate by reference to NHHO’s registered title, which comprised the flats and appurtenant rights, including access to the car park and bin store. The definition made sense. Reading it as the whole development would give the sublessees rights to the garden and other blocks which NHHO did not hold and could not grant. The principle of remediation by construction, discussed in East Pantiles (Plant Hire) Ltd (1981) 263 EG 61 and Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101, requires a clear mistake and a clear correction. Neither existed here. The ordinary principles of construction in Arnold v Britton [2015] UKSC 36 also required consideration of the lease’s language and context. Affordable housing was relevant context; the exclusion of services helped keep the arrangement affordable.
3. Charges for inaccessible services. A leaseholder can in principle be contractually liable for a service from which they receive no benefit. Without plain words imposing that liability, however, such a construction is extremely implausible. Informal use of the concierge did not alter the sublease. The mismatch between NHHO’s headlease obligations and the sublease terms could not be transferred to the leaseholders.
4. Costs orders upheld. The First-tier Tribunal acted within its discretion in making orders under section 20 C of the Landlord and Tenant Act 1985 and paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002. The respondents had succeeded on the main issue and other points.
5. Variation gateway not met. The appeal concerned only the threshold for variation under section 35(2)(e). The sublease made satisfactory provision for recovery of reasonable expenditure for the building. Neighbours’ gardens, concierge services and any resulting increase in flat value were too indirect to constitute expenditure for the respondents’ benefit. The possibility of future disputes about whether particular services benefited the building did not make the provision unsatisfactory. The problem arose from the different service-charge obligations in the headlease, not from the sublease.

1. Upper Tribunal (Lands Chamber): NHHO’s appeals against the service-charge and variation decisions were dismissed. The management-charge issue was remitted to the same First-tier Tribunal panel.
2. First-tier Tribunal (Property Chamber): Determined that most disputed service charges were not payable and rejected NHHO’s application to vary the leases.