Reshma Tachkani v Thornfield Hawley Management Company Limited

A landlord’s obligation to repair does not, without authority in the lease, permit it to accumulate or collect a reserve fund. A term authorising such a fund cannot be implied merely because the fund would be useful or prudent; an implied term must be necessary, and it is not necessary where the lease works without it. A lease made by deed cannot be varied by informal consensus at a meeting. Past conduct may support an inferred agreement to pay only where the payer knew what was being paid and did not pay under protest. Any estoppel arising from a past agreement does not require future payments, and earlier contentment or silence does not by itself establish agreement to later demands.

Mrs Reshma Tachkani holds long leases of a flat in a residential development. Thornfield Hawley Management Company Limited (THMC), the freeholder and landlord, demanded service-charge contributions to a reserve fund. The First-tier Tribunal (Property Chamber), deciding THMC’s application concerning service-charge liability under the Landlord and Tenant Act 1985, held that the repairing obligation permitted the fund and that the leaseholders’ conduct established agreement or estoppel. Ms Tachkani obtained permission to appeal on the reserve-fund issue. She challenged whether the leases authorised the fund, whether they could have been varied by consensus at a meeting, and whether her past conduct barred her challenge to demands for 2018 to 2025.

1. The appeal succeeded. Neither lease authorised THMC to hold a reserve fund or demand contributions to it. A repairing obligation alone did not confer that power.

2. A term may be implied only where it is necessary; it is not enough that the term would be reasonable or desirable. The leases operated without a reserve fund, so there was no need to imply authority for one. The Tribunal relied on Marks and Spencer PLC v BNP Paribas Securities Services Trust Company (Jersey) Limited [2014] EWCA Civ 603 and AG of Belize v Belize Telecom Ltd [2009] UKPC 10, in which Lord Hoffmann quoted with approval Lord Pearson’s formulation in Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601 at 609.

3. A lease made by deed can be varied only by deed or by order of a court or tribunal. It cannot be varied by implicit agreement over time, so the FTT was wrong to find that the leases had been varied by consensus at a meeting.

4. An agreement to pay may sometimes be inferred from payments made over many years without objection, if the payer knew what was being paid and did not pay under protest. Any estoppel based on a past agreement could relate to the relevant past demands, but would not require future payments. The appellant’s 2015 directorship and her lack of recorded objection at a 2017 meeting did not establish agreement to the demands from 2018 onwards. Past contentment or tolerance did not commit her to later payments.

5. The FTT’s decision was set aside and the Tribunal’s decision substituted to the extent that Ms Tachkani was not liable for the reserve-fund contributions demanded for 2018 to 2025. Contributions cannot be demanded in the future under these leases. The applications 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 remained undecided pending THMC’s response.

• Upper Tribunal (Lands Chamber): Allowed the appeal, set aside the FTT’s decision on the reserve fund, and substituted its decision that the appellant was not liable for the contributions demanded for 2018 to 2025.
• First-tier Tribunal (Property Chamber): Determined that reserve-fund contributions were payable, finding that the repairing obligation permitted the fund and that the leaseholders’ conduct supported variation or estoppel.