Security of tenure in almshouse accommodation

There are some 35,000 almshouse residents in this country, and in the recent case of Watts v Stewart [2016] EWCA Civ 1247 the Court of Appeal considered whether all or some of them are entitled to security of tenure. The case may also have wider significance as the decision relates to charitable providers of accommodation, albeit in this case almshouses.

Ms Watts was allocated a property by the charity by letter of appointment in 2004. That letter made reference to a ‘rent’. Some ten years later, the trustees of the charity served a notice to quit on Ms Watts. She argued that she had exclusive possession of the property and was a periodic tenant, thereby affording her security of tenure.

The Court of Appeal upheld the position of the lower court and confirmed that the appointment letter did not grant legal exclusive possession. It said that ‘whether an occupier is a licensee or a tenant is not necessarily determined by the labels or language used by the parties [but] turns on the intention of the parties having regard to all admissible evidence’ and that ‘the trustees could only properly discharge the trusts of the charity, which limited its objects to those in need, hardship or distress, if a personal revocable licence was granted’.

An appeal was also advanced under the Human Rights Act 1998 that occupiers of almshouses should be entitled to security of tenure by virtue of article 14 of the European Convention on Human Rights when read in conjunction with article 8. It was argued that, in not having security of tenure, Ms Watts was being discriminated against because of her status as an almsperson and/or object of a charity. The Court of Appeal also dismissed this element of her appeal and concluded that the denial of security of tenure to almspersons is clearly justifiable as a proportionate measure which secures a fair balance between the interests of charities and current and future almspersons.

Service charge payments

The recent case of Knapper and others v Francis and another [2017] UKUT 3 (LC) is one of several brought by tenants in relation to service charges falling due under long leases of chalets at a holiday park in St Merryn. This particular case was an appeal to the Upper Tribunal in relation to the meaning and effect of section 19(2) of the Landlord and Tenant Act 1985 and for a determination as to whether a sum payable on account of a service charge was reasonable.

Section 19(2) states: ‘Where a service charge is payable before the relevant costs are incurred, no greater amount than is reasonable is so payable, and after the relevant costs have been incurred any necessary adjustment shall be made by repayment, reduction or subsequent charges or otherwise.’

The leases (171 of them in total) required payment on account (in one annual payment) of such sums as the landlord reasonably required for anticipated expenditure. The landlord had included a sum of £50,000 for the employment of a site manager and a sum of £36,000 for the redevelopment of the children’s play area. These sums had not been incurred by the time the matter came before the First Tier Tribunal and the FTT made no reduction to reflect the fact that expenditure had not been incurred (but it did reduce the amount payable for employing a site manager to a sum which it considered to be more reasonable).

The UT confirmed that the FTT had been correct to disregard anything which was known only after the contractual liability to pay arose. However, it confirmed that under section 19(2) if matters became known after the budget was drawn up but before a particular payment became due (such leases would often provide for quarterly or monthly payments on account), then those matters could affect the reasonableness of the sum to be paid on that payment date.

Finally, the UT confirmed that the second limb of section 19(2) that ‘after the relevant costs have been incurred any necessary adjustment shall be made by repayment, reduction or subsequent charges or otherwise’ did not confer jurisdiction on the FTT to direct repayment where sums paid on account exceeded the expenditure actually incurred during the relevant period.

Implied terms in contracts

In the case of Irish Bank Resolution Corp Ltd (In Special Liquidation) v Camden Market Holdings Corp [2017] EWCA Civ 7, the Court of Appeal re-confirmed that the starting point in considering whether or not an implied term can exist in order to reflect the parties’ intentions from the time that the contract was entered into is to consider the express terms of the contract.

As set out by Lord Neuberger in Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72, it is a ‘cardinal rule’ that an implied term must not contradict any express term of the contract. Therefore, ‘the traditional tests which ask whether the term is necessary for the business efficacy of the contract and whether the parties would say “of course” to an officious bystander who asks whether the term was meant to be included were reaffirmed’.

The court found that an implied term may be linguistically consistent with the express terms but still be substantively (and therefore fatally) inconsistent.

Replacement fire doors

Southwark London Borough Council v Various Lessees of the St Saviours Estate [2017] UKUT 10 (LC) considered whether Southwark LBC was entitled to charge long leaseholders for replacement fire doors because they had been modified or replaced from the original doors.

The council owned the freehold of 12 blocks of flats on the St Saviours Estate in Bermondsey and between 2013 and 2014 embarked on major works to all blocks which included the replacement of all front entrance doors, the majority of communal doors, and some other works to improve fire resistance. Fire risk assessments had been carried out and recommended the replacement of a small number of front entrance and communal doors that no longer complied with fire safety requirements. The assessments recommended that further assessment of each door should be carried out before works commenced.

Instead of undertaking the suggested assessment, Southwark LBC’s surveyor conducted a ‘walk around’ and noted whether each door had been modified or replaced, assuming that modification or replacement meant that it was in disrepair and would no longer provide the required 20 minutes’ fire resistance which the original doors provided.

In the FTT, 88 long leaseholders (who had acquired their leases on the exercise of their rights to buy) sought a determination that the estimated costs of the front door replacements and works to communal fire doors were not payable on the basis that they constituted improvements rather than repairs and/or that the costs were not reasonable under section 19 of the Landlord and Tenant Act 1985. The FTT found in favour of the long leaseholders. Other than where the fire risk assessments had specifically recommended the replacement of doors or the fitting of door closers, there was no evidence of disrepair and the cost of the replacement doors was disallowed in full. With regards to the additional fire resistance measures undertaken, the FTT allowed 50 per cent of those costs to be charged to the long leaseholders and took a broad brush approach to its assessment owing to the lack of evidence put forward by Southwark LBC.

The decision was appealed to the UT by Southwark LBC. That appeal was dismissed and the UT was highly critical of Southwark LBC’s failure to undertake a proper assessment of the works required prior to embarking on the project and its failure to provide substantive evidence to the FTT.This case is a timely reminder to landlords, in particular council landlords undertaking large-scale projects, to ensure that proper assessment of works is undertaken prior to commencement if it wants to recover the costs of the same from long leaseholders.

Amy Sevier is a solicitor at SA Law

@SA_Law salaw.com