Often, leases include "sweeper" clauses within the service charge provisions, which essentially allow the landlord to introduce additional services during the lease and then recover the costs of those services from its tenant under the service charge. Arguments can and often do arise as to exactly how sweeper provisions should be interpreted and what they can cover.
Such was the case in 89 Holland Park v Dell, a very recent Court of Appeal decision, which concerned whether the service charge provisions in the lease of a residential property permitted the recovery (from residents) of substantial legal and professional costs incurred by the landlord during a legal dispute with the owner of a neighbouring property.
The disputed costs amounted to £430,411, and the legal dispute related to whether or not the freeholder (landlord) of the building could withhold approval to a neighbouring property owner's development plans on various grounds, including design and aesthetics.
The lease, in Dell, contained some general sweeper clauses providing that the tenants of the building were obliged to pay for 'general expenditure' incurred by the landlord, and for any other costs and expenses reasonably and properly incurred in connection with the building. It also provided that the landlord could cause to be done all such works, acts and things as in its reasonable discretion it considered necessary or advisable for the proper maintenance, safety, amenity, and administration of the building.
The court concluded that the disputed legal costs were not recoverable under the sweeper provisions in the lease. This is because the relevant provisions of the lease focused on the management and maintenance of the building itself, and it would strain the wording of the lease to read them as extending beyond costs incurred in maintaining and running the building, and keeping it safe. The disputed legal costs were unrecoverable because, while the legal dispute did relate in part to the structural integrity of the building, the building was under no immediate threat of being rendered unsafe, and the main object of the expenditure was to prevent the neighbour from being permitted to implement her development proposals.
The court's logic in the Dell case is equally applicable to sweeper clauses in service charge provisions of leases affecting commercial premises. The Court of Appeal decision acts as a reminder that, while the cost of some items a landlord is seeking to recover might technically fall within the strict wording of a "sweeper clause", if the parties would not likely have (at the time the lease was agreed) understood the clause to cover those items, then it is unlikely that the costs of those items will be recoverable under the service charge regime. That said, a lease will always need to be considered on the basis of its particular wording and the facts arising at the time. It is always preferable, therefore to be as explicit as possible in the service charge provisions to avoid the need to rely on a sweeper clause.
