Summary

On the proper construction of a lease, the lessee was liable to pay to the lessor advance sums in respect of the service charge for which the lease provided.

Facts

The court had to determine issues concerning the construction of a lease. The claimant (W), which was a subsidiary of the Football Association, had been formed for the purpose of acquiring the old Wembley Stadium and building a new stadium on the same site. The site of the old stadium and much of the surrounding land and facilities was owned by the first defendant (L). By a transfer and lease, L sold the old stadium and leased certain parking, access and other rights over its retained land to W. The consideration for the lease included payment of a service charge. L subsequently transferred the freehold of land, subject to the lease, including land over which it had demised rights by the lease to the second to fifth defendants (G). In due course L sought payment by W of sums allegedly due under the lease in respect of the service charge. W disputed its liability to pay. The issues were (i) which of the defendants was to be treated as the lessor for the purposes of the lease; (ii) whether W was liable to pay to the lessor advance payments in respect of the service charge for which the lease provided amounting to £120,000 together with interest; (iii) what heads of expenditure incurred by the lessor were recoverable by means of the service charge payable under the lease.

Held

(1) At all times since the grant of the lease, L had been bound by the lessor's covenants and entitled to the benefit of the lessee's covenants under the lease. The original contractual entitlement of L was not discharged under the Landlord and Tenant (Covenants) Act 1995 s.6(2), and as the absolute beneficial owner of the reversion L had always been entitled to sue for the service charge and advance payments. In the circumstances, L was the lessor for the purposes of the lease. (2) On the proper construction of the lease, W was liable to pay to L the advance payments in respect of the service charge. Judgment was given in favour of L for £120,000 plus interest. It was also declared that an advance payment was payable under the lease in respect of a financial year (as defined in the lease) irrespective of whether it was formally demanded, whether an account had been prepared of expenditure for any previous financial year and whether L's accountant had specified the estimated expenditure or W had been notified of the calculation of estimated expenditure for that financial year. (3) The court declared that the following costs, fees, expenses and outgoings were and had since the date of the lease been "expenditure" under the terms of the lease if and insofar as they had been properly incurred by L in complying with its obligations in respect of the lessor's services (a) costs incurred by L in carrying out services including the cost of labour materials, equipment and their storage; (b) costs incurred in managing the provision of services under the lease; (c) costs incurred in connection with the participation of L's representatives in meetings with the police, the local authority and other agencies.

Judgment accordingly