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Landlord wins dispute with tenant over service charge for insurance

Posted: 19th September 2019   In: Commercial Property

A landlord has won a dispute with a tenant over service charges for insurance dating back nearly 15 years. 

The case involved a tenant who held the lease of a flat in a building comprising of three flats and a commercial unit.

Under the lease, the tenant covenanted to contribute one-sixth of the building's specified costs and expenses, including insurance, through the service charge. Between 2005 and 2017, the landlord took out separate insurance for each flat and the commercial premises instead of taking out a single insurance policy for the whole building.

The tenant considered that the landlord had failed to comply with his insurance obligation, as the insurance might have failed to cover the whole building, meaning that he was under no obligation to reimburse the insurance premium.

He also challenged the amount he had been charged each year from 2005 to 2017.

The Upper Tribunal (Property) found in favour of the landlord.

It held that the lease did not require the landlord to place a single insurance policy for the entire building, but to insure the building against certain risks and to do so within a usual comprehensive policy of a reputable insurance company.

As for payments, there were some years when the tenant had been charged less than the one-sixth of the total insurance for which he was liable. In each year, the amount of the relevant insurance premium had been "agreed or admitted" by the tenant. 

By proceeding in a manner not in accordance with the lease, the parties had agreed that the amount paid by the tenant was to be treated as the agreed amount of the tenant's liability in respect of insurance premiums for the years in question. The tenant was no longer entitled to challenge those amounts.

Please contact Jonathan Carr or Janice Young if you would like more information about the issues raised in this article or any aspect of commercial property law.

 

 

Posted by: Jonathan Carr
Commercial Property
Luton Office