Landlord and Tenant - No implied insurance recovery in Service charge clause

Date: 11th January 2013
Author: Mark Keirl & John Somerville
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In a recent case where, by mistake, a lease contained no express clause for the landlord to recover the insurance premium from the tenant, it was held that there was no basis of implied recovery.

In Sadd v Brown (2013), the lease required the landlord to carry out works and spend money on the building, including repairing the structure and exterior, insuring the building, decorating the exterior and providing such other services as the landlord considered reasonable. The lease obliged the tenant to pay a service charge in respect of the cost of repairs; it was silent on the costs of insuring, decorating and providing other services.

The lease also contained the usual tenant covenant to pay and indemnify the landlord against "all rates, duties, charges, assessments and outgoings" that might be imposed in respect of the property, and it was suggested by the landlord that the insurance premium was an "outgoing" covered by that clause. It was also argued that a term could be implied into the lease requiring the tenant to reimburse the landlord’s insurance premium expenditure.

The argument that the premium was an "outgoing" was dismissed. The Court was of the view that such clauses dealt with charges imposed by others, not sums falling due under contracts voluntarily entered into by the landlord, and were equally dismissive of the implied term suggestion. It said that a term may only be implied if doing so was necessary to give business efficacy to the lease. The lease was not unworkable without the term, and including the implied term would have involved re-writing the lease.

It was noted that the landlord probably had alternative remedies. A claim for rectification could be made, as could a lease variation application under the Landlord and Tenant Act 1987 as the matter related to a long residential lease.

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Mark Keirl MRICS Director
John Somerville Director