The Sedum Roof, the EV Points and the Service Charge
Your client, Bexley Retail Ltd, holds a 15-year lease of Unit 4, a retail unit in a Bristol shopping centre, granted in 2015. Clause 4.2 of the lease requires the tenant to pay 'a fair proportion of the costs and expenses incurred by the Landlord in repairing, maintaining, renewing and otherwise keeping in good repair the Common Parts'. The Common Parts are defined as 'the car park, forecourt, malls, stairs and lavatories'. In 2024 the landlord replaced the flat roof over the mall with a sedum roof at a cost of £480,000 and installed six EV charging points in the car park at a cost of £72,000. The landlord has demanded 100% of both sums from Bexley, relying on the words 'renewing' and 'otherwise'. Bexley's service charge for the year has risen from £38,000 to £102,000. The landlord says the sedum roof improves insulation and the EV points are required by the lease's 'sustainability' clause. Bexley's director wants to withhold payment and argues that the works are improvements, not repairs.
1. Apply the ejusdem generis and noscitur a sociis canons to clause 4.2. Do the sedum roof and EV charging points fall within the service charge?
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Clause 4.2 must be read as a whole. The operative words are 'repairing, maintaining, renewing and otherwise keeping in good repair the Common Parts'. Applying ejusdem generis, 'otherwise' is confined to the genus of keeping the Common Parts in repair; it cannot extend to improvements. Applying noscitur a sociis, 'renewing' takes its colour from 'repairing' and 'maintaining': renewal of a worn-out roof can be a repair, but a replacement that upgrades the roof to a sedum roof is an improvement, and the betterment element is not recoverable. The EV charging points are a new installation; they are not repairing, maintaining or renewing the car park, and the words 'otherwise keeping in good repair' cannot be stretched to cover them.
The lease's 'sustainability' clause requires co-operation to improve environmental performance; it is not a charging provision and cannot be used to expand clause 4.2. Under Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, the court asks what a reasonable person with the background knowledge would understand. A reasonable person would not understand a repair covenant to fund a new EV charging business. Arnold v Britton [2015] UKSC 36 requires the natural meaning to be given even if harsh, but here the natural meaning favours the tenant. The landlord's demand for 100% also ignores 'fair proportion'; even if some cost were recoverable, 100% would need justification.
2. The landlord relies on a 'sustainability' clause in the lease that requires the parties to 'co-operate to improve the environmental performance of the Centre'. How should that clause affect the construction of clause 4.2?
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The sustainability clause is a general obligation to co-operate. It should be construed consistently with clause 4.2, but it cannot override the specific cost-allocation provision. The specific governs the general.
The clause might support a claim that the landlord consulted the tenant before carrying out works, or that the tenant should not unreasonably withhold consent, but it does not create a power to charge improvements. If the clause said 'the Landlord may carry out works to improve environmental performance and recover the cost as a service charge', the result would differ. The court will not imply such a term because it is not necessary to give the clause business efficacy (Marks & Spencer v BNP Paribas [2015] UKSC 72).
The landlord cannot use a duty to co-operate as a Trojan horse to rewrite the service charge. At most, the clause may require the tenant to consider a proposal and to act in good faith. It does not convert improvement costs into repair costs.
3. What advice should you give about withholding payment, and what are the risks under the lease and the Landlord and Tenant Act 1985?
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Do not simply withhold. This is a commercial lease, so the Landlord and Tenant Act 1985 does not apply; there is no s.27A application to the First-tier Tribunal and no s.20 consultation protection. Withholding exposes Bexley to interest, forfeiture and a claim for the full sum.
The safer course is to pay 'under protest and without prejudice' to the landlord's right to recover, expressly reserving the right to challenge the service charge, and then seek a declaration or arbitration under the lease's dispute resolution clause. Check whether the lease requires payment 'on account' and whether there is a certification mechanism. If the lease has an arbitration or expert determination clause, use it. Also check whether the landlord complied with the lease's consultation requirements. If not, that may be a defence to the excess.
In the meantime, request a breakdown of the £480,000 and £72,000, and obtain a building surveyor's report on whether the roof replacement was necessary or merely desirable. Keep the correspondence factual; a refusal to pay can be characterised as a repudiatory breach if the lease makes payment a condition.