In the recent case of 89 Holland Park (Management) Limited v Dell & Dell, the Court of Appeal refused to allow a management company to recover its litigation costs over £2.7million from its tenants via service charges.

The Facts

89 Holland Park is a block of 5 flats in London (“the Block”), each flat is held on a long lease. 89 Holland Park (Management) Limited (“89 Holland Park”) are the Freeholder of the block, they are a lessee run company. The Dells are the leasehold owners of flat 5.

The Block neighboured a plot of unused land (“the Land”) that used to be part of the Block. The Block has a restrictive covenant and positive covenants over the Land, including a restriction on development without consent.

The Land was acquired by an architect, she sought to develop the Land and create a modern residential dwelling. The tenants of the block, via 89 Holland Park, resisted the proposals and the grant of planning permission. 89 Holland Park ultimately prevailed in its claim but did not recover all its costs (£2.7 million), which it attempted to recover from its tenants. They only recovered a proportion of their costs, the balance, was what was attempted to be passed on.

Two tenants, Dell and Dell, who had initially supported the litigation, informed 89 Holland Park that they were no longer in support of the same whilst the dispute was on-going. Dell and Dell were later billed approximately £430,000 in service charges for the litigation costs.

The Proceedings

Dell & Dell brought the matter before the First Tier Tribunal (“FTT”), arguing that the litigation costs were not recoverable under their lease and the sum was not reasonable.

The issues in dispute in the FTT

At this stage, 89 Holland Park relied on two service charge provisions as encompassing the costs in question, both of which were ‘sweeper’ provisions of varying breadth:

  • Clause 4(4)(g)(ii) – “To employ all such surveyors builders architects engineers tradesmen solicitors accountants or other professional persons as may be necessary or desirable for the proper maintenance safety and administration of the Building.”
  • Clause 4(4)(l) – “Without prejudice to the foregoing to do or cause to be done all such works installations acts matters and things as in the reasonable discretion of the Lessor may be considered necessary or advisable for the proper maintenance safety amenity and administration of the Building.”

The FTT decided that the Dells had not admitted the charges in question, but found in 89 Holland Park’s favour on the other three issues:

  1. There was an estoppel by convention which precluded the Dells from challenging the form of the demands.
  2. The costs came within the scope of both clauses as 89 Holland Park was motivated by structural and aesthetic concerns for the Building.
  3. The costs, although high, were reasonably incurred and reasonable in amount.

There was no appeal against (1), the FTT gave permission to appeal against (2), and the Upper Tribunal (Lands Chamber) (“UT”) gave permission to appeal against (3).

The determination by the UT

The UT did not determine the appeal against the reasonableness of the costs because it held the costs in question fell outside the scope of the leases. The appeal was therefore allowed on issue (2). In its Judgment:

  1. The focus of the two provisions was on management and not litigation; it concerned 89 Holland Park’s obligations to maintain the Building.
  2. In the circumstances of the case, express wording would have been used had the parties intended for costs of this type to be recovered through the service charge.
  3. That conclusion that was reinforced by commercial common sense, as leaseholders would not be taken to commit themselves to ‘potentially ruinous’ costs that rendered the leasehold interests unmarketable.
  4. The obligation to pay the costs did not clearly belong in the provisions.
  5. Although Assethold Ltd v Watts [2015] L & TR 15 decided that litigation costs, which were incurred in a dispute with a third party where the safety of the block was at risk, were recoverable under virtually wording to that in Clause 4(4)(l), that case could be distinguished on the basis that the risk of damage was more proximate than that in this case.

89 Holland Park appealed on a single ground, that the UT’s interpretation of the provisions was wrong and unduly narrow.

The determination by the Court of Appeal

As part of that ground of appeal they relied, for the first time, on a third provision as permitting recovery of the disputed costs, arguing that those fell within the second limb of the definition of ‘General Expenditure’ in the lease which read:

“‘General Expenditure’ means the total expenditure … incurred by the Lessor in any Accounting Period in carrying out her obligations under Clause 4(4) of this Lease and any other costs and expenses reasonably and properly incurred in connection with the Building including without prejudice to the generality of the foregoing…”

The Court of Appeal (Lady Justice Falk, with whom LJJ Arnold and Philips agreed) dismissed the appeal, and although their reasoning differed slightly to the UT they largely agreed with its approach and the reasoning. In summary:

  1. The wording in paragraphs 4(4)(g)(ii) and (l) was general in nature rather than ambiguous.
  2. The Court of Appeal agreed that the focus of the clauses was on management and maintenance of the building. It would stretch that wording too far to encompass the costs in issue.
  3. Whilst 89 Holland Park was motivated by structural/ aesthetic concerns, there was no immediate threat to the Block.
  4. Given the substantial liabilities the Dells would face and the substantial obligations 89 Holland Park would face if it were correct, there would need to be clear wording to permit such costs to be incurred and passed onto leaseholders.
  5. As litigation costs were specifically mentioned elsewhere in the lease, that indicated that they would be explicitly provided for where they are to be recoverable.
  6. Whilst the Court of Appeal accepted that some litigation costs could fall within Clauses 4(4)(g)(ii) and (l), such as litigation over poor quality repair work, each item of expenditure would need to be treated separately.
  7. The identity of the landlord was irrelevant when construing the lease, even when (as in this case) the leases expressly envisioned the freehold being held by a lessee run management company, which would necessarily have no funds other than those recovered through the service charge.
  8. The Court of Appeal focused primarily on the existence of the Land itself, which meant there was a clear potential for litigation. But the absence of specific (i.e. express) wording in the leases addressing litigation of that type was telling.
  9. Assethold had also been correctly distinguished on its facts.


This is the third time in as many years that the Court of Appeal has addressed the question of whether legal and professional costs can be recovered through a service charge. Whilst this further guidance is welcome, it is unlikely to settle the issue. There will always be an element of being required to examine individual lease provisions.

Landlords, management companies and agents should be mindful of service charge expenditure clauses contained within a lease before incurring costs which they seek to recover via service charge. Greater consideration should be given by a landlord or management company before endeavouring our activities which may incur significant costs, with or without the support of its tenants in doing so, particularly when relying of a “Sweeper Clause”.

If you require assistance in recovering unpaid service charges or are unsure about the scope of the service charge provisions in your lease, please do not hesitate to get in touch with Molly Frankham or any other member of the Service Charge team at