Woops! The problem of the missing clause

In Sadd v Brown ([2012] UKUT 438 (LC)) the Upper Tribunal (Lands Chamber) had to deal with a dispute between the tenant of a flat held on a long lease and her landlord. The landlord covenanted to insure the building for its full reinstatement value. It sought to recover the cost of insuring the building. Unfortunately, there was no tenant’s covenant to reimburse a share of the premium.

The landlord sought to rely on a covenant to pay and indemnify the lessor against ‘all rates duties charges assessments impositions and outgoings whatsoever’. This was not adequate since this wording did not indicate an intention to repay an expense voluntarily incurred by the lessor ([18]). The landlord also relied on a number of other aspects of the service charge provisions in the lease but none of them amounted to an obligation to reimburse a share of the insurance premium (not even a covenant to contribute to the costs of estate management) ([16]).

Finally, there was no implied covenant. The lease was detailed and (on its face) a complete record of the terms that had been agreed ([20]). Business efficacy did not demand that a term to reimburse a share of the premium be implied. The mere fact that the landlord covenanted to insure was not a sufficient basis on which to imply the term. Nor was the fact that such a term would have been expected and was commonly encountered ([19] – [20]).

On the contrary:

‘To imply a term in the present case would be ‘to effectively draft a completely new paragraph in the Fifth Schedule to the Lease’ ([21].

The landlord could seek rectification or apply for the lease to be varied under Part IV of the Landlord and Tenant Act 1987 ([23]).

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