The Upper Tribunal has decided in English Rose Estates Ltd v Menon & Ors (2022) UKUT 347 (LC) that a landlord was not able to recover insurance costs from the residential long leaseholders because the lease drafting did not allow it to do so. The landlord was not able to rely on estoppel to argue that the historical payment of the insurance costs by the leaseholders amounted to an acceptance of the recovery and the Upper Tribunal did not agree with the landlord's argument that the lease contained an obvious mistake and should be rectified.

Interestingly, the case started with the leaseholders acting without legal representation and on the basis that they considered the insurance was unreasonable in amount. It was not until they instructed Counsel for the First-Tier Tribunal hearing that they raised the argument that the insurance was not recoverable at all in accordance with the lease.

The landlord's appeal included an argument that it was procedurally unfair for the First-Tier Tribunal to have allowed the leaseholders to raise the argument that the insurance was not recoverable at such a late stage. The Upper Tribunal also rejected this argument and found that it was right for the Tribunal to prioritise flexibility and the avoidance of delay over a more exhaustive approach, provided that it could do so fairly and with proper consideration.

As stated by Martin Rodger KC in his decision, this "is not a particularly satisfactory outcome for either side. The [landlord] is left unable to recover the cost of insurance which it has covenanted to obtain every year for the remainder of the term." The case continues the line of Court and Tribunal decisions that have determined that if the lease terms are clear, they will bind the parties even if that outcome is surprising.

It will be interesting to see if the parties are able to agree a resolution to this clear lacuna, as encouraged to do so by Martin Rodger KC, or whether the landlord will be able to make a successful application under section 35 of the Landlord and Tenant Act 1987 to amend the insurance provisions of the leases.