The High Court has considered whether a lease clause requiring a tenant to pay fees and costs, including legal charges, in respect of any application "for any approval or consent required by the lease", would extend to the cost of proceedings flowing from such an application.
The tenant's liquidators previously brought proceedings against the landlord for unreasonably refusing consent to the tenant's requests to assign the lease. The claim was unsuccessful and the tenant was ordered to pay the landlord's costs, subject to detailed assessment if not agreed. Those costs were never agreed and no detailed assessment took place.
The landlord later forfeited the lease and sought to recover charges from the tenant's guarantor including the legal costs of the unreasonable refusal of consent proceedings. The court considered whether those legal costs were recoverable under the lease and therefore under the guarantee.
The court held that the words of the clause clearly covered legal fees but the question was for what specific activity could the landlord incur legal fees which it could then recoup from the tenant.
It was held that the activity was clearly defined as any application for approval or consent under the lease. There was no reference in the clause to proceedings arising. Therefore, on a plain reading, the legal costs of the proceedings were not covered.
There was also no commercial or common sense need for the court to interpret the clause to cover the legal costs of proceedings because the court would make determinations on costs at the end of any such proceedings.
Therefore, the lease clause did not require the tenant to pay the legal costs of the previous claim and the guarantor was accordingly not liable for these.
Additionally, the court held that, even if the clause did allow for recovery of the legal fees, it included a precondition to tenant liability that a demand for the fees be made. There was no evidence that any demand for payment of costs was ever made. The costs of the proceedings were in a sum to be assessed and there had been no assessment so it was not clear what sum the landlord would even demand. The court order for costs was not itself sufficient to constitute a demand.
Whilst the interpretation of wording in one lease is not binding on a court interpreting wording in a different lease, the case is a useful reminder that if there is not clear wording in a lease explicitly naming a type of cost or activity, the landlord's costs may not be recoverable.
