Thursday, 9 May 2019

UK: England and Wales: directors and officers insurance was capable of recovery through service charge

The Upper Tribunal (Lands Chamber) gave judgment yesterday in Chiswick Village Residents v Southey [2019] UKUT 148 (LC). One of the issues before the Tribunal was whether a lessee was liable to pay, as part of his service charge, an expense to cover the cost of the insurance for those lessees acting as directors of the company owning the freehold. The First-tier Tribunal held that this expenditure could not be included but the Upper Tribunal disagreed. 

The Upper Tribunal held that the provision in the lease covering the insurance expenses that could be recovered as part of the service charge - “Effecting insurance against the liability of the Lessor to third parties and against such other risks and in such amount as the Lessor shall think fit (but not against the liability of individual tenants as occupiers of the flats in the Building).” - could not be given a wide interpretation whereby "the liability of the Lessor" included the liability of its directors and officers. It held, however, that this provision contemplated the Lessor company obtaining insurance against liabilities of persons other than itself and that, in the context of the case, without insurance cover for the directors it would be difficult to find individuals willing to act as such or for the company to function at all.

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