I sublet an apartment on the 99th floor of my block

No prizes for guessing what I was listening to when I decided to write this. I bring you two important cases from the Upper Tribunal (Lands Chamber) about sub-let fees and administration charges:Holding & Management (Solitaire Ltd) v Norton and other appeals [2012] UKUT 1 and Re: Bradmoss Ltd [2012] UKUT 3 (LC). In all cases:

(a) the tenant sought to sub-let their flat; and,

(b) the leases prohibited this without the consent of the landlord/management company.

In some of the leases, there was a further express provision requiring the tenant to pay the costs of the consent and/or a registration fee. In all cases, the landlord/management company sought to impose a charge for consent and/or registration of between £135 and £105, with a further £75 for registering the consent.

The LVT disallowed the charges in all cases, relying on s.19, Landlord and Tenant Act 1927. This provides as follows:

19 Provisions as to covenants not to assign, &c. without licence or consent.

(1)In all leases whether made before or after the commencement of this Act containing a covenant condition or agreement against assigning, underletting, charging or parting with the possession of demised premises or any part thereof without licence or consent, such covenant condition or agreement shall, notwithstanding any express provision to the contrary, be deemed to be subject—
(a)to a proviso to the effect that such licence or consent is not to be unreasonably withheld, but this proviso does not preclude the right of the landlord to require payment of a reasonable sum in respect of any legal or other expenses incurred in connection with such licence or consent; and
(b)(if the lease is for more than forty years, and is made in consideration wholly or partially of the erection, or the substantial improvement, addition or alteration of buildings, and the lessor is not a Government department or local or public authority, or a statutory or public utility company) to a proviso to the effect that in the case of any assignment, under-letting, charging or parting with the possession (whether by the holders of the lease or any under-tenant whether immediate or not) effected more than seven years before the end of the term no consent or licence shall be required, if notice in writing of the transaction is given to the lessor within six months after the transaction is effected.

The Upper Tribunal allowed the appeals by the landlords/management companies:

(a) it was not a  case under s.19(1)(b), as the premium for the lease was not in consideration of the errection (etc) of the building, but in consideration of the grant of the lease;

(b) nor was it a case under s.19(1)(a) as this did not prohibit a landlord for charging for a consent; a charge could be levied regardless of whether there was an express term in the lease for such a charge.

In reality, the charges were administration charges under Sch.11, Commonhold and Leasehold Reform Act 2002 and, in particular, variable administration charges (being charges neither specified in the lease not calculated in accordance with a formula in the lease): see here. Such charges are required to be reasonable and, as no-one had yet considered that point, the parties were invited to make submissions on that point.

In addition, in Re: Bradmoss, the President noted that the LVT had referred to a decision (of his) refusing permission to appeal. He wanted to make “clear that decisions on applications for permission to appeal should not be treated as laying down guidance” and should not be relied upon.

So, what to make of these: The point on permission decisions is clearly right, although, perhaps, I might have tempered it a bit. In quite a few areas we simply don’t have many LT/UT decisions, and so permission decisions are all there are. Not ideal but, if the choice is between saying to a client/LVT “there is no law on this” or “there is a permission decision on this point”, I suspect most people would take the latter course. Perhaps the correct position is that such decisions should not generally be cited unless they’re the only thing on point (which, from memory, is what the Practice Direction on Citations says).

Then we turn to the wider points. So, these are variable administration charges are they? Well, lets take a step back. Apologies, but this is going to get messy.

The President says that a charge for a consent is clearly an “administration charge”, see Sch.11, para.1(1)(a), 2002 Act, as being a charge for or in connection with the grant of an approval. I think I’d agree with that. But then, to be an administration charge, it also has to be “payable”. Here, the President says that the charge is payable because either (a) there is an express term providing for it or (b) it follows from the fact that there is a right to withhold that a condition of grant can be the levying of a fee. I’m not so sure about (b). Surely the absence of an express contractual right is fatal?

Never mind, lets move on. He then decides it is a variable administration charge. This is defined as a charge which is neither specified in the lease, nor calculated in accordance with a formula specified in the lease. The formula bit is out, but surely in at least some of these leases, the charge was specified in the lease. There was an express right to charge. What is that if not “specified”? What the President means, I think, is that the amount of the charge wasn’t specified in the lease. But (a) that isn’t what Sch. 11 says and (b) how does this square with the earlier decision of Re Hampstead Garden Suburbs, under the similarly worded provisions about Estate Charges, which seemed to say that the merest mention in the lease meant that it was “specified” in the lease? Now, it could well be that Re Hampstead is wrong, but as it wasn’t even cited to the President, how can we know?

To put it bluntly, I’m more confused than an English batsman facing a Pakistani spin bowler. Like the English middle-order, any help would be gratefully received!

 

Posted in FLW case note, Housing law - All, Leasehold and shared ownership, Uncategorized. RSS feed for this post and comments.

About

J is a barrister in London. He loves service charges and all things leasehold law related. He also likes beating rogue landlords and mortgage companies.

6 Comments

  1. Posted 26/01/2012 at 3:30 pm | link to comment

    There’s worse: what he appears to be saying (at least in Re: Bradmoss) is that the effect of s19 of the 1927 Act is that a charge made for consent to sub-let must be reasonable – otherwise a refusal by a landlord to consent but for the payment of an unreasonable charge would be itself unreasonable.

    In turn that means that no such sum could be payable unless it were reasonable.

    Thus, if the charge is unreasonable, its not payable and therefore not an administration charge at all. If the charge is reasonable then it is payable (and an administration charge) and so an LVT has jurisdiction to decide if its payable but by this time it does not need to because (ex hypothesi) its reasonable.

    In practical terms this seems to me to be sensible, but I can imagine some people finding it a little hard to get their head around.

    I completely agree with your concerns about the payability of charges. However, the alternative is worse. If one reads the 2002 Act literally it means that the LVT may not adjudicate future payability (in contrast to service charges). But a charge for sub-letting will only be payable (at least if not specified in the lease) by a tenant until the tenant has agreed to pay it by separate agreement. But, once agreed, the LVT loses jurisdiction anyway.

    Ergo, the LVT can never adjudicate on an administration charge that is not payable under the lease.

    That was the problem in Drewett v Bold.

  2. J
    Posted 26/01/2012 at 4:07 pm | link to comment

    I confess that I can’t understand what the President is saying on that point, even though you’ve explained it to me twice!

  3. Siva
    Posted 01/01/2013 at 12:59 pm | link to comment

    These do look like poor decisions by Judge Bartlett. Very confusing.

    I do think that it is clear that Judge Bartlett doesn’t believe that s19(1)(a) LTA1927 confer’s a right to make a charge. But can’t work out what he thinks gives this right.

    J, you are probably right, Judge Bartlett believes it follows from the fact that there is a right to withhold that a condition of grant can be the levying of a fee.

    Or perhaps he believes that all reasonable costs relating to permissions can be passed on as an admin. charge?

    Either way I think he is wrong.

    I think it is sensible to assume that CLRA 2002 refers to the amount of charge when it defines “variable administration charge” as being “specified” and that the Hampstead Garden Suburbs decision was wrong.

    In regard to the point Francis Davey makes, there does seem to be possibly a jurisdiction issue in the practical sense. If the charge is not referred to in the lease then it would not be in the LVT’s jurisdiction because it is not payable unless the charge had been agreed. If it had been agreed then it is not in the LVT’s jurisdiction.

    I suppose it is unlikely that a charge is agreed but not the amount. However that would bring it into the LVT’s jurisdiction. I suppose as a leaseholder you could pay the amount asked but say you are only agreeing to a charge and not the actual amount as you want to dispute that at the LVT. Refusal on that basis would probably be deemed unreasonable.

    • J
      Posted 01/01/2013 at 10:02 pm | link to comment

      Well, we know from some of the subsequent cases (also covered on the blog) that the UT are now saying that, if the lease provides for the consent of the landlord to be needed for a sub-let, then that consent can be on terms that you pay a reasonable fee. The 1927 Act just isn’t going to come into it in almost all cases. The Hampsted case and the point FJMD makes are both things that we don’t have answers to.

      • Siva
        Posted 02/01/2013 at 3:13 pm | link to comment

        I’ve found Freehold Managers (Nominees) Ltd v Piatti which is different in that although the lease doesn’t specify a fee being payable there appears to have been an agreement to pay a fee (just going from your summary).

        I don’t have any problem with a fee being a condition of approval, just that if the leaseholder hasn’t agreed to a fee, then I don’t think it’s payable.

        In the case from this blog post Judge Bartlett determines it is payable when there has been no agreement.

        What next? The LL being able to charge other admin. charges (non consent) without agreement?

        • J
          Posted 02/01/2013 at 4:04 pm | link to comment

          That last point is the one that most troubles me. In service charge cases, you’d need to be able to point to clear words entitling you to the money. Why does the same not apply to admin charges?

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