Faidi & Anor v Elliot Corporation [2012] EWCA Civ 287 concerned two leaseholders in Eaton Mansions. The freeholder is the Grosvenor Estate and the reversioner is Eaton Mansions (Westminster) Ltd (EMW), a company owned by the leaseholders. The Claimant had Flat 6, the Defendant Flat 8, directly above it. The leases were in identical terms.

Clause 4 of the lease contained covenants by the tenant with the landlord “and with and for the benefit of the Flat Owners”. Clause 4(5) stated that the tenant covenanted to:

“observe and perform the regulations in the Fourth Schedule hereto or any future regulations imposed by the Lessors for the better management of the Building Provided that the Lessors reserve the right to modify or waive such regulations in their absolute discretion”

The Fourth Schedule contained at paragraph 3 a prohibition on ‘doing, permitting or suffering, in or upon the demised premises, any act or thing which may be or become a nuisance or annoyance to the lessors or the tenants of the lessors or the occupiers of any part of the building or of any adjoining or neighbouring premises’, and at paragraph 15, this:

“At all times to cover and keep covered with carpet and underlay the floors of the Demised Premises other than those of the kitchen and bathrooms and at all times suitably and properly to cover and keep covered the floors of the kitchen and bathrooms in the Demised Premises”

Flats 8 and 10 had been joined as one. The Defendant decided to separate them, and obtained consent from the freeholder and EMW in 2007. A part of this consent involved a letter requiring the works to include “an appropriate sound resisting/absorbent material must be laid between the floor structure and the new floor finish”, as the new floors in Flat 8 where to be timber, with underfloor heating.

The Defendant’s evidence was that sound proofing material had indeed been put in place between wooded floor and the concrete.

The licence for the works was to last the term of the lease, unless breaches of licence term were unremedied. Clause 7.3 of the licence stated

“It is agreed and declared that the obligations on the part of the Tenant and the conditions contained in the Lease which are now applicable to the Premises shall continue to be applicable to the same when and as altered as permitted by this licence and shall extend to all additions made to the Premises in the course of the Tenant’s Works.”

The Claimants claimed that ordinary noise from Flat 8 was a disturbance to them in Flat 6. Eventually they issued proceedings in the tort of nuisance and in breach of covenant. Both heads of claim were dismissed at first instance trial. The Claimants appealed, solely on the breach of covenant issue.

The argument from each party was:

The Defendant’s case was that, by agreeing to the work being done as proposed by Stinger, EMW had waived the obligation to carpet those rooms to which otherwise the obligation to lay carpet and underlay would have applied under paragraph 15 of the Fourth Schedule. That is because it would have been inconsistent with the giving of consent to the installation of the new timber floor in general, and in particular also with the installation of underfloor heating as the primary source of room heating. It was open to EMW to waive that obligation under clause 4(5), and that is what they did.

The Claimants opposed this on two different bases. First it was said to be inconsistent with clause 7.3 of the licence, which preserved the application of the lease. Secondly, it was said that the conduct of EMW was not clear enough to amount to an irrevocable waiver, especially having regard to the effect of the waiver not only on EMW itself but on the lessees of other flats. It was said that, if Stinger had wanted a dispensation from the terms of paragraph 15 of the Fourth Schedule, it should have sought it in express terms as a provision of the licence.

At first instance, the Judge held that there had been a waiver of paragraph 15 as the licence gave permission to carry out the specific works involved. Laying carpet would reduce the effectiveness of the underfloor heating, so carpeting throughout was not a reasonable solution. In addition the sound proofing that had been put in exceeded the relevant building regulation requirements.

Rather astonishingly, there was no issue on privity of contract or privity of estate taken in the assignee leaseholder of flat 6 seeking to enforce a lease covenant in the lease of flat 8 against the assignee of that lease.

On appeal, the Claimant argued that the carpeting requirement should not be seen as all or nothing. There were rugs in parts of flat 8. Thus EMW’s licence should not be seen as irrevocably waiving paragraph 15. It was thus open to the court to make an injunction, at its discretion, for an intermediate solution which would give some sound protection while not affecting the purpose of the underfloor heating and wooden flooring.

The Court of Appeal was not having this:

Clause 4(5), as applying to paragraph 15, is either effective or it is not. If it is effective it requires the entire floor surface of the relevant rooms to be covered with carpet and underlay. If it is not effective, it does not require carpeting at all. An intermediate solution might have a great deal to be said for it as an agreed or mediated solution to this sort of issue, arising as it does between neighbours who may have to live with the situation over a long period. It does not seem to me that an arrangement for agreed partial carpeting is one which the court could achieve, whether under its discretion as to the grant of, and the terms of, an injunction, or in any other way.

The Claimant also argued that clause 7.3 of the licence meant that the lease covenants applied as before. This included para 15 of the Fourth Schedule – the carpeting obligation.

Further, the Claimant argued that there was nothing in the licence which precluded EMW later requiring compliance with paragraph 15 if it turned out that there remained problems of sound disturbance. EMW as landlord was also acting on behalf of other lessees. Its position was to be taken as being not that it would never seek to enforce the paragraph 15 obligation, but that it would not do so except for good cause.

The Court of Appeal found that, while it would have been better if the licence had been clearer on this point, the licence had expressly addressed the specific works and alterations in a way that could not be overcome by a general clause. The waiver was good.

Further it was unrealistic to take the licence as being less than a full waiver. The possibility of enforcement of paragraph 15 was wholly at odds with the nature, extent and expense of the works covered by the licence.

Appeal dismissed.

Lord Justice Jackson went on the make the following observations on neighbour disputes, the courts and the value of mediation:

34. [...] This case concerns a dispute between neighbours, which should have been capable of sensible resolution without recourse to the courts. During the course of his submissions in the Court of Appeal Mr Pearce for the claimants observed that this may not be an “all or nothing” case. A moderate degree of carpeting in flat 8 might (a) reduce the noise penetrating into flat 6 and (b) still enable the occupants of flat 8 to enjoy their new wooden floor. This is precisely the sort of outcome which a skilled mediator could achieve, but which the court will not impose.

35. Of course there are many cases where a strict determination of rights and liabilities is what the parties require. The courts stand ready to deliver such a service to litigants and must do so as expeditiously and economically as practicable. But before embarking upon full blooded adversarial litigation parties should first explore the possibility of settlement. In neighbour disputes of the kind now before the court (and of which I have seen many similar examples) if negotiation fails, mediation is the obvious and constructive way forward.

36. In the present case a mediator would not have been concerned about the interaction between the various leases and the licence to carry out works. Nor would he have been concerned about the other interesting points of construction, which first the county court judge and now this court have been called upon to decide. Instead he would have been helping the parties to find a sensible resolution of the practical problem which had arisen. I have little doubt that such a mediation would have been successful. The points of law upon which the litigation has turned are not easy ones and at the time of the hypothetical mediation neither party could have been confident of victory.

37. As it is, neither side wrote to the other proposing mediation until shortly before the hearing in the Court of Appeal. By then huge costs had been incurred. The claimants’ costs up to the end of trial were £23,195. The claimants incurred a further £34,609 costs on the appeal. The defendant’s costs up to the end of trial were £32,798. The defendant incurred a further £49,532 costs on the appeal. Thus the total costs thrown away amount to £140,134. If the parties were driven by concern for the well being of lawyers, they could have given half that sum to the Solicitors Benevolent Association and then resolved their dispute for a modest fraction of the monies left over.

Beitov Properties Ltd v Elliston Martin [2012] UKUT 133 (LC) is, I suspect, going to cause some sleepless nights for managing agents of long leasehold properties (and, possibly, some other agents and landlords).

Section 47, Landlord and Tenant Act 1987 applies to all demands for rent (whether ground rent or “normal” rent), service charges and administration charges. It requires that all written demands for payment of such sums must “contain… the name and address of the landlord and… if that address is not in England and Wales, an address in England and Wales at which notices… may be served on the landlord by the tenant.” If this information is not provided, then the sums are not due “any part of the amount demanded which consists of a service charge” is not due (S.47(2)).

In the present case, the service charge demands had given the name of the landlord, but not his address. Rather, they gave the address of the managing agents. The LVT held that this was insufficient to comply with s.47 and, hence, the service charges were not due. They rejected an argument that it was good enough to give the details of the agent, holding that the requirement as to give the registered address or trading address (in the case of a company).

The Upper Tribunal dismissed an appeal. The wording of s.47 was clear. The requirement as to provide the name and address of the landlord, not of any other party. If that address was not in England or Wales, then an address in the jurisdiction had to be provided. Either way, the demand had to tell the tenant who the landlord was and where he could be found. In the case of an individual, this would be his place of residence or business. In the case of a company, it would be either the registered office or place of business. None of this had been complied with, so the appeal was dismissed.

The Upper Tribunal did (to my mind, rather unfairly) appear to criticise the LVT for taking such a technical point (“balls aching” as one learned member of the NL team called it). I’m not sure that’s fair. If it’s the law then it’s the law. The LVT can’t chose which laws to enforce and which to ignore. This appears to be a large commerical landlord, with access to professional advice. It’s surely not too much to ask that they get this bit right?

As to the wider consequences. First, I rather suspect this landlord (or, rather the agents) are urgently checking their demands again. But this is a wider issue. I know of many managing agents that take the same approach as in this case. I rather suspect it’ll be a while until this filters into the wider consciousness. Until then, this “balls aching” point is there to be taken.

The building in question was built in 1888 and consisted of a basement, ground and five upper floors. It was originally built as (in effect) six flats, with a housekeeper’s flat and three small shops.  The question was whether this could reasonably be called a house. The judge held that it could not. It was, in truth, a block of flats with three shop units. It was not a house which had been divided into flats (which would have been capable of being enfranchised).

An appeal to the Court of Appeal was dismissed. It was important to remember that the question was whether it could “reasonably” be called a house. It was clear that a purpose built block of flats could not reasonably be called a house.  Depending on what happens in Hosebay, there may be a further appeal.

The case involved 132 leases in a development consisting of three blocks. Variations were proposed so as to extend, inter alia, the repairing covenants of the landlord. At the time of the LVT application, it seems that 10 leaseholders objected to the variation. By the time of the LVT hearing, it was up to 13. That, it was said by the objectors, was more than 10% opposed and, therefore, the application should fail. The LVT rejected this, saying that 13 was “not more” than 10% and that 14 objectors would be needed.

The Upper Tribunal held that the first issue to decide was at what point in time the 10% objection had to be established. The UT held that the key date was when the LVT application was made and that anything after that – whether consent or objection – should be disregarded. Whether someone was objecting was to be assessed objectively. No more than 10% had actively expressed opposition when the application was issued and, hence, the appeal was dismissed.

The UT went on to recomend that the LVT should amend its application forms for variation applications to require applicants to specify how many leases were involved, how many actively consented and how many actively opposed, togehter with an indication of the need to produce evidence to prove that.

This may be one of the more esoteric points to be heard by the Court of Appeal on terms of a lease, but one of the issues in Newman v Framewood Manor Management Co Ltd [2012] EWCA Civ 159 was whether Mrs Newman was entitled to damages for loss of amenity for not being provided with a contractual jacuzzi but rather a sauna by the Defendant lessor.

While the facts may be of very limited general applicability, there are some general points about loss of amenity claims worth a look. There is also the extraordinary spectacle of an appeal on a claim worth, in the end, about £6,400 in total and where the claimant/appellant is represented by a QC and junior. One can only presume Mrs Newman was a very indignant leaseholder with considerable resources.

Mrs N took the lease of Apartment 18, on the first floor of a newly converted block in 2005. She had a previous lease of the same apartment from 1989. The Management Company was the lessor, and was a company with all the lessees as shareholders.

Apartment 18 was in the same block as the swimming pool, originally accessed via in internal stairwell. This ease of access to the swimming pool was, Mrs N asserted, one of the reasons she had taken that apartment in the first place. However, a design fault meant that there were condensation problems in the stairwell. In 2009 the Management Co. decided to block off the door from the stairwell to the swimming pool. This formed one part of Mrs N’s claim

The lease contained a covenant by the Management Co to keep common recreational facilities in good order and repair, including the swimming pool and a ‘whirlpool’. There had been a jacuzzi, but it was a domestic model and fell out of repair. The management Co. by a majority vote of the tenants, decided to replace it with a sauna, which took place. This was the second part of Mrs N’s claim.

There were further claims for damage done by tree roots to the tarmac of the drive, for failure to repair or replace gym equipment, lack of light to a steam room and damage to a wardrobe.

The company defended, in part on the basis of an exoneration clause in the lease which said:

“the … Company shall not be liable or responsible for any damage suffered by the Lessee or any servant agent or licensee of the Lessee or any member of the Lessee’s family … through any defect in any fixture conduit staircase or thing in or upon [Framewood Manor] or any part thereof … or through the neglect or fault or misconduct of any servant agent contractor or workman whatsoever employed by … the Company in connection with [Framewood Manor] except insofar as any such liability may be covered by insurance effected … by the Company.”

The insurance did not cover any of the matters claimed for by Mrs N.

At first instance, the Judge awarded £250 damages in respect of the steam room light, which had not been repaired for a long period and £1,202.50 in respect of the damage to the wardrobe. These do not form part of the appeal.

The Judge otherwise held that the exoneration clause ruled out liability for defects not covered by insurance.

On the doorway, while the condensation damp was in breach of covenant, there was no evidence of loss through diminuition in value to the apartment. The company had now obtained plans to re-open the doorway and on Mrs N accepting that this would be done within 2 months, no question of an order for specific performance. The exoneration clause ruled out damages for loss of amenity.

On the jacuzzi, while there was a breach, any damages had to take into account that the jacuzzi had been replaced by a sauna, which wholly covered the loss, though it was materially different. There would be no order for specific performance to replace the jacuzzi because the sauna was an adequate replacement and the costs of installing a jacuzzi had to be balanced against the finding of no damages.

The tree roots claim was rejected as there was no evidence that work could be done or what it would cost. It was likely that the tree was subject to a preservation order. This was trifling and not worth an award of damages.

The gym equipment claim was rejected on the basis that the equipment had now been replaced and Mrs N didn’t use the gym. Any loss was trifling.

Mrs N, rather astonishingly, appealed to the Court of Appeal.

Mrs N argued that the exoneration clause did not cover loss of amenity as it was not ‘damage’ within the meaning of the clause. Further, the clause did not cover breach of covenant, which was the cause of action here, being rather aimed at tort, such as under the Occupiers Liability Act 1957. If the Judge’s interpretation of the clause were right, it would make otiose the specific clauses for notice by the company that repairs needed to be done and obliging the company to do repairs within a reasonable time.

The company maintained that the judge was right and the exoneration clause only permitted liability for risks for which the company was insured. The clause was the mirror of the clause containing an obligation to insure.

The Court of Appeal found for Mrs Newman:

The clause has to be interpreted in the light of its factual matrix and this includes the fact that the Company is effectively owned by the lessees of all the apartments at Framewood Manor. The object of the clause is certainly to give them the benefit of any insurance held by the Company. However, the matter does not stop there. Effect has to be given to the clear wording of the exoneration clause. That wording makes it clear that the exoneration clause only applies where the Company is sued on the basis of vicarious liability. If the judge were right, the procedural provisions for giving notices of breach would be, as Toulson LJ pointed out in argument, completely circumvented and rendered otiose. The Company expressly undertook certain repairing covenants. It would be very odd indeed if, under later provisions of the lease, it was exonerated from liability for breaching those covenants unless it had taken out insurance.

Further, the term ‘damage’ did not extend to loss of amenity, as damage referred to physical damage.

The Court then turned to the appealed heads of claim.

On the doorway claim, Mrs N argued that the Judge should have made a declaration that, but for the belated undertaking to re-instate the door by the company, this was a case in which an order for specific performance would have been made, as this would be reflected in costs. The Court of Appeal declined to do so, on the basis that achieving the undertaking should be arguable in costs.

Mrs N argued that the Judge should not have found that the blockage was temporary, as it had been announced as being a ‘permanent solution’ to the condensation problem. It followed that there should have been an award of damages for loss of amenity during the blocked period as Mr & Mrs N had to walk around 19 metres round the outside of the building to get access, rather than directly via the internal stairwell. Mrs N put this at about £50 per week for the periods they were in occupation.

The Court of Appeal accepted that the blockage was intended to be permanent. The company had not investigated any other solutions to the condensation and did not do so until proceedings had been issued. Damages for loss of amenity followed:

As to damages for loss of amenity, it is not simply a question of compensating Mrs Newman for the short extra distance that the Newmans had to walk to use the pool. The loss of amenity also meant aggravation and inconvenience from having to walk outside rather than using an inside entrance. The Newmans had purchased their apartment specifically in order to have this facility. In those circumstances I would award damages for loss of amenity in the sum of £1,000 for loss of amenity. This represents in round terms the loss of amenity for one year at just under £20 per week.

On the Jacuzzi claim, Mrs N argued that the Judge was wrong not to award damages for loss of amenity, wrong not to make an order for specific performance or wrong not to make an award of damages in lieu of specific performance.

Mrs N submitted that it was not a ground to refuse specific performance that it might be too costly, or that the other shareholders were happy in a case of breach of covenant. The Judge’s finding that the sauna was a sufficient replacement for the jacuzzi was perverse and Mrs N had detailed her use of the jacuzzi in evidence. This was not a reason for refusing specific performance, or for refusing damages in lieu of specific performance. The starting point was the contractual obligation to keep the jacuzzi in good repair.

The Court of Appeal found that the Judge was right not to order specific performance. The costs of installing a new jacuzzi would be disproportionate to the loss of amenity involved and excessive. The situation was similar to the missing 18″ of depth of swimming pool in Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344, where an award of damages in lieu was made.

On damages for loss of amenity, the Judge had been wrong not to make an award. IN fact the Judge appeared to have considered the issue in terms of diminuition in value of Mrs N’s lease when discussing the sauna as a sufficient replacement. While the judge was right that there was no evidence of any diminuition in value resulting, he did not then reach a conclusion on loss of amenity.

While Mrs N’s evidence had not expressly stated that she did not regard the sauna as a replacement, a sauna and a jacuzzi are so different that acceptance could not be inferred from silence. A case that she had been adequately compensated by the sauna had not been put to Mrs N

In any event, the question of what her personal preferences were is not conclusive, any more than it was a question whether a majority of leaseholders at Framewood Manor were prepared to approve the change. The question, in my judgment, was also whether a reasonable person with knowledge of the circumstances in which people acquired leasehold interests in this sort of development would say that it was not a substitute for a jacuzzi.

In my judgment, a reasonable person would reach this conclusion. A sauna and a jacuzzi do not serve the same function. A sauna uses steam to induce perspiration in an enclosed space. A jacuzzi, on the other hand, uses warm aerated water and is fitted with a whirlpool, and is usually situated near a swimming pool. A jacuzzi would be much more useful as a facility to enjoy safely with one’s young children or grandchildren than a sauna. Both would require adult supervision but a child would clearly have to be older to use a sauna for any length of time than he or she would have to be to use a jacuzzi. The development at Framewood Manor was after all for private residential use by individuals and families. It was reasonable to expect that a resident might wish to entertain young children.

Damages for loss of amenity followed, assessed at £1000 for the 2.5 years to trial and £2500 for future continued loss of amenity.

On the tree root claim, this had apparently been dealt with by removing the affected tarmac and reducing the tarmaced area. There was no merit to a claim for loss of amenity

On the gym equipment claim, there was evidence that gym equipment had been out repair for a years and that Mr & Mrs N used, or would have used, the facilities. Damages of £500 were appropriate as Mr & Mrs N were not in residence for the full year.

The full damages award, from first instance and appeal was therefore:

And the answer to the question of the difference between a jacuzzi and a sauna? About £325 per annum, pro rata. But only if you really, really want a jacuzzi.

If nothing else, the case serves as a reminder of the difficulty in pursuing and low awards in loss of amenity claims, at least if brought as the sole head of claim.

So, to the recommendations:

1) RICS, ARMA and ARHM should review the guidance which they give on service charge consultation and, if improvements are necessary, should adopt the approach taken in the public sector

[OK, that doesn't seem too controversial. Lets see what the Supreme Court say when Daejan is argued later this year]

2) The Mayor should, when allocating Decent Homes money, assess the likely financial impact of major works on leaseholders

[Basically, the Decent Homes scheme has led to huge service charges in London - £50K isn't out of the question; for an example, see here. The problem with this recommendation is, though (i) Decent Homes has nearly finished (ii) leasehold properties aren't included in the Decent Homes work and (iii) the Gov has already sought to address this by extending the powers of authorities to offer advantageous financial terms to leaseholders in the Housing and Regeneration Act 2008]

3) Where the Mayor grants funding for housing improvement works (e.g. energy efficiency), he should consider the impact on leaseholders

[I can't imagine that the impact on leaseholders would, however, ever be a major factor - if the works need doing, e.g. to comply with new energy standards, then they need doing]

4) The LVT should review the different levels of legal support used by landlords and tenants and introduce appropriate protocols if leaseholders are found to be disadvantaged

[Hold your horses here. It is generally (but not always) true that landlords have solicitors and counsel, but that can't be a basis for changing the procedural rules or adopting protocols. A party is entitled to be represented by whomesoever they wish and you can't punish them for chosing to use counsel and solicitors. The LVT, let us not forget, is a judicial body to determine disputes fairly, not a quasi-audit body that landlords have to jump through hoops for. This is, potentially, a very dangerous suggestion]

5) The LVT and LEASE should expand their mediation and pre-application advice service

[Mediation, fine. Advice is not something the LVT should issue. LEASE can do it, but there is no chance of the gov. providing funding for this]

6) The Gov should look at making mediation compulsory

[Fine. More work for lawyers]

7) The LVT should review how its rulings are enforced and whether there is suitable redress for leaseholders

[Err. This isn't something the LVT can do. Only Parliament can give the LVT powers to enforce its own decisions and, if it goes that route, it's going to have to grapple with the thorny question of limitation periods in the LVT. No chance]

8) The Gov should review whether the barriers to achieving the Right to Manage mean that it is less effective in London

[By "barriers" they mean "qualifying criteria", that is to say, those in s.72, CLRA 2002 (and Sch.6 exceptions). You have to be a self-contained building or part of a building. Properties need at least 75% residential floor space, etc). The only one that would make any difference, in practice, would be to change the definition of "self-contained building" in s.72(3), 2002 Act, so as to provide, perhaps, for some sort of "materiality" provision, a la s.2(2), 1967 Act. Won't happen]

9) The Law Society should review the standard conveyancing protocol so as to ensure that prospective purchasers get more details about service charges.

[Good idea. But, given that very few leaseholders even bother to read the lease before they buy it, and given the pressure to get conveyancing fees as low as possible by not using solicitors, I can't see this making any difference. Tesco-law ain't gonna talk you through the nuances of s.20, LTA 1985]

A worthy report but, I suspect, likely to be ignored by the government. The good landlords/agents will adopt the recommendations, but the bad ones won’t. The real answer is (at least in part) to require managing agents to be properly regulated and to educate leaseholders as to what it is they are buying.

Ms Lawton is the leaseholder of a flat in 55 Elgin Crescent. In or around 2004, she paid certain service charge monies on account of major works, which, on her case, had still not been exhausted as she had still not received value for money in respect of the works done. The landlord disagreed.

First LVT case

Proceedings were issued in the county court and, in turn, transferred to the LVT. The LVT noted that Ms Lawton as arguing, inter alia, that there had been non-compliance with s.20, Landlord and Tenant Act 1985, such that her service charge liability was capped. At the pre-trial review, the LVT set that issue out as one of the issues for trial.

For reasons which are not entirely clear, the LVT which heard the final trial, did not allow Ms Lawton to advance this defence, holding that there was no jurisdiction to consider the point. It indicated that, if she wanted to run this argument, she needed to issue a fresh application. This she duly did (indeed, it was issued during the course of the first LVT case!)

Second LVT case

A PTR was held in the second case, at which the landlord indicated that it intended to argue that Ms Lawton was now estopped and/or barred by laches from running any s.20 argument. That issue was set down for trial and, ultimately, accepted by the LVT. They found as a fact that Ms Lawton had not raised any issues under s.20 until 2009, at the earliest and, accordingly, was now estopped / barred by laches from advancing that argument

The appeal

The Upper Tribunal allowed an appeal. The evidence was clear that s.20 had been in issue since 2004; that evidence had been before the LVT and it was impossible to see how they could have concluded anything else. That being so, there was no possible factual basis upon which an estoppel or laches argument could have worked.

The more interesting stuff

OK, so an LVT doing something mad isn’t that unusual (see, by way of the most recent – and extreme – example, this case). But, the more interesting arguments were the ones the President didn’t feel the need to rule on. Was the second LVT decision perverse in the Wednesbury sense, given that the first LVT had effectively told Ms Lawton to issue the application? Was it possible, as a matter of law, to be estopped from relying on protective legislation such as s.20, 1985 Act? In order for laches to apply, there must be no limitation period; so is there a limitation period for LVT claims? The UT(LC) heard argument on these points, but didn’t find it necessary to decide them. No doubt they’ll come up again, probably sooner rather than later.

In November 2007, through no fault of its own, the Appellant management company found itself with a gas bill in the region of £100,000. This arose because the Appellant had mistakenly been paying EDF Energy for the supply of gas, when EDF were not responsible for the supply of gas to the block (this was unsurprising as the developer had told the Appellant EDF supplied the gas). Moreover, EDF had been under charging. Even when EDF paid Total Energy (i.e. the company who had been supplying the gas) there still remained a shortfall of £100,000, which the Appellant demanded from its leaseholders under the service charge five months later on 28 April 2008.

Mr Burr argued before the LVT that he was not liable to pay the service charge because the cost of the gas supply had been incurred at the time it was supplied and therefore, as the demand for payment had been made for than 18 months after the cost had been incurred, the service charge was not recoverable. The LVT agreed. The Appellant appealed.

The Upper Tribunal allowed the Appellant’s appeal. The authorities showed that costs become incurred when they are either expended or become payable (see Brent LBC  v Shulem B Association Ltd [2011] EWHC 1663 (Ch) / Capital & Counties Freehold Equity Trust Ltd v BL plc [1987] 2 EGLR 49 / Hyams v Wilfred East Housing Co-Operative [2007] 1 E.G.L.R. 89); they did not become incurred merely because a liability to pay at a future date had arisen. Under s.20B costs would therefore be incurred on the presentation of an invoice or on payment. In this case the invoice had been demanded in November 2007 and the demand for payment had been made in April 2008. It followed that the service charges were recoverable.

Perhaps foreseeing that this definition could lead to more confusion in other cases (e.g. the invoice is served on the landlord 20 months before the service charge demand, but the cost is expended 14 months before the service charge demand), the Upper Tribunal indicated that this point will be a question of fact for LVTs to decide in each case on their own facts. The Upper Tribunal made clear, however, that where there was a long delay in the payment of the invoice and it appeared the landlord was prevaricating  to postpone the start of the 18 month period, other than in circumstances where there was a genuine dispute or the landlord had entered into negotiations to reduce the payment, the relevant date would be from the date of the invoice .

Comment

As a lawyer whenever I see a phrase in a judgment which says something like “this question is best left to the [insert lower court] to decide on a case by case basis” I always rub my hands with glee as this breeds uncertainty and therefore a need for lawyers.

However, as a common law lawyer I must accept that certainty is no bad thing really and I’m not sure the Upper Tribunal needed to leave the question open for LVTs to decide in this one. In Capital Counties, all the High Court said is that incurred is synonymous with both “becomes payable” and “expended” and it did not mean the liability had arisen. It didn’t say it can mean one or the other depending on the circumstances; it means both. Thus, surely if it means both, when an invoice has been received the cost is incurred and that should be the relevant date for s.20B.

Mrs Singer was the long leaseholder of a flat within a block of 30 flats. She, and her husband, had (as described by the lawtel note) “a long running service charge dispute” with the management company responsible for managing the block, albeit it appears that Mr Singer often conducted the litigation on Mrs Singer’s behalf.

This dispute resulted in the Singers making more than 30 applications to the LVT, the county and magistrates’ courts arising from the service charge. The Divisional Court noted, while the Singers had had limited success in the LVT, they had none in the county or magistrates’ courts and the applications rarely had any basis in law, tended to repeat arguments that already been unsuccessful and were often branded as being without merit. The appeals they pursued were also unsuccessful. The LVT, on their most recent application, had decided that the application was an abuse of process and vexatious. Not only that, Mr Singer had been prosecuted for harassment.

It followed that the Divisional Court had no doubt that the Singers satisfied the second limb of the test. The real question for them to decide appears to have been whether applications in the LVT were civil applications and if the LVT was an inferior court. Both questions were answered in the affirmative. The purpose of the LVT was to resolve proprietary disputes which would otherwise have been dealt with by the civil courts. Importantly the court noted that the county court could transfer proceedings to the LVT. Its functions were therefore plainly judicial in nature and it was also noted that the Court of Appeal had previously decided that the LVT and Lands Tribunal were courts for the purposes of Article 6 of the Convention (R (Sinclair Gardens Investments (Kensington Ltd) v Lands Tribunal [2005] EWCA Civ 1305).

The Divisional Court decided to exercise their discretion and make the order. There was no sign of the Singers’ behaviour abating. Despite the fact that it was Mr Singer who had mainly conducted the litigation, it was also appropriate to make an order against Mrs Singer because it was she who had signed the applications.

Comment

This decision would appear to be fairly uncontroversial. However, one can see that the damage had already been done before the Attorney General got involved and (even with this new rather interventionist Attorney General) it is likely to be a rare case where he deems conduct to be serious enough to warrant him getting involved.

However, in the county court there should be no need for the Attorney General to get involved. Under CPR3.11, the county courts have the power to make a civil restraint order against vexatious litigants. Of course the CPR is of no application in the LVT and the LVT procedure regulations do not give LVTs the power to make similar orders. It would appear therefore that the LVT’s hands are tied.

Yet, such orders are not a species of the CPR, but rather stem from the 19th century authority Grepe v Loam (1888) L.R. 37 Ch. D. 168. In Bhamjee v Forsdick [2003] EWCA Civ 1113, the Court of Appeal affirmed the principle that there is a power vested in every court (not just the High Court) to protect its processes from an abuse of process. This begs the question: if the LVT is an inferior court does it not have the power to make an order barring vexatious applicants from making future applications?

(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!