Tag Archive for 'LVT'

Variation of service charges

Published
by
J
on 01/02/2010
in Leasehold and shared ownership and Uncategorized
. 2 Comments

Shersby v Grenehurst Park Residents Co Ltd LRX/142/2007 Upper Tribunal (Lands Chamber)

The appellant held a lease of a flat in a former mansion house. The wider estate comprised 17 such flats and a number of freehold houses and mews cottages. In total there were 40 residential units. All the units were obliged to contribute to the costs of repairing the main structure of the mansion house but, for the first five years of the lease, the service charge was capped by virtue of an agreement between the developer and the tenants.

It subsequently became clear that the cap could not be maintained as it was not sufficient to allow for the collection of any reserves. The freeholder house owners were not happy with this and pointed to the apparent unfairness of obliging them to repair not just their own homes but also the mansion.

The respondent – as freeholder and manager under the leases – was minded to move towards a scheme whereby the leaseholders would pay increased service charges. The lease did provide for the service charge percentages to be varied and the issue was whether or not the respondent had lawfully done so.

The appellant contended that it had not done so. In particular, he argued that the obligation to contribute towards the mansion was a collective obligation on both the leaseholders and freeholders and that the lease made no provision for dividing costs into separate “pots”. There were also sound policy reasons against construing a generous power of alteration to the respondent, if only because leaseholder were entitled to certainty regarding their proportion of the overall expenses. In addition, a subsidiary issue arose as to payment of insurance premiums.

The Upper Tribunal (Lands Chamber) dismissed the appeal. The lease entitled the respondent to vary the percentages payable if “in the opinion of the Manager” it was appropriate to do so. This had to be a genuine and bona fide opinion. The task of the Tribunal was to determine whether the respondent reached a lawful and reasonable decision. It was not the task of the Tribunal to substitute its own view but to ensure that the decision taken as one within the range of reasonable decisions.

The respondent took legal advice on the issue and advice from a surveyor. It gave detailed and careful consideration to the matter and came to a clear view. It was a bona fide decision. The fact that a different decision was possible was immaterial.

The insurance premiums had been paid between 1997 and 2004 and, in addition, had not been challenged at the time, whether in correspondence or in previous LVT proceedings between the parties. The charges had been admitted within the meaning of s.27A(4), Landlord and Tenant Act 1985 and were not capable of challenge in the LVT. In addition, premiums since 2004 were payable as charged.

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Unfair but not unsatisfactory

Published
by
J
on 06/10/2009
in FLW case note and Leasehold and shared ownership
. 10 Comments

Morgan and another v Fletcher and others LRX/81/2008 is an important decision of the Upper Tribunal (Lands Chamber) (aka the Lands Tribunal) on the scope of s.35, Landlord and Tenant Act 1987.

As you’ll remember, Part 4, Landlord and Tenant Act 1987 confers power on an LVT to vary a residential lease in circumstances where the “lease fails to make satisfactory provision” (s.35(2)) with respect to inter alia, the computation of a service charge payable under the lease (s.35(2)(f)). For these purposes, a lease fails to make satisfactory provision if it provides for a total service charge recovery of more or less than 100% of the amount that the landlord expends (s.35(4)).

In the present case, six of the eight lessees of residential flats brought an application under s.35, seeking a variation of the service charge percentages in their leases. They had two concerns:

(a) the total proportion of the service charges payable under the eight leases came to 116 per cent;

(b) the proportions paid by the leaseholders seemed to arbitrary, in that larger flats did not pay a larger service charge.

After the application was issued, the leaseholders of the other two flats (one of whom was also the freeholder) varied their leases so as to reduce their service charges, and therefore reduce the total amount recoverable to 100%.

Those two leaseholders then argued that the application should be dismissed, since the reduction in their service charges meant that the leases now made satisfactory provision for the computation of the service charges i.e. they now totalled 100%.

The LVT rejected this argument, relying on the fact that, notwithstanding that the service charges now totalled 100%, the apportionment was manifestly unfair. One of the two leaseholders held the largest flat but paid a significantly lower (by a factor of 16 in some cases) service charge than the other leaseholders.

The two leaseholders appealed to the Lands Tribunal. They contended that the only circumstances in which an LVT could vary a lease so as to amend the service charge percentages payable was where the total recovery exceeded 100%.

Judge Jarman QC found that s.35 was ambiguous and, hence, that he was entitled to have regard to the Hansard debates that surrounded s.35 and the subsequent amendments, applying Pepper v Hart [1993] A.C. 593, HL. Having so considered the debates (and the Nugee report 1985), the Judge held that s.35(4) had to be read as limiting s.35(2)(f) i.e. the only circumstances in which an LVT may vary the service charges payable under a lease are where the recovery exceeds or is less than 100%. If the percentage payable is 100% then the LVT is not empowered to vary the lease.

The Judge did express “some sympathy” for the respondents, but allowed the appeal. Although not cited, the Judge might have found some support for this approach in the earlier Lands Tribunal case of Southend-on-Sea DC v Skiggs [2006] 2 EGLR 87, where the Lands Tribunal also limited the power of the LVT to go behind an otherwise valid contract.

I’m not wholly persuaded that this is right. Why can an LVT not examine questions of apportionment? It can plainly give rise to “unsatisfactory provision” for the computation of service charges if an unfair apportionment is adopted. Suppose (to borrow an example from the case) that a freeholder converts a house into two flats, each of which pays 50% of the service charges. He reserves the roof space and air space to himself and then builds a third flat at the property. Can he leave that flat with a nill service charge liability? The answer would appear to be “yes” – and, the existing two leaseholders cannot ask an LVT to remedy this situation. Is that really right?

One final point. This was – yet another – appeal where only one party had the benefit of legal representation. The Upper Tribunal (Lands Chamber)  is now a court of record and its decisions have precedential value. It is wholly unacceptable that a body making such decisions should continue to hear so many appeals where only one party is represented. In the absence of a robust and well-funded legal aid system, surely there is a case for the Bar Pro Bono Unit / Law Works to promote their services to via the Lands Chamber. I’m only asking for them to include a leaflet amongst the paperwork which is sent to parties. There are plenty of people – including, I suspect, at least two of your NL team – who would be quite prepared to consider doing Lands Chamber cases on a pro bono basis if the Unit / Law Works would just ask…

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Leasehold update

Published
by
J
on 13/03/2009
in FLW case note, Housing law - All and Leasehold and shared ownership
. 2 Comments

A couple of things to leave you with on a Friday afternoon.

Leaseholders who are dissatisfied with the management of their properties are entitled to apply to a Leasehold Valuation Tribunal (LVT) for the appointment of a manager – Part 3, Landlord and Tenant Act 1987. The LVT may appoint a manager in a number of prescribed circumstances including, where there has been a failure to comply with the provisions of a relevant Code of Practice – s.24(2)(ac), LTA 1987.

The relevant Codes of Practice are prescribed by the Secretary of State (or the Welsh Assembly) pursuant to s.87, Leasehold Reform, Housing and Urban Development Act 1993.

As of 6 April 2009, there is a new Code for England. The Approval of Code of Management Practice (Residential Management) (Service Charges) (England) Order 2009 SI 2009/512 will mean that the “Service Charge Residential Management Code” (ISBN 085406 6438) will cease to be a prescribed code and will be replaced with the “Service Charge Residential Management Code” (ISBN 9781842191682).

The new code will – we hope – shortly be available for purchase from the Royal Institute of Chartered Surveyors. The fact that something with statutory force has to be purchased is, however, entirely unacceptable.

In Akorita v 36 Gensing Road Ltd LRX/16/2008 (.pdf), the Lands Tribunal considered whether or not the Appellant had been properly served with a notice under s.20 Landlord and Tenant Act 1985.

In 2005, the Respondent freeholder had indicated that it was minded to carry out significant repair works to the building. These works were “qualifying works” within the meaning of s.20 Landlord and Tenant Act 1985, such that, if the Respondent did not adequately consult, then the amount that it could recover by way of service charges was capped at £250 per leaseholder unless the LVT gave dispensation from the consultation requirements.

The Respondent engaged surveyors to prepare the s.20 notice. The notice was sent to the Appellant at Flat 3, 36 Bensing Road. It was known to the Respondent that the Appellant in fact lived in Forest Hill, London and not at Flat 3 (although she was the leasehold owner of the same).

The Appellant contended that she had not been served with the s.20 notice. The LVT found as a fact that the s.20 notice had been sent by post to the Appellant at Flat 3 and that this was service within the meaning of the lease and, hence, good service.

The LVT also found that, in any event, there was a “reasonable chance” that the Appellant had, in fact, received the notice.

The Appellant appealed to the Lands Tribunal.

The appeal was allowed. The flat was not the last known place of abode of the Appellant, nor was it her place of business nor was it an address that she had agreed could be used as a postal address. In any event, the was no evidence that the notice had actually made it to the flat as opposed to being left in the common parts. This was not a technical distinction but a point of substance. There was a real and significant difference between a letter which arrived in the communal areas and one which was actually put through the door of a demised property.

As regards the “puzzling phraseology” that there was a “reasonable chance” that the Appellant had received the s.20 notice, this was a decision reached without considering all the relevant material. It was unclear what a “reasonable chance” actually meant. Something could be less than 50% likely (and, hence, not proved on the balance of probabilities) and yet still have a “reasonable chance” of being true.

In the light of these decisions, the appropriate route was for the Lands Tribunal to redetermine the point. It was therefore found that the Appellant had not received the s.20 notice and the question of dispensation was remitted to the LVT.

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Right to Buy leases and service charges

Published
by
J
on 21/01/2009
in FLW case note, Housing law - All, Leasehold and shared ownership and right-to-buy
. 0 Comments

Leicester City Council v Masters LRX/175/2007 (links to a .pdf)

Pursuant to the Right to Buy provisions, the respondent purchased a leasehold interest in his flat in April 2005. As readers will know, where someone is purchasing a leasehold interest under the RTB provisions, the local authority will serve a notice under s.125 Housing Act 1985, setting out the anticipated level of service charge expenditure for the first five years of the lease. Save for increases for inflation, the s.125 notice operates to cap the level of service charge recovery during those first five years. .

In 2006, the local authority carried out a number of items of works which had been identified in the s.125 notice and sought to recover some £2,234.24 from the respondent. It appears (although the report is slightly unclear on this point) that some of this included a payment towards a reserve fund.

The respondent contended – successfully – before the LVT that there was no power under the lease nor under the s.125 notice to require him to make contributions towards a reserve fund. The local authority appealed.

The Lands Tribunal allowed the appeal. The terms of the lease did, correctly understood, permit the local authority to establish a reserve fund. One had to have regard to all the factual background, including the fact that the s.125 notice had made reference to a reserve fund and that the establishment of a reserve fund was in the best interests of both parties.

I’m not quite sure what to make of this, mainly because I didn’t find the factual background very easy to follow. Comments gratefully received.

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Procedure in the Lands Tribunal

Published
by
J
on 07/01/2009
in FLW case note, Housing law - All and Leasehold and shared ownership
. 1 Comment

The Lands Tribunal has handed down a number of important decisions in the last week that those working in the field of leasehold enfranchisement need to be aware of.

Earl Cadogan v Erkman LRA/56/2007 & LRA/68/2007 (links to a .pdf file) concerns attempts to get around the decision of the Court of Appeal in the Sportelli litigation ([2008] 2 All ER 220). Although Sportelli subsequently went to the House of Lords, it only went up on the question of “hope value” (see our earlier post about this here). The Court of Appeal decision is – arguably – of wider practical importance, since it confirmed that there was a general deferment rate of 4.75% for houses and 5% for flats and that the Lands Tribunal could and should give detailed guidance of this sort for the benefit of the LVT.

In the appeal, both parties contended both that the LVT had erred in applying the Sportelli deferment rate and that a different rate should have been applied. Evidence justifying departures from the Sportelli approved figures was filed on both sides.

The Lands Tribunal held that it had the power to allow this new evidence to be adduced by both parties but that, in the present case, it would not allow the evidence to be relied upon. At least some of the evidence was directed to undermine the decision in Sportelli and should not be allowed. The LVT (and Lands Tribunal) should only allow evidence which went to undermine the Sportelli approved deferment rates in exceptional circumstances.

For those working in enfranchisement in and around London, this will be a very welcome decision, since it means that we no longer need detailed expert evidence on deferment rates, save, perhaps, for a truly exceptional case. However, for those working outside of London, this decision will not be well received. There was already some considerable disquiet about having a deferment rate which was determined in litigation about  PCL (Prime Central London) properties applied to – say – rural Gloucestershire. But, the Lands Tribunal has spoken…

Halliard Property Company Ltd v Bemont Hall and Elm Court RTM Company Ltd and other appeal LRX/130/2007 & LRA/85/2008 (links to a .pdf file) concerns the power of the LVT to award up to £500 of costs against any party who has acted “frivolously, vexatiously, abusively, disruptively or otherwise unreasonably in connection with the proceedings.” (See Sch 12, para 8, Commonhold and Leasehold Reform Act 2002).

The appellant companies were freeholders of various properties. In one case, the appellant had been the respondent to a Right to Manage application which had been withdrawn and in the other appeal, it had been the respondent to an application for a lease extension. In each case, the appellant company was entitled to a sum (to be determined by the LVT) in respect of its costs.

In each case, the LVT pushed for the matter to be determined on the papers and, in each case, the appellant companies rejected this approach and sought an oral hearing on the question of costs. The LVT determined that – by requiring an oral hearing in a matter which the LVT thought was suitable for a determination on the papers – the appellant companies had acted otherwise unreasonably and ordered that the appellant company pay costs, not to exceed £500 in each case.

Unsurprisingly, the companies appealed these costs orders and their appeals were allowed by the Lands Tribunal. In order for a party to behave “otherwise unreasonably” it’s behaviour had to be akin to the previous words in the sentence – i.e. it had to be frivolous, vexatious, abusive or disruptive. Merely behaving in a manner which merited criticism was not, of itself, unreasonable behaviour. Regard should he had to the comments of Sir Thomas Bingham MR (as he was then) in Ridehalgh v Horsefield [1994] 3 All ER, to the effect that something cannot be unreasonable if it has a reasonable explanation and behaviour in reliance on the judgment of a legal practitioner is not usually regarded as being unreasonable.

In addition, a party had an absolute right to an oral hearing before the LVT and it was the paper based hearing which was the exception to the general rule. It would need truly exceptional circumstances before a party could be said to have acted unreasonably by insisting on the exercise of a statutory right.

Robust common sense all round.

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Stadium Housing to Appeal

Published
by
Francis Davey
on 30/09/2008
in Assured Shorthold tenancy and Housing law - All
. 27 Comments

Regular readers of this blog will have read our comments on (in our view) a fairly poor example of service charge management by an RSL, entitled On the Naughty Step. To my surprise the RSL in question — Stadium Housing — have decided to appeal the decision.

This should prove interesting as they appear (so my information goes) to be appealing against

The first ground will be of particular interest as many LVT’s have one or more HLPA members on the panel. The idea that such membership should normally require recusal would have far reaching consequences. The other two grounds of appeal may also produce interesting comment from the Lands Tribunal.
Doubtless the decision on appeal — when it comes — will be blogged here.
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On the Naughty Step

Published
by
NL
on 21/09/2008
in Assured Shorthold tenancy and Housing law - All
. 23 Comments

Or an RSL behaving badly, again. And this time it’s personal…

21 Press House, Press Road LON/00AE/LSC/2007/0292 [pdf], an LVT decision. The landlord, Stadium Housing Association, were facing an application over hefty service charges made on an shorthold assured tenancy which was Part VII temporary accommodation for Brent Council.

How did Stadium Housing decide to defend the case? By attacking the integrity of the Tribunal. Stadium pointed out that the chair, Nik Nicol, was a member of the Housing Law Practioner’s Association (yes, Hlpa!). Stadium, via their counsel Mr Grundy, alleged that:

the purpose of Hlpa was to promote the interests of tenants [...] and it was as plain as a pikestaff that an “ordinary member of the public” would perceive members of Hlpa as biased in favour of tenants.

Nik Nicol pointed out that he was not just a member, but had been on the executive of Hlpa for 9 years and helped to write the constitution. In addition, another member of the sitting Tribunal, Mel Cairns, was also a founder member of Hlpa and is currently on the committee.

Stadium, it was pointed out, had utterly failed to understand the difference between ‘promoting the rights of tenants’ (Hlpa aim) and promoting the interests of tenants. Finding in favour if a tenant without basis in evidence and law would not be promoting the rights of the tenant. In addition Hlpa’s code of conduct commits its members to professional behaviour. There could be little that was more unprofessional than judicial bias, which was what was being suggested.

Hlpa’s stated objectives were notably similar to those of most RSLs and would not look out of place on Stadium’s website, so it would be hard to see how a member of the public could perceive bias.

Mr Grundy’s submissions would mean that no member of Hlpa could ever hold judicial position, simply by that membership and that would make a mockery of the rigorous selection process. There was no bias or appearance of bias.

Just why Stadium might have taken this utterly ridiculous approach is clear in the rest of the Judgment. They were levying a walloping £129.72 per week service charge. However:

  • It was improperly apportioned under the tenancy agreement
  • Services had been changed without notification or consultation
  • Stadium could provide no breakdown of the charge
  • Charges weren’t audited, despite Housing Corp requirements
  • The charge was very high in comparison to others, for no reason, but it was usually paid by Housing Benefit, so nobody cared (except the applicant, who was working).
  • The contract was not individually negotiated so the Unfair Terms in Consumer Contract Regulations were engaged
  • The applicant was being asked to pay a charge for things that “no assured shorthold tenant in the private sector would even think of paying, even if the landlord were minded to try to impose it”.
  • On reasonableness of other charges, there was simply no evidence provided of the actual costs incurred by the respondent. The Tribunal wasn’t prepared to guesstimate on no evidence.

The result, service charges of £42.75 per week payable, a drop of £87 per week. This amount to be retrospective. No subsequent changes to the service charge made by the respondent were valid.

Oh dear, oh dear. Probably best not to impugn the professionalism of the Tribunal when it is your utter lack of professionalism that is about to come to light.

This challenge to service charges for temporary accommodation under Part VII is worth bearing in mind when, for example a client is facing a ‘rent arrears’ possession from temporary accommodation, if a service charge component is levied, at least. Stadium are far from alone in their cack-handed handling of the charge.

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Just passing

Published
by
NL
on 08/07/2008
in Leasehold and shared ownership and Various (non-housing)
. 6 Comments

I have been and remain extremely busy, but thankfully there has been nothing of significance to post about. I’m toying with a summary of the fascinating and now very, very lengthy comment thread on the Malcolm post, but that too will have to wait.

While I am here, may I just say that probably the last place I anticipated jaw-dropping procedural topsy-turvydom in a hearing was the Leasehold Valuation Tribunal. A long story that I can’t actually tell here, but damn, that was like Alice in tribunal-land. Or I am being naive?

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