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By J
06/06/2012

Leasehold round up

Ok, sorry about this. I’ve been meaning to do a LVT/UT round up for some time and kept putting it off to allow me to work/sleep/see my wife, etc. So now I’ve got loads of cases to do. Here goes.

Court of Appeal

In Westbrook Dolphin Square Ltd v Friends Life Ltd [2012] EWCA Civ 666, the Court of Appeal overturned the earlier High Court decision (our note, here) concerning the consequences where a collective enfranchisement claim has been withdrawn or otherwise abandoned. The facts were set out in our previous post, but, for ease of reference:

… Friends Provident owned the freehold of Dolphin Square, London. It contained over 1200 flats, together with leisure facilities. A headlease as granted to a third party who, in turn, had granted an underlease to Westbrook. Then, under that, Westbrook had granted leases of the flats to some 600-0dd companies. Those companies were partially owned/controlled by Westbrook.

The companies served an initial notice, naming Westbrook as the nominee purchaser. Friends Provident served a counter-notice, in which they disputed the entitlement to collective enfranchisement, taking a number of points, including that the leases to the companies were a sham. Proceedings were issued and subsequently discontinued shortly before trial.

A year or so later, the companies served a new initial notice, in largely the same terms as the original notice. Friends Provident served another counter-notice, taking almost entirely the same points as before. Westbrook issued proceedings seeking to determine that it had the right to enfranchise the property.

The High Court held that there was no right to bring the second claim, since CPR 38.7 prohibited a second claim from being brought where it was on substantially the same facts to the first unless the permission of the court was obtained. The Court of Appeal allowed an appeal. CPR 38.7 simply did not apply to this situation. Where there had been an abandoned enfranchisement process, the Leasehold Reform, Housing and Urban Development Act 1993 contained its own sanctions/penalties for a second claim. In particular, there was a one year bar on serving a further notice of claim (s.13(9)) and the tenants would be liable for the costs of the abandoned process (s.29). It followed that the 1993 Act was a self-contained code and there was no need to invoke the general rules under the CPR.

UT(LC): procedure

In  LB Havering v Macdonald [2012] UKUT 154 (LC), the UT(LC) provided helpful confirmation that the approach on applications for permission to appeal for insufficient reasons adopted by the civil courts (see English v Emery, here), applies with equal force to the LVT . The LVT had, during the course of a service charge dispute, disallowed certain costs relating to the provision of television signals and had made an order under s.20C, LTA 1985, preventing the landlord from recovering its legal costs. In assessing the fair costs, the LVT made use of its role as an expert tribunal with expert knowledge. The appellant sought to appeal on the basis of the allegedly inadequate reasons given by the LVT.

After a review of the relevant authorities, the UT(LC) held that, although the LVT could not review its own decision it could, when faced with an application for permission to appeal on the basis of insufficient reasons, amplify and explain its reasons. Those additional/amplified reasons must emerge from the evidence that was presented to the LVT and have been available for comment by the parties.

Country Trade Ltd v Hanton [2012] UKUT 67 (LC) is a very odd case. The parties were involved in a service charge dispute. Before the LVT hearing started, the landlord applied for an adjournment on the basis that there was an outstanding appeal to the UT(LC) that it was involved in which it had been criticised by the LVT for a number of things that were now to be considered in this case. In addition, two of the LVT panel members in the first decision was now sitting on the second case. The application to adjourn was refused and the case resolved largely against the appellant.

An appeal to the UT(LC), alleging bias on the part of the second LVT, was allowed (!!). In the first case, the LVT had rather put the boot in to the landlord, criticising the use of, inter alia, linked companies to provide services. That decision had been throughly criticised on appeal (see our note here).

The appeal was allowed in this second case as well. The decision contains a very careful overview of the approach to be taken by the “fair-minded and informed observer” (who is the person assessing an allegation of bias). That person would be aware that there was a limited pool of LVT members and that hearing dates are not lightly to be set aside. He would also be aware that it would be likely that a landlord or management company may find itself appearing before the same LVT on a number of occasions and that the LVT may start to form provisional views about the landlord or his agents and that there was nothing per se objectionable about this.

The difficulty was that, in this case, the LVT had been so critical of the landlord in the past and that decision had been throughly disapproved on appeal. Two of the LVT members in the second case had been parties to the LVT in the first case. There was no reason for the parties to think that the LVT had changed its view. In addition, the factual decisions were very similar in the second case to those in the first and the procedure adopted by the LVT when dealing with certain aspects of the evidence was unsatisfactory. The LVT should have adjourned the case and allowed a differently constituted tribunal to deal with it; in short, there was a real possibility that the fair-minded and informed observer would consider that the second LVT was biased and the appeal had to be allowed.

UT(LC): RTM

In Alleyn Court RTM v Abou-Hamdan [2012] UKUT 74 (LC), the UT held that a mortgagee in possession was a landlord for the purposes of the Commonhold and Leasehold Reform Act 2002. I won’t set out the facts and reasoning as it’s (a) tortuous and (b) appears to be on its own facts. Perhaps more importantly, the UT(LC) discussed the circumstances in which a notice would be invalid under the RTM process. The RTM process involves service of a claim notice on, inter alia, all the tenants. In the present case, there had been two such notices. The first was considered by the RTM company to be invalid as they had not served it on all the tenants and so they served a second. The UT noted that, although there had been a failure to comply with a mandatory requirement to serve all tenants, that did not necessarily make the notice invalid.

UT(LC): Legal Costs

In Re: 36 Culpepper Close [2012] UKUT 102 (LC), the LVT had found for the landlord on the substantive issues, but held that it was not entitled to recover the legal costs under the terms of the lease as it did not use external solicitors, but had in-house lawyers. In effect, it held that the legal costs charged by the in-house lawyers were notional costs (i.e. £150 per hour) and that, at most, only the actual costs would be recoverable (i.e. a proportion of the salary of the solicitor involved).

The UT(LC) disagreed. It was trite law that there was no basis for distinguishing between the costs of an in-house lawyer and an external one: Henderson v Merthyr Tydfil UDC [1900] 1 QB 434, as applied over the subsequent century. The costs were allowed in full.

UT(LC): Service charges

Finally (phew!) we come to Solitaire Property Management v Holden and others [2012] UKUT 86 (LC), a mammoth of a decision, where almost nothing of the LVT decision is left standing. Which isn’t surprising, as it’s a terrible decision. The LVT had held that:

(a) the landlord had wrongly taken money from the reserve fund to cover shortfalls in income and they should now refund this money to a third party, the LVT appointed manager;

(b) no service charges were payable at all, owing to there having been no valid compliance with s.20B(2), LTA 1985 (i.e. the landlord had demanded the on-account service charges properly, but not the balancing charges, so nothing was due);

(c) if that was wrong, then certain “fall back” figures were provided for what was reasonable for each head of expenditure (which, for the most part, were relatively minor reductions)

(d) the landlord was to pay £500 in costs to the tenants as it had been frivolous, vexatious or otherwise abusive in its conduct of the case.

The UT held that the LVT had erred in even considering the alleged use of the reserve fund; whilst it had jurisdiction to decide what was a reasonable sum to set aside in the reserve fund, what had been done with the money was irrelevant. In particular, the LVT seemed to have thought that it could engage in a quasi-trust claim, trying to trace the trust funds and, if they had been improperly spent, order them to be reimbursed. There was simply no power for the LVT to do this. In any event, even if that was wrong, the LVT had, on the evidence, reached an unsustainable conclusion. The lease expressly permitted the reserve fund to be used to meet temporary deficiencies, something which the RICS Service Charge Code also authorised. There was no suggestion that the landlord had run off with the money or otherwise converted it to its own use.

On the s.20B/demands issue, the UT(LC) had now settled beyond doubt that s.20B did not apply to on-account payments (see our note, here). There was no basis for coming to a different conclusion and the LVT should not have even considered doing so. The balancing demands were not compliant with s.20B and the landlord rightly had conceded those before the LVT.

The order that the landlord pay £500 in costs was also overturned. The reason for the award was that the landlord had produced evidence late; but, as the landlord had explained, that was because it did not get the evidence from its accountants/auditors on time. That was regrettable, but was hardly frivolous, vexatious or abusive.

 

J is a barrister. He considers housing law to be the single greatest kind of law known to humankind and finds it very odd that so few people share this view.

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