I thought the landlord would lose Daejan v Benson, and, as you all know, the landlord won (see our note here). When NL flagged the next case up to me, I predicted the landlord would lose. And it won. Quite remarkably in my view, but, as is becoming clear, no-one should rely on my view. Least of all me.
In Brickfield Properties Ltd v Botten [2013] UKUT 133 (LC), the Upper Tribunal was grappling with whether or not a variation of a lease under the Landlord and Tenant Act 1987 could have retrospective effect. By way of introduction, as you know, the LVT has two primary powers to vary leases. The first (s.35, 1987 Act) applies where leases are defective in one or more of a number of specified ways. The second (s.37, 1987 Act) applies where there is sufficient qualified majority support for the variation. In either case, the power to make the variation is in s.38, which provides that the LVT may vary the lease in such manner as is specified.
The case concerned a development of 8 blocks of flats and the service charges were predicated on all flats contributing to the costs of, e.g. repairs. In 2006, one of the blocks enfranchised, with the result that the total recoverable service charge fell to just over 85%. The then landlord (Daejan) engaged in detailed negotiations with the remaining leaseholders, seeking to increase their service charge percentages. Throughout the process, Daejan made clear that, absent consent, an application to the LVT would be made. This took at least 4 years and resulted in only 3 leaseholders agreeing the proposed variations. In January 2010, Daejan granted a 999 year head-lease to the appellant and, in effect, dropped out of the picture.
The LVT application was duly made. The LVT had no problem with varying the percentages so as to now add to 100%. The problem was when this should take effect from. The landlord argued for 2006, i.e. the date of the enfranchisement. The LVT held it had no power to back-date a variation and provided for the variation to take effect from the date of their decision.
The Upper Tribunal allowed an appeal. The purpose of the variation provisions was to cure defects. In that regard, there was no reason why the parties should have to suffer a defect pending an application. Further, the parties were free to agree a retrospective variation and there was no reason to interpret the statutory power any less generously. Finally, the statutory wording suggested that there was no such restriction.
I wouldn’t have predicted this, I must say. I’m not entirely sure it’s going to be very common to make a retrospective variation though. I say that because, of course, s.38 prohibits variations which cause undue prejudice to any party (generally a leaseholder), and, as discussed in this case that isn’t something to be just swept aside. Still, it’s interesting to know that we can now go back in time with our variations.