A Hawarden Kite

Forfeiture of (residential) long leases is a controversial subject: on the one hand, it’s clear that there has to be a practical and accessible route for landlords to enforce covenants, whether as to payment of monies or more general “management” covenants (e.g. stopping people just removing load bearing walls); but, on the other, the potential for an enormous (and almost always disproportionate) benefit to the landlord if the lease actually is forfeited is pretty hard to justify. Moreover, as a result of both the general drafting techniques in long leases and some [ahem] interesting Court of Appeal decisions, (discussed by us here) there is a pretty good case that a landlord can recover his legal and professional costs of pursuing forfeiture matters, even if the breach is trivial or if relief would be granted.

Now, in the Commonhold and Leasehold Reform Act 2002, Parliament attempted to introduce certain restrictions on forfeiture; for our purposes, we are concerned with s.168, 2002 Act. This relates to “non-money” breaches and provides that, before any notice under s.146, Law of Property Act 1925, can be served, the tenant must have admitted the breach or it must have been established by way of proceedings in the FTT(PC)/LVT, court or in arbitration . This was intended to act as  a deterrent to weak forfeiture claims; after all (it was assumed) who would litigated to prove a breach where relief was inevitable? Well, it hasn’t quite worked that way – to the contrary, there is now quite an industry in bringing forfeiture claims in the FTT, with landlords (and their lawyers) doing so safe in the knowledge that even a minor breach should entitle them to recover their legal and professional costs under the lease. I don’t criticise this per se, I just note that it might be thought not to be the most desirable or admirable aspect of the law.

Which brings us to Raja v Aviram[2016] UKUT 102 (LC). The respondent was the leaseholder of a flat in a building, the freehold of which was owned by the appellants. The respondent wanted to replace his boiler; this required a new exhaust vent and waste pipe to be installed. The lease provided that he could not cut the external walls without the consent of the freeholder. He made some attempts to contact them but was unable to do so and, accordingly, went ahead with the works.

The freeholder was unhappy (it seems) with inter alia, the quality of the works, and issued proceedings in the FTT. Perhaps surprisingly, the FTT found that there was no breach of covenant. Although the new pipe work did involve a cutting into the external walls, it appeared that his plumber had told him that the old pipework would be used; although he needed the consent of the freeholders for the works, he had made reasonable efforts to trace the freeholders and, as he was unable to do so, it was hard to see how he could ever obtain permission.

The Upper Tribunal allowed an appeal. New holes had indeed been cut into the external walls; this was a very trivial breach (indeed, in evidence, the freeholder indicated he would likely have consented). Even if one accepted that the respondent did not know what his plumber had done, he was responsible for the acts of the plumber on the normal rules of agency. The position might have been different if the respondent had given instructions that only the old pipes were to be used and the plumber had failed to follow that advice (see Hagee v Co-op [1992] 1 EGLR 57 – a very useful little case for people trying to avoid forfeiture claims as it has lots of helpful nuggets for leaseholders), but this was not the case. Consent had clearly not been obtained; it was not that difficult to get hold of an address for the landlord (e.g. the Land Registry address). Parliament had not provided that a failure to provide an address vitiated the requirement to obtain consent (cf ss.47, 48, LTA 1987, where there is a sanction for failure to provide an address). On the evidence and facts as found by the FTT, there could only be one result – a breach of covenant had occured.

In the final paragraph, however, the UT starts to deal with the wider issue. What is the point of these proceedings? It was a very modest breach and relief from forfeiture was overwhelmingly likely. Damages would almost certainly be nominal. But, these questions (i.e. ultimate remedy) were not for the FTT.

Comment

But perhaps they should be? What is gained by these proceedings? Is this really something that needed to take up a day in the FTT, a day in the UT and, perhaps in due course, a day in the county court? There are some tentative discussions going on at the moment about extending the jurisdiction of the FTT. Might this be an example of a case where, if the FTT had the full range of remedies open the county court, justice would have been better served?

 

About J

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.
Posted in Housing law - All, Leasehold and shared ownership.

3 Comments

  1. Great article, as usual. How can a lay person access decisions, such as the Hagee v Co-op you mention? How do I know whether it is a binding decision?

    • I’m afraid that the simple answer is that you don’t, unless you can access a library with law reports, or pay for one of the subscription services.

      Whether a decision is binding depends on a) the nature of the decision (a final decision, rather than a refused permission to appeal, for example), and b) the level of the Court/Tribunal. So Upper tribunal is binding on First Tier Tribunal (and county courts). High Court is binding on county courts and FTT. Court of Appeal binding on High Court/Upper Tribunal, and so on.

  2. yes I agree to an extent however I have long said that the FTT then LVT ought to be appointed to issue determination, under a statutory amendment to leases where say injunctions are introduced and those costs recoverable in the same was S146 and other costs. that leaves the Court with a technical determination, to, as it should, deal with judgement. Rather than the nuclear option landlords can enforce breaches with security for merited costs and for arrears under say £10000 a statutory amendment can require that only money claims can be issued. these too by statute allow for merited costs and not simply the paltry amount offered bearing in mind that a won case can easily hoover up several years of ground rent, or centuries of peppercorn rent. No wonder landlords are embroiled in fat commissions from insurers energy companies their agents and commercial arrangements with service providers. When blocks of flats are owned by owners companies or controlled by residents management companies, those costs then fall on the company and may not be recoverable as SC and the company rarely has a mechanism to collect from the mutual members (one of whom owes the arrears! ), pushing them to insolvency. Forfeiture can go or be curtailed however disputes arise and so enforcement and costs will stay and provision has to be made. I still propose the above on forfeiture free perpetuity less one year leases rather than strata titles, but what do I know !

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