Some quick notes on leasehold related cases.
Termhouse (Clarendon Court) Management Ltd v Al-Balhaa (2021) EWCA Civ 1881
The First Tier Tribunal has no power to enforce its decisions. This has to be done via the County Court. In some circumstances this can be done via an application under section 176C of the Commonhold and Leasehold Reform Act 2002 or section 27 of the Tribunals, Courts and Enforcement Act 2007. However, the Court of Appeal has made clear that this does not apply to determinations on service charges under section 27A Landlord and Tenant Act 1985. In this appeal, the landlord had sought to apply a dtermination on service charges via section 76C and the County Court had allowed it. The Court of Appeal was clear that it shouldn’t be.
It seems to me that, even assuming that it is open to the FTT to say what a tenant actually owes rather than merely what has properly been charged, such a decision will be no more than declaratory, and in fact I should be surprised if the FTT went so far as to purport to order a tenant to make a payment in respect of outstanding service charges, let alone to require the tenant to do so within any particular time frame. Even, therefore, in a case in which the FTT expresses a conclusion on what the tenant currently owes, the landlord will not be able to resort to either section 176C of the 2002 Act or section 27 of the 2007 Act for enforcement. If needs be, the landlord should issue new proceedings in the County Court in which the FTT’s decision will be binding on the parties.
In the circumstances, it seems to me that the FTT decision can no more be enforced under section 176C of the 2002 Act than it can under section 27 of the 2007 Act. It neither orders Mr Al-Balhaa to make any payment nor requires him to do or refrain from doing anything else. It is declaratory in nature and so not susceptible to enforcement pursuant to either section 176C of the 2002 Act or section 27 of the 2007 Act.
So, the proper route is a fresh money claim in the County Court.
Kyriacou v Linden (LANDLORD AND TENANT – BREACH OF COVENANT) (2021) UKUT 288 (LC)
The FTT had refused Ms Kyriacou’s application for a determination of breach of lease against the leaseholder, Ms Linden, and then made a rule 13 costs order against Ms K for £35,841. Ms K appealed both the finding on breach of lease and the costs award.
The Upper Tribunal allowed the appeal in part. One of the allegations of breach of lease was a failure to take out insurance as required. This had not been done at the correct time, but had been taken out shortly before the application was issued. The FTT had been wrong to consider that because the breach had been remedied, there was no reason to make a determination of breach. There had been a breach and that was the finding the FTT should have made.
On costs, given the finding on breach of lease, the FTT’s decision could not stand. The Upper Tribunal carried out is own consideration. Ms K’s applications on breach of lease were indeed conducted unreasonably to an extent.
I have no doubt that Mrs Kyriacou’s conduct in bringing the application before the FTT was unreasonable in certain specific respects. In particular, it was unreasonable to raise for a second time allegations about the storage of dustbins when the same allegations (although relating to different occasions and different sub-tenants) had so recently been fully considered and rejected by the FTT in July 2019. It was also unreasonable to include in an application issued in March 2020 allegations about builders depositing rubbish in the front garden in 2017 (one of the allegations which was struck out) when Mrs Kyriacou had had the opportunity to raise those allegations when she applied to the FTT in 2019.
In the context of the allegation that rubbish and refuse bins were being deposited unlawfully in the entrance way, I bear in mind that the root cause of that problem, which has persisted for more than 20 years, is Mrs Kyriacou’s refusal to give effect to the right granted to Ms Linden by the lease to use an area prescribed by Mrs Kyriacou for that purpose.
Ms K was ordered to pay Ms L £10,000 in costs under Rule 13.
There were two issues in this appeal. Whether section 20 Landlord and Tenant Act 1985 consultation requirements had been complied with on major works, and whether the landlord’s costs of running as a limited company was recoverable under the service charge.
On the consultation, the landlord had not sought a quotation from the contractor put forward by leaseholders before serving the Notice of Estimates on the leaseholders. It had subsequently sought a quote from that contractor, but rejected it as not giving the information and detail sought. The FTT, somewhat confusingly, had found
Whilst there may have been some issues regarding the consultation process and the timescales over which it was conducted, the Tribunal notes nevertheless, that the landlord had endeavoured to carry out some consultation and evidently when some resistance was expressed by the lessees regarding the amount of the estimates, the landlord did obtain further quotes. (…) On the basis that the work carried out is accepted as not being wholly excessive, and in the absence of any specific challenge by the Applicants to the actual costs, The Tribunal finds no evidence that the interests of the Applicants may have been materially prejudiced by any shortcomings which may have occurred through the Section 20 consultation process.
The Upper Tribunal allowed the appeal on this issue. The requirements of Section 20 were strict and sequential.
There is no room in the clear wording of the provisions for flexibility in their interpretation, and no legal precedent for a flexible interpretation. They are anything but woolly.
Whilst paragraph 3 of Schedule 4, Part 2 of the Consultation Regulations does not specify a time when the landlord must try to obtain an estimate from the tenant’s nominee, it is clear that the nominee’s estimate if provided must be included in the notice of estimates. That means that a notice of estimates cannot be given until the landlord has tried to obtain a quote, and the notice of estimates in this case did not comply with paragraph 4 because the landlord had not complied with paragraph 3.
The charge to the leaseholders was capped at £250 each.
On the managing agents fee for running the management company, clauses 6 and 7 of schedule 4 of the lease included under the service charge
6. All other proper expenses (if any) incurred by the Lessor in and about the maintenance and proper and convenient management and running of the property.
7. The fees and disbursements paid to any Managing Agents Accountants and Auditors appointed by the Lessor in respect of the property…
Neither of these encompassed the costs of managing the company.
Clause 7 is a covenant to pay fees and disbursements incurred in the management of the property, and not in the management of the landlord company. I do not see that it is possible to construe the clause as Mr Groves argues and accordingly I find that the appellants are not liable to pay the managing agents’ fees for running the landlord company.
Wynne v Yates & Anor (LANDLORD AND TENANT – SERVICE CHARGES) (2021) UKUT 278 (LC)
This was the landlord’s appeal from the FTT’s refusal to give dispensation from section 20 consultation requirements. The landlord had consulted on works to redecorate the exterior of the building. A contractor had been appointed and started works, but had been unable to complete them. The landlord had appointed other contractors to finish the works, and to carry out some roof repairs which it had become evident were required during the works. The leaseholders argued that the landlord should have consulted again before appointing the second contractors and increasing the scope of works. The landlord applied for dispensation and the FTT refused it, saying:
“We decline to grant dispensation. The Tribunal believes that the Respondent could have consulted with the Applicants, even some form of informal consultation would have been expected. No proper explanation has been provided as to why this did not take place and we are satisfied that the Applicants were prejudiced by this failure.”
The Upper Tribunal set aside this decision. Firstly, there had been no evidence of prejudice to the leaseholders in the failure to consult, and this was absolutely required, as per Daejan Investments Ltd v Benson (2013) UKSC 14. But further, there was no requirement in these circumstances for a second consultation.
The FTT assumed without discussion that the landlord should have consulted afresh about the additional work, but I see no reason why a fresh consultation was necessary. I explained above that compliance with the consultation requirements gives no guarantee to the tenants about the eventual price and scope of the work. The consultation process requires the presentation of estimates and a choice between them; it does not require that estimates are not exceeded, as anyone who has engaged decorators or builders knows does happen. And the consultation process does not guarantee that the contractor whose estimate is chosen will be able to finish the job. The consultation requirement applies to a “set of works” (Phillips v Francis (2014) EWCA Civ 1395), and if a contractor engaged to carry out a set of works is unable to complete it there is no requirement for a fresh consultation about the same set of works, even if the price is going to go up (as it normally will if the original contractor gave the cheapest quote), and even if the tenant’s contribution is going to rise by more than £250.
The same can be said where the work to be done turns out to be more than expected and more than the estimate covered – again, we all know that it happens.
There will be cases where the project takes an unexpected turn so that the new work cannot be said to be part of the same “set of works”. Whether that is the case will be a matter of fact and degree. If it is, fresh consultation is required, although where new work is found to be necessary while the original project is under way then a fresh consultation will often be impracticable and there will be an application for a dispensation.
The roof repairs did not amount to a ‘fresh set of works’. The original Notice of Intended Expenditure stated “External redecoration, repairs to roof and associated works”, even if the extent of the roof repairs had become larger. But if the Tribunal was wrong on this, dispensation would have been granted anyway.