Some quick notes on various recent (ish) Upper Tribunal decisions

Crisplane Ltd v Plymouth Community Homes Ltd (LANDLORD AND TENANT – SERVICE CHARGES – liability of lessee under right to buy leases to contribute to cost of repairing roof – s.139 and Sch.6, para 14, Housing Act 1985) (2024) UKUT 15 (LC)

Where two right to buy leases of flats in a building did not include a requirement for the lessee to pay a share of the lessor’s costs of repairing the roof, and in one instance put the repairing obligation for the roof on the lessee) the statutory obligation on the landlord to repair structure and exterior (paragraph 14 of Schedule 6 to the Housing Act 1985) did mean that the landlord was obliged to repair the roof.

However, that did not give rise to an implied obligation on the lessee to pay a share of the costs where that was not included, or explicitly excluded, in the service charge provisions in the lease.

NB – the successful appeal of the FTT decision did not overturn the County Court money judgments based on the FTT determination. Those must be separately dealt with.

Tower Hamlets Community Housing Ltd v Leaseholders of Painter House (LANDLORD AND TENANT – VARIATION OF LEASE – computation of service charge in a lease – the construction of the ‘gateway’ provision of section 35(2) of the Landlord and Tenant Act 1987 – exercise of discretion – whether variation sought would be reasonable or would substantially prejudice the leaseholders) (2024) UKUT 37 (LC)

This was an appeal of the FTT’s refusal to order a variation of lease terms, specifically the service charge apportionment on the landlord’s application under s.35 Landlord and Tenant Act 1987.

This was a block of 24 flats, with a commercial unit on the ground floor. The leases provided that the leaseholders pay 1/38th of the overall service charge. (It is not clear why, but suggested that a larger block of 38 flats intended had been divided into two self contained blocks during development.). Except two of the leases provided for payment of ‘a fair proportion’ of the charge. The building as defined included the commercial unit.

Tower Hamlets applied to alter the provision to be 1/24th. The FTT held that section 35(2)(f) did not apply because not all the leases expressed ‘a proportion’ within the meaning of s.35(4) and the service charge provision was workable.

The Upper Tribunal reversed the FTT on the application of s.35(2)(f). The FTT was wrong in finding that ‘proportion’ in s.35(4) meant only numerical proportions. It was evident that 16/38ths being apportioned to the two flats with the ‘fair proportion’ leases would be unfair.

However, the UT refused to vary the leases.

The commercial unit had to be considered (although not yet leased). It would not be right for the leaseholders to be solely paying for the building costs where that would also benefit the commercial unit,

Tower Hamlets made assertions that leaseholders would not be charged such costs, despite that being the effect of the variation sought, but also, and simultaneously, asserted that as a registered provider, payment of service charges by leaseholders supported its charitable objects. This did not get them very far.

61. The appellant is running a business and of course has to cover its costs. But why the costs of maintaining its office should be the responsibility of this small group of tenants, rather than being funded by its overall income from a few thousand lessees, is not explained and cannot be justified.
62. The variation sought by the appellant would make the residential lessees of Painter House responsible for the whole of the landlord’s expenditure (as defined in clause 7(5) of the leases) on the ground floor offices. That would be a bizarre arrangement. One can imagine the estate agent’s particulars should the appellant choose in future to let the Commercial Unit: “No service charge, the flats above pay for everything!”; and one can imagine the effect of that arrangement upon the rent that the appellant might charge.

So, the variation sought would be likely to substantially prejudice the leaseholders and would be unreasonable (s.38(6) LTA 1987.

Clemente v Mindmere Ltd (LANDLORD AND TENANT – ADMINISTRATION CHARGE – recovery of costs as an administration charge when incurred) (Rev1) (2024) UKUT 50 (LC)

An appeal on a determination of reasonableness of an administration charge.  Mindmere had brought a money claim for unpaid service charges and ground rent (the claim expressed as being with a view to service of a s.146 notice and forfeiture). The proceedings had been transferred to the FTT to determine the service charges. Mr Clemente was debarred for procedural failings. The FTT decided the charges, and then, with the FTT judge sitting as a county court judge, there was a judgment on money claim, interest and county court costs. The FTT then dealt with Mindmere’s costs in the FTT. The FTT is a no cost jurisdiction, but the FTT determined that costs of £15,563 would be reasonable and payable if demanded as an administration charge under the ‘s.146 costs’ provision of the lease.

Mr Clemete appealed on the basis that in choosing to issue a money claim for service charges and ground rent amounted to a waiver of the right to forfeit on the basis that doing so could only be consistent with the lease continuing.

The UT noted that section 81 Housing Act 1996 required a determination of a court or Tribunal on service charges before a s.146 notice could be served (save where the tenant admitted the charges due). But did this extend to a money claim, rather than a Tribunal decision or declaration in the county court?

London Borough of Tower Hamlets v Khan (2022) EWCA Civ 831 contained no suggestion that a money claim might amount to waiver, and Cussens v Realreed Limited (2013) EWHC 1229 suggested that an action for damages (other than non-payment of service charges) could equally found a s.146 notice as well as a declaration of breach.

The letter before claim had made the landlord’s intentions clear and there had been no further demands for rent or service charges.

There was no direct authority on the point, perhaps surprisingly, but the appeal was dismissed.

Connell & Anor v Beal Developments Ltd & Ors (LANDLORD AND TENANT – SERVICE CHARGES – striking out application) (2024) UKUT 54 (LC)

Mr Connell and Ms Lynn had applied to the FTT for a determination of their service charge. The FTT struck out their application on the basis that other leaseholders of the building had applied for a determination of service charges for the same period previously and that had been made. The FTT also struck out the application insofar as it addressed two subsequent years to the previous one, as it raised similar issues.

Mr Connell and Ms Lynn appealed.

The UT held that the FTT was wrong. While the strike out of an overlapping application by one of the leaseholders who had been a party to the previous application was merited, the FTT should not had struck out the appellants’ applications

The short answer to the FTT’s approach is that every leaseholder is entitled to a determination by the FTT of the service charges that they are liable to pay. That right cannot be removed from them by a decision made by the FTT about the service charge payable by someone else, whether or not the expenditure on which both service charges are based was the same. That right is conferred by section 27A, and it is protected both by the common law right to a fair hearing and by Article 6(1) of the ECHR, which states: “In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law”.

The FTT considered that the appellants’ 2020 application would “(in effect) raise an appeal” against its determination of Mr Fernie’s 2018 application. But the remaining issues to be determined in the 2020 application are different from those in the 2018 application, in that they concern the sums payable by the appellants rather than by Mr Fernie, and the appellants had the right to rely on evidence which they would produce, which might be different to the evidence considered by the FTT in the 2018 application. Even if the material put forward by the appellants turned out to be the same as the material previously relied on by Mr Fernie, that would not deprive them of the right to have their own application determined.

Appeal allowed. However, the appellants should have close regard to the previous determination and may be at risk of rule 13 costs if the same issues ass already decided were raised without more.

Adriatic Land 5 Ltd v Long Leaseholders at Hippersley Point (LANDLORD AND TENANT – SERVICE CHARGES – BUILDING SAFETY ACT 2022) (2023) UKUT 271 (LC)

On an application by the landlord for dispensation from section 20 consultation requirements, the Upper Tribunal held that the FTT had erred in imposing as a condition of dispensation that the landlord be precluded from putting the costs of the application through the service charge.

No prejudice to the leaseholders had been found by the FTT, pursuant to Daejan Investments Ltd v Benson (2013) UKSC 14.

The landlord was not ‘in default’, or seeking retrospective dispensation, but seeking to make the building safe as quickly as possible.

In the present case, and on the findings of the FTT, the position of the Appellant was about as blameless as it could be. In addition to this, the FTT had identified that the Appellant was, in making the Dispensation Application, not seeking to avoid its responsibilities, but was seeking to ensure that an unsafe building was made safe as quickly as possible. In these circumstances I find it difficult to see how the making of a dispensation order was, on the facts as found by the FTT, properly described as a forbearance. It is also difficult to see why it was unfair to the Respondents that the Appellant should be able to recover the costs of the Dispensation Application from the Respondents. Given the circumstances in which the Dispensation Application came to be made, as those circumstances were found by the FTT, it seems to me that the Appellant’s expenditure on the costs of the Dispensation Application (the Costs) might legitimately be described as essential expenditure for the benefit of the Building and the safety of the Respondents. This does of course assume that the amount of the Costs was reasonable, but that question would be one for any subsequent challenge to the amount of the Costs based on Section 19 of the 1985 Act.

There was no general principle that a costs condition should follow an application for dispensation.

However, paragraph 9 of Schedule 8 of the Building Safety Act 2022 did apply so far as the costs of the dispensation application were legal costs incurred in relation to a liability for a relevant defect. Paragrpah 9 prevented any such legal cost being put through the service charge.

The Costs are the Appellant’s costs of the Dispensation Application, representing legal and (it may be) other professional services rendered to the Appellant in relation to the Dispensation Application. As I understand the position, the Works comprise or, at the least, include works required to deal with a relevant defect or relevant defects, within the meaning of Section 120. There was no argument to the contrary from Mr Allison. The Appellant is the person liable or potentially liable to remedy the relevant defect or defects. I assume that such liability arises under the terms of the leases of the Flats and, at least potentially, also under the terms of the 2022 Act. The Appellant thus has a liability or potential liability incurred as a result of relevant defects, within the meaning of Paragraph 9. As I have already noted, it is not necessary, given that this liability or potential liability arises under the terms of the 2022 Act and as a matter of contract, to decide whether the reference to liability or potential liability refers only to a liability or potential liability arising under the 2022 Act or includes a liability or potential liability arising from another source.

While the dispensation application was made before the BSA provisions were in force on 28 June 2022, the effect of paragraph 9 was that any charges that came to be paid after 28 June 2022 were caught, even if demanded before that date and in respect of costs incurred prior to that date, as paragraph 9 addressed payability.

The upshot was that any such charges, even if incurred and demanded before 28 June 2022, if already not paid, ceased to be payable on 28 June. Adriatic Land 3 Limited v Residential Leaseholders of Waterside Apartments (MAN/30UG/LSC/2021/0044) distinguished as only addressing charges already paid.

RM Residential Ltd v Westacre Estates Ltd & Anor (2024) UKUT 56 (LC)

The Upper Tribunal held that the FTT had erred in refusing to grant dispensation from s.20 consultation requirements because the works concerned did not appear to the FTT to be urgent.

The Supreme Court in Daejan has made it clear that whether there was prejudice to the tenant is “the main, indeed normally, the sole question” for the FTT. The only mention of urgency in Daejan is in paragraph 56 where urgency is given as an example of a reason why a landlord might want to apply for dispensation before doing the work. That urgency is not a pre-condition for dispensation is abundantly clear from Daejan, and should be equally clear from decisions of this Tribunal (such as Marshall v Northumberland & Durham Property Trust (2022) UKUT 92 (LC) and Lambeth LBC v Kelly (2022) UKUT 290 (LC))

There was also a somewhat odd issue about the landlord not having registered title at that point and therefore not being able to apply for dispensation. This got short shrift.

the owner of the property, albeit in equity and not yet at law, is the landlord. Section 18 of the 1985 Act defines service charges by reference to a landlord’s costs, and an unregistered purchaser, for whom the legal owner holds on a bare trust, is the landlord in all senses relevant to the recovery of service charges imposed for the recovery of the landlord’s costs.

Appeal allowed and dispensation given.