Category Archives: Leasehold Valuation Tribunal

Payment of lease extension completion statement did not oust LVT’s judgement on costs

By section 60 of Leasehold Reform Housing Urban Development Act 1993 (the 1993 Act) it is the enfranchising residential tenant who must pay the costs of the extension lease. Where those costs are in dispute there is a mechanism for completion to take place without resolution of that dispute. This is provided by section 56(3) of the 1993 Act.

Whether the Leasehold Valuation Tribunal (LVT) has jurisdiction depends, to some extent, on section 91(1) of the 1993 Act. It says the LVT only has jurisdiction “in default of agreement” as to the amount of costs recoverable under section 60.

In the Upper Tribunal (Lands Chamber) case of Friends Life Ltd & Anor v Jones [2014] the central issue was whether a binding agreement as to the amount of the solicitors’ conveyancing fees occurred, or was made, when the residential tenant’s solicitor paid, without demur, the completion monies requested by the intermediate and head landlords, at completion of the extension lease, on 22 March 2013.

The Tribunal determined that there was no agreement as to costs because by its surveyor the residential tenant had five weeks earlier issued an application in the LVT under section 92(1)(d) of the 1993 Act seeking determination of the reasonable costs payable and, a week prior to the completion of the extension lease, the LVT had issued directions without hearing requiring the intermediate and head landlords to send a detailed statement of the costs which they sought under section 60(1) of the 1993 Act.

Seen in that context, the payment of the completion monies could not amount to an unequivocal acceptance of the 22 March 2013 cost figure. Rather, the payment of the full completion fees accorded with section 56(3) of the 1993 Act, which requires that where the amount of costs is not agreed the tenant cannot require completion of the extension lease without tendering the amount “so far as ascertained” of the costs for which the tenant is liable under section 60. Here the amount of the costs was “ascertained”, and full payment had been tendered and made, even if the amount of the costs had not been “agreed” because any costs in excess of £722 plus disbursements and VAT were disputed as was clear from the residential tenant’s surveyor’s section 92(1)(d) application.

In short, the payment of the costs on 22 March 2013 was merely the provision of full “security” so as to enable completion of the extension lease to take place pending the outcome of the residential tenant’s surveyor’s section 92(1)(d) application to the LVT. The fact that the tenant was acting by two representatives, or agents, did not affect that conclusion. Their separate acts were to be treated as the joint acts of the principal i.e. the residential tenant.

So the LVT had jurisdiction to decide the cost issue. That jurisdiction had not been ousted by any “agreement” as to the amount of costs recoverable under section 60.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Flat balcony works could be recharged as common parts’ cost

The Upper Tribunal (Lands Chamber) case of Castle Rock 2002 Management Ltd v Jeffery [2014] concerned an apartment block at Castle Rock, highly located and overlooking Woolacombe Bay with uninterrupted views.

The middle ground floor flat was constructed with a wooden-decked balcony with a balustrade.

The lease contained service charge provisions.

The Management Company had carried out the following works but it’s ability to recoup the costs through the service charge was challenged:

1. Works to the decked balcony.

The decking of the balcony and the material immediately below the decking was removed, and a paved patio was installed (“the patio works”).

The patio works were disallowed from service charge recovery by the Leasehold Valuation Tribunal (“LVT”) because the works were carried out in relation to parts of Castle Rock which were not common parts but were let to individual tenants

2. The removal of a fence and the installation instead of a low retaining wall (“the wall works”).

The costs of the wall works were similarly disallowed because the works were not needed or required to repair or maintain the building or its safety and had in fact been carried out to enhance and improve the views from the building.

The Upper Tribunal said only the surface of floors were let with the flats and there were excluded from the lets “all such parts of the Building as are below the floor surface.” Those words were not limited to excluding from the lets all such parts of the building as were below the floor surface inside the flats. They also excluded all such parts of the building as were below the floor surface of the balconies.

The works which were carried out to Flat 2’s balcony went below the surface of the decked area, and the Flat 3 balcony patio works went below the surface of it’s patio.

So the patio works for both Flat 2 and Flat 3, involved works to the common parts. So the LVT’s reason for disallowing the inclusion of the costs of those works within the service charge was wrong. The costs could be included.

There was nothing before the Upper Tribunal to enable it to conclude that the LVT was wrong in finding that the cost of the wall works was a cost not reasonably incurred. Accordingly, the cost of the wall works was not recoverable from the respondent.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Enfranchising freeholder could circumvent dispute over leasebacks

Where you have a collective enfranchisement under Chapter I, Part I of the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”), and a nominee purchaser, is to acquire the freehold under those collective enfranchisement provisions it may be that the Leasehold Valuation Tribunal (“LVT”) awards the freeholder the right to a leaseback of some of the flats.

What if the freeholder is dissatisfied with the leaseback terms and the price determined by the LVT? Can the freeholder grant third parties long leases of the flats concerned on terms more favourable to it than those which it had previously proposed, but which had already been rejected by the LVT in the alternative terms they awarded? Can a freeholder circumvent a determination by the LVT as to the terms of a leaseback in this way?

From the nominee purchaser’s perspective whatever the freeholder transacts, in exercising that freedom to deal with what temporarily remains it’s own property, will be mitigated by it’s being reflected in the price paid for the freehold by the nominee purchaser and if that necessitates an adjustment to the figure already quantified by the tribunal the price adjustment need not cause significant delay.

Any wasted expenditure, may be considerable but that may be a risk which the nominee purchaser and the participating tenants must take to obtain the freehold.

In the Upper Tribunal (Lands Chamber) case of Queensbridge Investment Ltd v 61 Queens Gate Freehold Ltd [2014] the Appellant freeholder said the effect of Section 36 and paragraph 5 of Schedule 9 to the 1993 Act was that it was under no obligation to enter into leasebacks on the terms the LVT had awarded.

The Appellant had been entitled to grant 3 new flat leases (“the New Leases”) to third parties on it’s own terms whilst the enfranchisement claim progressed.

Agreeing with the Appellant the Upper Tribunal said the only basis on which the Respondent nominee purchaser could insist on the grant of leasebacks would be either if there had been a contract between the parties for a grant of leasebacks on the terms determined by the LVT, or if the Appellant had been estopped from using the freedom allowed by the 1993 Act to grant New Leases until immediately before the Respondent acquired the freehold. That grant was not prohibited by the elaborate anti-avoidance provision designed for the protection of tenants exercising the enfranchisement rights in section 19 of the 1993 Act.

There was clearly no enforceable contract for the grant of leasebacks. There was no document satisfying section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.

The counter-notice’s inclusion of a statement that the Appellant accepted the participating tenants’ proposals for mandatory leasebacks of flats A and 8 and additionally required a leaseback of flat 9 did not commit the Appellant to leasebacks on whatever terms were determined by the LVT and whether or not the conditions in paragraphs 2(1) and 5(1) of Schedule 9 were satisfied immediately before the freehold purchase was completed.

The 1993 Act did not create a statutory contract binding the parties to proceed on the terms agreed or determined by the relevant tribunal. The nominee purchaser could withdraw from the purchase at any time until it was completed.

The only time at which it could be known whether a leaseback was to be granted was “immediately before the appropriate time” i.e. immediately before the freehold is acquired by the nominee purchaser (see paragraphs 2(1) and 5(1) of Schedule 9 of the 1993 Act). In the meantime, the freeholder could continue to grant new leases while the enfranchisement claim progressed so long as the anti-avoidance provisions in section 19 of the 1993 Act were not infringed.

It was “immediately before the appropriate time” that the “condition subsequent” must exist which determined the freeholder’s entitlement to a leaseback.

If, at that time, a flat was let to a qualifying tenant, the freeholder had no obligation to take a leaseback under Part II of Schedule 9 and no entitlement to do so under Part III. Nor would there be any obligation on the nominee purchaser to grant such a leaseback.

Section 6(1), which imposed that obligation, applied only in respect of leases which are required to be granted by virtue of Parts II and III of Schedule 9.

As regards elective leasebacks under Part III of Schedule 9 of the 1993 Act, whether or not a flat was occupied by a qualifying tenant at the appropriate time, a freeholder retained the right to decline to accept a leaseback at all if it was unhappy with the terms offered by the tribunal.

The fact that registration of the New Leases at the Land Registry had not been completed did not mean that the New Leases were not tenancies for the purpose of the 1993 Act. In Part I of the 1993 Act “lease” and “tenancy” have the same meaning and include (where the context permits) an agreement for a lease (see section 101(2)). An executed lease, awaiting registration, is an agreement for a lease, and the lessee under that lease was not disqualified from being a qualifying tenant by section 27 of the Land Registration Act 2002.

It follows that any dispute over the terms of a leaseback is therefore conducted against the background that the freeholder may circumvent the dispute which may render the dispute redundant and the costs incurred wasted.

This blog has been posted as a matter of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Landlords not final say on share of residential service charge

Section 27A(6) of the Landlord and Tenant Act 1985 (“the 1985 Act”) makes void any agreement (other than a post-dispute arbitration agreement) by the tenant of a dwelling in so far as it claims to oust the Leasehold Valuation Tribunal (LVT)’s jurisdiction to determine anything which may be the subject of an application under sub-sections (1) or (3) of section 27A of the 1985 Act. Such questions include the amount of the service charge payable by the tenant.

The fact that sub-section (4) specifically excludes from the scope of sub-section (1) an application in respect of a matter which has been the subject of a post-dispute arbitration agreement demonstrates that dispute resolution provisions in general are not afforded any exemption from these anti avoidance provisions.

In the Upper Tribunal (Lands Chamber) case of Windermere Marina Village Ltd v Wild & Anor [2014] the lease of a residence provided for the tenant to pay a fair apportionment of the cost of services. That apportionment was “to be determined by the surveyor for the time being of the Lessor whose determination shall be final and binding”.

The principal issue in the appeal was whether section 27A(6) made void that agreement in the lease that the landlord’s surveyor’s decision on the apportionment of the service charge was to be final and binding.

The tribunal said the question referred to the LVT in this case was what proportion of the expenses incurred by the appellant was to be paid by the respondents.

By paragraph (2) of the Schedule to their leases the respondents had already agreed that they were to pay such proportion as was determined by the appellant’s surveyor, whose decision was to be final and binding.

That agreement was void because it had the effect of providing for the manner in which an issue capable of determination, by the LVT, under section 27A(1) was to be determined, i.e. by a final and binding decision of the appellant’s surveyor.

The effect of sub-section (6) was to strike out so much of an agreement as made such alternative provision.

The LVT had been entitled to consider what was the fair proportion of the expenses payable by the respondents, because the contractual mechanism for identifying that fair proportion, being the words “(to be determined by the Surveyor for the time being of the Lessors whose determination shall be final and binding)”, had been struck out by section 27A(6) of the 1985 Act.

Section 27A had completely deprived the landlord’s surveyor of his role in determining the apportionment: even if the alternative method, which it barred out, may also have been fair.

There may be other forms of lease in which the provision of a certificate or the making of a determination is a pre-condition of the tenant’s liability to make a payment. It may well be that that contractual procedure continues to bind the landlord and tenant, so long as the eventual content of the certificate or determination is still open to challenge before the LVT under section 27A.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.