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BRICKFIELD PROPERTIES LIMITED v BOTTON [2013] UKUT 0133 (LC): LVT Jurisdiction To Order A Lease Variation: Appeal Allowed

Summary: The LVT has jurisdiction to order a variation of leases to take effect from a date prior to the LVT’s decision and prior to the application to vary.

Facts: The freeholder of 56 flats contained in seven blocks had granted long leases with a covenant to repair and maintain the buildings and a concomitant covenant by the lessees to contribute towards the service charge. Qualifying tenants in one of the blocks exercised their right to collective enfranchisement of their block. As a consequence, the total expenditure incurred by the freeholder in maintaining the remaining six blocks of flats was less than it would have been if the freeholder had been obliged to continue to maintain seven blocks rather than six. Thus, the total expenditure by the freeholder which was capable of being recovered through the service charge provisions decreased. A further consequence concerned the relevant proportions paid by each of the lessees in the remaining six blocks. If the proportions for each of these flats were added together they now added up to less than 100%.

The freeholder subsequently granted a headlessee to the appellant. In consequence, the rights and obligations of the freeholder under the various long leases of the flats became vested in the appellant. After attempts to agree variations with the lessees failed, the appellant applied to the LVT seeking variations of the relevant leases with effect from the date of the transfer pursuant to the collective enfranchisement (“the Transfer Date”) so as to re-establish the 100% total for the proportionate contributions to the service charge expense.

Issues: (1) Did LVT have jurisdiction to order a variation of leases to take effect from a date prior to the LVT’s decision and prior to the application to vary; and (2) If so, whether such jurisdiction should be exercised in the instant case.

First Instance: The LVT ordered a variation of the leases but ordered such variations were to have effect from the date of the decision, not the Transfer Date as sought in the application. It did not expressly consider whether it had jurisdiction to order that the variation was to be effective from the Transfer Date, but appears to have concluded that it did have jurisdiction to do so. The LVT decided it should not exercise its discretion because of the delay in making the application and having regard to the contra proferentum rule.

Decision on Appeal: HHJ Huskinson accepted that the LVT did have jurisdiction to order a variation of leases to take effect from a date prior to the LVT’s decision and prior to the application to vary. There was no justification for refusing to order the variation to take effect from the Transfer Date. The appeal was allowed.

SIMON v ST MILDREDS COURT RESIDENTS ASSOCIATION LTDSt [2015] UKUT 0508 (LC): Lease Variation Requires Majority When Application Is Issued

Summary: The requisite consent of a majority of parties to vary a lease in accordance with s.37 of the 1987 Act must have been achieved at the date the application is issued.

Facts: The service charge provisions in the leases provided that the service charge shall be apportioned amongst lessees according to rateable values. The problem was that 3 of the 29 flats did not have a rateable value. On 10 June 2014 the landlord issued an application to vary the terms of the leases proposing that the service charge be paid equally between all lessees. By a letter of the same date (10 June 2014) the landlord invited the lessees to agree or disagree with the application which that day had been issued. Enclosed with the covering explanatory letter was a copy of the application and the proposed new terms of the lease as well as a piece of paper entitled “Agreement” which was to provide the lessees with an opportunity to accept or reject the proposal. A total of 23 lessees consented which, when added to the applicant freeholder, totalled 24 thereby garnering the requisite majority. The FTT was “satisfied on the balance of probability that informed consent to the variation had been given by 26 of the lessees and that none of the points raised affected the validity of the number of consents required to comply with the provisions of the 1987 Act.”  One of the lessees appealed.

On Appeal: The respondent landlord submitted that whilst it was accepted that the consent of the requisite majority had not been obtained at the time when the application was issued on 10 June 2014, it had been obtained at the time when an application in relation to the hearing and at the time of the hearing itself which, as a matter of construction, was sufficient.

Held: The UT (HHJ Gerald) held that the consent of at least 75% of the total number of the parties concerned must have been obtained before the application was made because that is what the section says, specifically: “any such application shall only be made if” the requisite majority has approved.  Marshall Dixon v Wellington Close Management Ltd [2012] UKUT 95 (LC) applied.

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