Decision Nº LRX 90 2013. Upper Tribunal (Lands Chamber), 29-07-2014
| Jurisdiction | UK Non-devolved |
| Judge | Martin Rodger QC, Deputy President |
| Date | 29 July 2014 |
| Court | Upper Tribunal (Lands Chamber) |
| Judgement Number | LRX 90 2013 |
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UPPER TRIBUNAL (LANDS CHAMBER) |
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UT Neutral citation number: [2014] UKUT 0322 (LC)
LT Case Number: LRX/90/2013
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LANDLORD AND TENANT – administration charges – covenant to pay costs of proceedings – whether costs incurred “in or in contemplation of” proceedings under s.146, Law of Property Act 1925 - Freeholders of 69 Marina v Oram considered – s.81, Housing Act 1996 – ss.167-169, Commonhold and Leasehold Reform Act 2002 - appeal allowed
IN THE MATTER OF AN APPEAL AGAINST A DECISION OF A LEASEHOLD VALUATION TRIBUNAL OF THE SOUTHERN RENT
ASSESSMENT PANEL
BETWEEN:
HILARY ANN BARRETT Appellant
andMRS ANNE ROBINSON Respondent
Re: 14 Heather Ridge Arcade,
Camberley
Surrey GU15 1AX
Determination on written representations
© CROWN COPYRIGHT 2014
The following cases are referred to in this decision:
Christoforou v Standard Apartments Limited [2013] UKUT 0586 (LC)
Egerton v Jones [1939] 2 KB 702
Escalus Properties Ltd v Robinson [1996] 2 QB 231
Freeholders of 69 Marina v Oram [2011] EWCA Civ 1258; [2012] L&TR 4
Khar v Delmounty Limited (1998) 75 P&CR 232
Mohammadi v Anston Investments Ltd [2003] EWCA Civ 981
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In relative terms this appeal concerns a large legal bill incurred in a dispute about a small service charge.
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The appellant is the long leaseholder of a flat above a shop in the Heather Ridge Arcade in Camberley. In February 2012 she queried the sum which she was asked to pay by her landlord, the respondent, as insurance rent under her lease. The insurance rent was £324, which was half of the premium payable under a single policy of insurance taken out by the respondent to cover both the shop and the flat. The appellant considered that the sum was too high and that it was unreasonable for her to be expected to pay half of the premium for the two units since the risks associated with the shop were greater than those referable to her flat.
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By a decision given on 3 August 2012 a leasehold valuation tribunal of the Southern Rent Assessment Panel (“the first LVT”) decided that the manner in which the insurance premium had been apportioned was reasonable, although the total amount payable by the appellant was less than had originally been claimed by the respondent.
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By a decision given on 19 April 2013 a second leasehold valuation tribunal (“the second LVT”) found that the appellant was bound by the terms of her lease to pay £6,250 to the respondent as costs incurred in connection with the first LVT proceedings.
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This appeal (which is brought with the permission of the Tribunal) is against the decision of the second LVT.
The Lease
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The appellant’s lease was granted on 26 April 1991 for a term of 999 years from 1990 at a ground rent of £50 per annum. The appellant acquired the lease in September 2006.
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By clause 4(1) of the lease the tenant covenanted with the landlord:
“To pay the rent and the insurance rent herein reserved on the days and in the manner aforesaid.”
The insurance rent referred to had been defined in clause 1(j) as “the sums which the Lessor [the landlord] shall from time to time pay by way of premium for insuring the premises in accordance with his obligations contained in this lease.” The obligation referred to in that definition was at clause 8(a) which required the landlord to keep the appellant’s flat insured at all times during the term.
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Although clause 4(1) refers to “the rent and the insurance rent herein reserved”, the insurance rent was not reserved as rent at all. The part of the lease by which rent was reserved, clause 2, reserved only the ground rent of £50 per annum. Nor did the lease state that the insurance rent was to be treated as if it had been reserved as rent. Accordingly, although it was described as “insurance rent” the sum which the tenant is obliged to pay towards the cost of insuring the flat is not strictly a rent at all. The insurance rent is a variable service charge, and indeed is the only sum which the landlord is entitled to collect as a service charge because, unusually, the lease places the obligation to repair and maintain the premises on the tenant.
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The other critical covenant in the lease is at clause 4(14), by which the tenant covenanted:
“To pay all reasonable costs charges and expenses (including solicitors’ costs and surveyors’ fees) incurred by the Lessor in or in contemplation of any proceedings or the preparation of any notice under section 146 of the Law of Property Act 1925 notwithstanding forfeiture is avoided otherwise than by relief granted by the Court.”
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The lease also contains a forfeiture clause (clause 9(1)) entitling the landlord to re-enter the demised premises and terminate the lease “if the said yearly or other rents or sums of money hereby reserved” are in arrear for more than 21 days.
Statutory restrictions on the forfeiture of residential leases
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As this appeal concerns the entitlement of a landlord to rely on a tenant’s covenant to pay costs incurred in or in contemplation of any proceedings or the preparation of any notice under section 146 of the Law of Property Act 1925, it will be helpful to have the terms of that section in mind, together with other more recent statutory restrictions on the forfeiture of residential leases.
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Section 146(1) provides that:
“A right of re-entry or forfeiture … shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice –
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specifying the particular breach complained of;
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if the breach is capable of remedy, requiring the lessee to remedy the breach; and
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in any case, requiring the lessee to make compensation in money for the breach;
and the lessee fails, within a reasonable time thereafter, to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach.”
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Section 146 does not apply to all forfeitures. In particular section 146(11) provides that:
“This section does not, save as otherwise mentioned, affect the law relating to re-entry or forfeiture or relief in case of non-payment of rent.”
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Additional statutory restrictions apply to the forfeiture of leases of residential premises. The first of these is contained in section 81 of the Housing Act 1996, and applies only to forfeiture for non-payment of service charges or administration charges. It provides:
“81(1) A landlord may not, in relation to premises let as a dwelling, exercise a right of re-entry or forfeiture for failure by a tenant to pay a service charge or administration charge unless –
(a) it is finally determined by (or on appeal from) a leasehold valuation tribunal or by a court, that the amount of the service charge or administration charge is payable by him, or
(b) the tenant has admitted that it is so payable.”
Section 81(4A) makes it clear that the reference in this section to the exercise of a right of re-entry or forfeiture includes the service of a notice under section 146(1) of the 1925 Act.
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Section 167 of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”), restricts the right of forfeiture for failure to pay small sums for a short period as follows:
“167(1) A landlord under a long lease of a dwelling may not exercise a right of re-entry or forfeiture for failure by a tenant to pay an amount consisting of rent, service charges or administration charges (or a combination of them) unless the unpaid amount –
(a) exceeds the prescribed sum, or
(b) consists of or includes an amount which has been payable for more than a prescribed period.
(2) The sum prescribed under sub-section (1)(a) must not exceed £500.
(3) If the unpaid amount includes a default charge, it is to be treated for the purposes of sub-section (1)(a) as reduced by the amount of the charge; and for this purpose “default charge” means an administration charge payable in respect of the tenant’s failure to pay any part of the unpaid amount.”
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Section 81 of the 1996 Act applies to forfeiture for failure to make payments of service charges or administration charges; section 167 of the 2002 Act relates additionally to forfeiture for non-payment of rent. Further protection for residential tenants against the service of a notice under section...
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