evonshires solicitors Leasehold Management Brief Issue 4

evonshires solicitors Leasehold Management Brief Issue 4

In this issue 3 Welcome 4 Cain v Islington Limits on leaseholder challenges 6 Moorjani v Durban Absent leaseholder s damages claim 8 Raja v Aviram Breach of Covenant by Leaseholder 10 Leaseholders of Foundling Court v (1) Camden LBC (2) Allied London (Brunswick) Ltd Who should consult? Head landlord or intermediate leaseholder? 12 Launch of Free Leasehold Management Advice Line 13 Leasehold Management Training Programme 2016/17 14 Contributors

Welcome Welcome to the summer edition of the Leasehold Management Dbrief. In this issue, not only have we highlighted some of notable recent decisions in the courts and tribunals, but we are also very excited to announce the launch of our free Leasehold Management Advice Line to help you with your leasehold queries. We have recognised that leasehold management is playing an ever increasing part of our clients role. Therefore, we have taken the opportunity to provide this service as we continue to strive to meet our clients requirements. Please take the opportunity to use the advice line. We are always interested in your leasehold queries. From the queries we have received during seminars and dealing with specific cases for clients the case update covers areas of particular interest to our RP clients. This includes limits on leaseholders challenging service charges, damages claims by leaseholders, breach of lease by leaseholders and the s.20 consultation process where there are intermediate leaseholders and sub-leaseholders. We hope you find this interesting and informative and, as we say, please do make use of the advice line. Neil Lawlor Partner 020 7880 4273 neil.lawlor@devonshires.co.uk 3

Cain v Islington Limits on leaseholder challenges 4

Leasehold Management Brief This case was considered by the Upper Tribunal on 25 September 2015 and concerned Mr Cain s challenge to reasonableness of service charges over the previous 12 years. This is an important case as it provides scope for limiting the leaseholders ability to challenge the reasonableness of the service charges where the leaseholder has repeatedly paid the service charges in the past. Therefore, landlords should be aware of this case, particularly with a view to limiting the scope of challenges to the service charges by their leaseholders. In this case Mr Cain acquired his flat in 2002 and had paid all of the service charges demanded since then until raising a challenge in 2014. That was considered by the First Tier Tribunal (FTT) in November 2014. The FTT had found that he could not challenge the previous 12 years of service charges because: 1. Mr Cain had made repeated payments of the service charge demands throughout the period he was now seeking to challenge; and 2. Mr Cain correspondence with his landlord had historically raised requests for information rather than challenging the service charges; and 3. When asked by the FTT why he had not raised his concerns with the FTT earlier he said I did not want to waste anyone s time. Why should I waste the time of the Tribunal when Islington had the information but would just not provide it. As a result of the conduct of Mr Cain he was found to have admitted that the service charges were due. Section 27A(4) (a) prevents challenges to the reasonableness of the service charges where they have been admitted or agreed. Mr Cain appealed that decision on the grounds that under the relevant statutory provisions, namely s.27a(5) of the Landlord and Tenant Act 1985, his conduct was insufficient to result in a finding of any agreement or admission on his part. He argued that no specific date or act or failure to act was identified by the FTT so that, on analysis, all that was left was his payments which, by virtue of section 27A(5), cannot be found to be an admission or agreement. Further, as a matter of law, an admission or agreement cannot be inferred from a lessee s conduct under section 27A(5). At the Appeal the Upper Tribunal considered s.27a(5) in particular, which states the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment. The FTT took the view that an agreement could be implied or inferred from the circumstances, usually by an act or a series of acts or inaction in the face of specific circumstances or even mere inaction over a long period of time or a combination of the two, as well as being express. Further, the FTT took the view that the wording of 27A(5) meant that whilst the making of a single payment on its own will never be sufficient to infer or imply an agreement or admission, the making of multiple payments even of different amounts over a period of time may suffice to give rise to an admission or agreement. The reason why a single payment cannot give rise to an admission or agreement is because failure to make such a payment can put the leaseholder at risk of forfeiture so they will need to make the payment while still challenging it. The Upper Tribunal found that the FTT was entitled to find Mr Cain had admitted or agreed the service charge amounts purely by the series of payments made in respect of the demanded service charge without reservation, qualification or other challenge or protest. Further, that entitlement was reinforced by the length of time which has passed before a challenge was first. The Upper Tribunal found that the FTT is entitled to look at matters in the round and find that where there has been substantial delay in making any challenges to the items now in dispute, and most if not all of which have long-since been paid, that the tenant has agreed or admitted the amounts claimed which, after all, have longsince lain dormant without challenge. As a result of the conduct of Mr Cain he was found to have admitted that the service charges were due. 5

Moorjani v Durban - Court of Appeal Decision Absent leaseholder s damages claim Neil Lawlor Partner 020 7880 4273 neil.lawlor@devonshires.co.uk 6

Leasehold Management Brief This case was considered by the Court of Appeal on 4 December 2015 and concerned a claim by the leaseholder for damages for disrepair when the leaseholder was not occupying the flat concerned for reasons unconnected to the disrepair. The basic position in landlord and tenant disrepair cases, even those involving leaseholders, is that where the landlord is in breach of their repair obligations the tenant is entitled to damages to put them back in the position had the breach not occurred. Damages will often relate to specific items of loss (known as Special Damages) such as damaged belongings and expenses incurred in obtaining alternative accommodation while the repairs are carried out. However, general damages for interference with and loss of enjoyment of the property are also payable by the landlord where they have breached their duty. The method of calculating the general damages is based on a percentage of the rent paid. In leasehold properties the rent is often minimal and a token amount. Therefore, in those circumstances a notional rent should be used to calculate the general damages. In this case the landlord had carried out refurbishment works in 2005 which resulted in a flood into the leaseholders flat. Another leak occurred a year later. At the time, the leaseholder was living elsewhere. When the case was first heard the claim for general damages relating to the period that the leaseholder had been away from the property was dismissed as the judge at first instance took the view that the leaseholders non-occupation meant there was no basis for the claim. However, The Court of Appeal did not agree with that approach and took the view that even though the leaseholder was absent from the property when the breach occurred they still suffered an interference with their property. Therefore, the starting point was to assess damages by reference to the rental value of the property. However, the damages should then be reduced by half to reflect the fact that the leaseholder was not occupying the flat at the time of the breach. It is important for landlords to be aware of their repairing obligations and the fact that even if a tenant is not in occupation of their property when disrepair occurs that they can still be entitled to damages for loss of amenity as well as any actual specific loss such. It is important for landlords to be aware of their repairing obligations and the fact that even if a tenant is not in occupation of their property when disrepair occurs that they can still be entitled to damages for loss of amenity as well as any actual specific loss such. 7

Raja v Aviram Breach of Covenant by Leaseholder Alex Wyatt Solicitor 020 7880 4394 alex.wyatt@devonshires.co.uk 8

Leasehold Management Brief This case involved the leaseholder, Mr Aviram, carrying out works to his flat, in particular replacing his boiler. The new boiler required a new vent and waste pipe to be installed. The lease prohibited works to the external walls without consent of the freeholder. Attempts were made by Mr Avariam to contact Mr Raja who was the freeholder. Despite these attempts he was unable to make contact Mr Raja. Therefore, Mr Aviram decided to press ahead with the works. Mr Raja, the freeholder then issued proceedings in the First Tier Tribunal (FTT) for a determination that there had been a breach of covenant under the lease. The FTT found that no breach had occurred. Mr Raja appealed that decision to the Upper Tribunal (UT)who allowed the appeal. The UT found that the contractor had been instructed by Mr Aviram and, therefore, Mr Aviram was responsible for the consequences of his instructions. The only conclusion open to the FTT was that the terms of the lease had been breached as Mr Aviram had not obtained consent from the freeholder before carrying out works to the external wall. The fact that the freeholder would have consented did not alter matters. Further, failure by the freeholder to provide a name and address in accordance with sections 47 and 48 of the Landlord and Tenant Act 1987 did not allow the tenant to carry out works without consent where the lease provided for consent to be obtained. However, despite the breach having been found to have occurred the judge did question the purpose of the claim and appeal pursued by the freeholder. The judge stated that a modest breach of covenant has been committed it seems unlikely that this valuable lease will be capable of being forfeited without relief being granted. Whether Mr Raja is entitled to any remedy at all (other than nominal damages) is not a question within the jurisdiction of this tribunal. The case highlights the importance of being aware of the terms of the lease and adhering to them. Simply making attempts to compel with the terms but not actually complying will not avoid a breach. Equally, though it highlights the importance of considering what a landlord wants to achieve when taking action against a leaseholder in relation to a breach of a lease. In this particular case it was clear that any attempt to seek to forfeit the lease as a result of the breach would almost certainly have been defeated by any application for relief from forfeiture. Landlord s need to consider exactly what they want to achieve and whether or not those aims are likely to be achieved when taking steps to deal with a breach of lease. These decisions are of a practical and commercial nature as much legal. The case highlights the importance of being aware of the terms of the lease and adhering to them. Simply making attempts to compel with the terms but not actually complying will not avoid a breach. 9

Leaseholders of Foundling Court v (1) Camden LBC (2) Allied London (Brunswick) Ltd Who should consult? Head landlord or intermediate leaseholder? Neil Lawlor Partner 020 7880 4273 neil.lawlor@devonshires.co.uk 10

Leasehold Management Brief The recent decision of Upper Tribunal in Various Occupational Leaseholders of Foundling Court and O Donnell Court, Brunswick Centre, London v (1) Camden LBC; (2) Allied London (Brunswick) Ltd and others provided helpful guidance in dealing with the consultation process under S.20 where there is an intermediate landlord and occupational leaseholders. Under S.20 of the Landlord and Tenant Act 1985 a landlord must comply with the statutory consultation process in order to recover costs through service charges over the statutory cap ( 250 for works and 100 for Qualifying long term agreements) unless the landlord has obtained dispensation from the First Tier Tribunal from the consultation regulations. In this case Allied London was the freeholder. Camden had been granted a headlease and Camden then granted a number of long leases for individual flats. As such Camden was the intermediate leaseholder while the individual flats were held by the occupational leaseholders with Camden as their landlord. This is a situation RP s commonly find themselves in. The occupational leaseholders brought a challenge in the FTT on the basis that they had not been consulted with. Allied London intended to carry out works and consulted with Camden in relation to the works but they did not consult with the occupational leaseholders. Camden did consult with the occupational leaseholders to an extent but it was not compliant with s.20. Camden paid the sums sought by Allied London but then sought to recover these sums from the occupational leaseholders. The occupational leaseholders then brought an application in the FTT challenging their liability to contribute to the costs of the works on the basis that they had not been consulted with in accordance with S.20. Therefore, the costs recoverable by Allied London should be capped at 250. Allied London argued that they did not need to consult with the occupational leaseholders. The Upper Tribunal found that the duty to consult was owed by Allied London. It was they who would place the contract, not Camden, and it was Allied London who would arrange for the works to be carried out and supervise their completion. The Upper Tribunal found that the consultation process was there to make sure leaseholders had an opportunity to influence the nature and cost of works. Therefore, Allied London should have consulted with both Camden and the occupational Leaseholders. The Upper Tribunal recognised that consulting with occupational leaseholders could be difficult if the details of the occupational leaseholders is not known. Therefore, if that is the case, the freeholder/head landlord should seek dispensation from the FTT before placing any contract. The FTT could grant dispensation on terms allowing alternative methods of consultation so that the occupational leaseholders position is protected as far as possible. That may include, for example, placing notices in communal parts. This is an important decision as it addresses a common concern of RPs in relation to consultation where there are intermediate leaseholders and occupational leaseholders. It is clear that the onus is on the freeholder/head landlord to consult and failure to do so exposes the head landlord to the services charges being capped. It is also clear that the fact that there are practical difficulties in consulting with the occupational long leaseholders does not act as a legitimate excuse for a head landlord s failure to consult with all of the long leaseholders who may be required to contribute to the costs of the works or agreement. The practical way of addressing this is apply for dispensation. Head landlords must consult with both intermediate leaseholders and occupational leaseholders. 11

Launch of Free Leasehold Management Advice Line We are pleased to announce the launch of the Free Leasehold Management Advice Line. If you have any queries regarding leasehold management and need assistance please call us on our free Leasehold Management Advice Line. Leasehold Management Advice Line 0845 994 0091 Monday to Friday 9am - 5pm 12

Leasehold Management Training Programme 2016/17 Devonshires Solicitors Leasehold Management Team is pleased to present the 2016/17 Leasehold Management training programme. Invitations outlining programme and speaker details will be issued for each event. Seminar Programme Leasehold Management for Beginners 4 October 2016 Leases: Dealing with Breaches 9 November 2016 Leases: Dealing with Dilapidations 17 January 2017 An Introduction to Commercial Lease Management 14 March 2017 Service Charges: S20 and Consultation 18 April 2017 Service Charges Workshop 24 May 2017 All of our Leasehold Management seminars are free of charge Look out for our responsive Webinars and Breakfast Briefings announced throughout the year To sign up to our mailing list please email seminars@devonshires.co.uk CPD hours Devonshires seminars are CPD accredited by The Solicitors Regulation Authority 13

Contributors Neil Lawlor Partner 020 7880 4273 neil.lawlor@devonshires.co.uk Neil conducts housing litigation, including defending disrepair claims and advising clients of settlements; bringing actions for nuisance such as possession proceedings, Anti-Social Behaviour Injunctions and Anti-Social Behaviour Orders; and bringing possession actions for unlawful subletting, non-occupation and disputed succession claims following the death of a tenant. Neil also conducts general property litigation which includes both residential and commercial properties. He regularly works on matters in relation to claims for forfeiture, service charge disputes including recovery of unpaid service charges and consultation and judicial review. Neil conducts cases in the County Courts, High Court, Magistrates Courts and Tribunals. As well as conducting contentious cases, Neil also provides non-contentious advice in respect of housing management and general property matters including drafting tenancy agreements and advising on policies and procedures. Alex Wyatt Solicitor 020 7880 4394 alex.wyatt@devonshires.co.uk Alex has over 9 years experience of dealing with housing litigation, both on a residential and commercial basis, and has experience of acting for both landlords and tenants. He has particular expertise in possession proceedings, including forfeiture, disrepair and debt recovery. His debt recovery experience includes the recoverability of Service Charges, LVT challenges and money claims. 14

Alex Wy Solicitor alex.wya 020 7880 15

Legal updates and seminars Devonshires produce a wide range of briefings and legal updates for clients as well as running comprehensive seminar programmes. If you would like to receive legal updates and seminar invitations please visit our website on the link below. http://www.devonshires.com/join-mailing-list Edited by: Nick Billingham Head Office: 30 Finsbury Circus, London EC2M 7DT Further copies: Marketing Department on t: 020 7628 7576, or email info@devonshires.co.uk or via our website at www.devonshires.com Devonshires has taken all reasonable precautions to ensure that information contained in this document is materially accurate however this document is not intended to be legally comprehensive and therefore no action should be taken on matters covered in this document without taking full legal advice. Devonshires Solicitors has taken all reasonable precautions to ensure that information contained in this document is materially accurate however this document is not intended to be legally comprehensive and therefore no action should be taken on matters covered in this document without taking full legal advice. Devonshires Solicitors is the trading name of Devonshires Solicitors LLP, registered in England and Wales at the address above with company number OC397401.