First-tier Tribunal Grants Lease Variation and Limits Costs

OUTCOME: Allowed

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00BG/LVL/2023/007 Property : 132 [ADDRESS] [POSTCODE] Applicant : [redacted] : [NAME], counsel Respondent : [redacted] London E1 [NAME] & [NAME] ([NAME]) Representative : [NAME], counsel Type of application : Variation of leases – s.35 of the Landlord and Tenant Act 1987 Tribunal members : Judge Tagliavini Venue : 10 [ADDRESS] [POSTCODE] Date of hearing Date of decision Correction :

6 September 2024 10 September 2024 31 October 2024

DECISION & CORRECTION – pursuant to rule 50 of The Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013

2 The tribunal’s decision (i) The tribunal determines that the grounds for varying the 100 leases of

132 [ADDRESS] [POSTCODE] are satisfied under s.35(2) (e)

and (f) of the Landlord and Tenant Act 1987. (ii) The tribunal therefore makes the variations sought by the applicant in the form attached to this decision as Appendix I (Annex 1 and Annex 2). (iii) The tribunal makes an order under s.20C of the Landlord and Tenant Act 1985 limiting the applicant’s costs of this applicant to 50% in respect of the liability of the [NAME] to contribute to these costs. ____________________________________________________ The application 2. This is an application to vary 100 long leases (‘the Leases’) at the estate known as 132 [ADDRESS] [POSTCODE] This development consists of two buildings – a front building (‘the Front Building’) containing Flats 1-89 and a rear building (‘the Rear Building’) containing Flats 90-100 and collectively referred to as ‘The Building.’

3. The applicant is a lessee owned management company charged with providing services under the Leases. The shareholders of the management company are the leaseholders as are its Directors. The applicant asserts that the only means of raising funds for the maintenance and management of the Building is via the service charge mechanism in the Leases. Only the applicant is required to provide services, under the terms of the Leases as the landlord has a power, but not an obligation, to step in in default. The applicant asserts the leases entitle the applicant to recover 112% of its expenses in respect of the Front Building but only 13.2% of its costs in respect of the Rear Building.

4. The applicant therefore applies to vary the Leases under s.35 (1) of the Landlord and Tenant Act 1987 (“the Act”) and asserts the statutory basis of the application under s.35 (2) (e) and (f) of the Act is met, namely that the Leases fail to make satisfactory provision in respect of (e) the recovery by one party to the lease for expenditure incurred or to be incurred by that party for the benefit of the other party or (f) the computation of a service charge payable under the Leases.

The hearing The applicant’s case

3 5. The applicant was represented by [NAME] of counsel. The respondent was represented by [NAME] of counsel. The parties relied upon a revised digital bundle of 596 pages.

6. Only the [NAME] raised any objections to the terms of the proposed variations. The applicant adopted some (but not all) of the proposals made and subsequently reached agreement with [NAME] as to the variations sought. The applicant submits is it is reasonable for the tribunal to make the order sought as the statutory grounds are made out and without the variations the applicant is at risk of not being able to meet its obligations in respect of the Building- that would be to the detriment of all the [NAME] as there is no other party obliged to provide services to the Building.

The tribunal’s reasons

7. The relevant part of section 35 of the Landlord and Tenant Act 1987 states:

(1) Any party to a long lease of a flat may make an application

to the appropriate tribunal for an order varying the lease in such

manner as is specified in the application.

(2) The grounds on which any such application may be made are

that the lease fails to make satisfactory provision with respect to

one or more of the following matters,

(e) the recovery by one party to the lease from another party

to it of expenditure incurred or to be incurred by him, or

on his behalf, for the benefit of that other party or of a

number of persons who include that other party;

(f) the computation of a service charge payable under the

lease.

8. In the absence of any objection to the variation of the leases in principle, the tribunal was satisfied by the applicant’s submissions and supporting documents that the grounds for varying the 100 leases under s.35(2)(e ) (f) applied. Therefore the tribunal made the variations sought in the form agreed between the parties (including the [NAME]) and attached as Appendix I to this decision.

9. As no application for compensation was made, the tribunal did not consider or determine this issue.

Application by the [NAME] under section 20C of the Landlord and Tenant Act 1985

4 10. The respondent [NAME] made an application to the tribunal seeking to limit the costs incurred by the applicant that might otherwise be payable by them. [NAME] asserted the [NAME] had incurred their own legal costs of approximately £8,000 in seeking revisions to the terms of the lease variations sought by the applicant. [NAME] asserted that as originally made, the application had been defective and would have provided for the recovery of 200% of certain costs and a division of 50/50 of certain (unapportioned) service charges to the Front and the Rear Buildings despite the disparity in size. Consequently, if there had been no intervention, the application had been in danger of not being successful or subject to further amendments in any event. Therefore, it was just and equitable for the tribunal to make the order sought.

11. The applicant opposed the s.20C application and asserted that the individual [NAME] contribution was likely to be in the region of £500 per flat. The applicant accepted the respondents had made helpful suggestions only some of which had been accepted and incorporated into the final version of amendments now submitted to the tribunal for approval, with the only real change was the incorporation of the word ‘reasonable’ to the division of unapportioned costs shared between the Front and the Rear Buildings.

12. The applicant also asserted that were the application allowed, it would disincentive the parties from reaching an agreement and in any event, if the applicant’s costs were not paid by all [NAME], the ‘missing’ costs could not be shared amongst the remaining leaseholders and therefore could not in theory, be paid.

The tribunal’s decision and reasons 13. The tribunal determines the applicant is restricted to charging 50% of the costs incurred in respect of this application to the leaseholders of [NAME].

14. The tribunal was somewhat surprised to hear that the applicant’s costs of this application equated to £500 per leaseholder, thereby generating a total in the region of £50,000. On the face of it, this appeared to be on the high side, even having regard to number of leases that required to be varied. However, the tribunal was satisfied the [NAME] had made some positive contribution to the variations sought by the applicant being agreed in a form the tribunal finds appropriate. The tribunal finds it just and equitable to reduce the liability of [NAME] to pay the costs incurred by the applicant in respect of this application, to 50%.

Name: Judge Tagliavini

Date: 10 September 2024

Rights of appeal

5

By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the Tribunal is required to notify the parties about any right of appeal they may have. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber), then a written application for permission must be made to the First- tier Tribunal at the Regional Office which has been dealing with the case. The application should be made on Form RP PTA available at https://www.gov.uk/government/publications/form-rp-pta-application-for- permission-to-appeal-a-decision-to-the-upper-tribunal-lands-chamber The application for permission to appeal must arrive at the Regional Office within 28 days after the Tribunal sends written reasons for the decision to the person making the application. If the application is not made within the 28-day time limit, such application must include a request for an extension of time and the reason for not complying with the 28-day time limit; the Tribunal will then look at such reason(s) and decide whether to allow the application for permission to appeal to proceed, despite not being within the time limit. The application for permission to appeal must identify the decision of the Tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal and state the result the party making the application is seeking. If the Tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).

6

APPENDIX I

In the First Tier Tribunal Property Chamber (Residential Property)

Case Ref: LON/00BG/LVL/2023/0007

Between:

[COMPANY] Applicant and

[NAME], LONDON, E1 Respondents

ORDER

Upon the Applicant’s application to vary the leases more particularly described in the Annex One to this Order (“the Leases”)

Upon those applications being unopposed and the Tribunal being satisfied that it is reasonable to make this Order.

It is Ordered that:

7 Lease Variations – Front Building 1. The Leases to Flats 1-89 be varied as follows:

Clause 1 is varied as follows:-

Substitute for ‘“the Building means the Building of which the Demised Premises forms part’: ‘“the Building” means the building of which the Demised Premises forms part fronting [ADDRESS] comprising eighty-nine flats (“the Front Building”) and the adjacent building comprising eleven flats (“the Rear Building”)’

Substitute for the existing definition of “the Service Charge”: ‘(i) [X] per centum of the cost to the Management Company of carrying out its obligations hereunder during the Financial Year in question in relation to its obligations imposed by Clause 5 of this lease insofar as those costs relate solely to the Front Building together with; (ii) [X] per centum of the proportion reasonably allocated by the Management Company to the Front Building in accordance with Clause 6 (c) of this lease of the cost to the Management Company of carrying out its obligations hereunder during the Financial Year in question in relation to its obligations imposed by Clause 5 of this lease in respect of the Development save for costs that relate solely to the Front Building or costs that relate solely to the Rear Building, plus; (iii) such sums as the Management Company shall in its absolute discretion determine for use as a Sinking Fund against anticipated future expenditure or (in the case of the current Financial Year) a due proportion of such costs and provision calculated from the date hereof to the 31st March next following apportioned amongst the one hundred

8 flats within the Building in accordance with parts (i) and (ii) of this clause and clause 6(c) herein’ (iv) Save as provided at (iii) of this clause the Applicant shall not recover more than its anticipated or total expenditure in respect of the Development

Insert Clause 6 (c)

In assessing the Service Charges payable by the [NAME] of the Rear Building and the [NAME] of the Front Building the Management Company shall have regard to the extent to which the [NAME] of the Rear Building use the Common Parts but with a view to the [NAME] of the Front Building paying solely for such items of expenditure which are referable only to the Front Building and do not contain any element of use common to both the Front and Rear Buildings and with a view to the [NAME] of the Rear Building paying solely for such items of expenditure which are referable only to the Rear Building and do not contain any element of use common to both the Rear and Front Buildings

Lease Variations – Rear Building 2. Clause 1 in the Leases of Flats 90 to 100, be varied as follows:-

Substitute for the existing definition of “the Service Charge”:

(i) [X] per centum of the cost to the Management Company of carrying out its obligations hereunder during the Financial Year in question in relation to its obligations imposed by Clause 5 of this lease insofar as those costs relate solely to the Rear Building together with; (ii) [X] per centum of the proportion reasonably allocated by the Management Company to the Rear Building in accordance with Clause 6 (c) of this lease of

9 the cost to the Management Company of carrying out its obligations hereunder during the Financial Year in question in relation to its obligations imposed by Clause 5 of this lease in respect of the Development save for costs that relate solely to the Front Building or costs that relate solely to the Rear Building, plus; (iii) such sums as the Management Company shall in its absolute discretion determine for use as a Sinking Fund against anticipated future expenditure or (in the case of the current Financial Year) a due proportion of such costs and provision calculated from the date hereof to the 31st March next following apportioned amongst the one hundred flats within the Building in accordance with parts (i) and (ii) of this clause and clause 6(c) herein’ (iv) Save as provided at (iii) of this clause the Applicant shall not recover more than its anticipated or total expenditure in respect of the Development Both Buildings 3. X is defined for each Lease in accordance with the table in Annex Two to this Order

4. Pursuant to s.38 (9) of the Landlord and Tenant Act 1987 the Tribunal directs that a copy of this Order be endorsed on each Lease by way of memorandum of the variations ordered herein.

6 September 2024

10 Annex One

Flat 1 – EGL981495 EGL381495 Flat 2 – EGL379658 Flat 3 – EGL380888 Flat 4 – EGL383301 Flat 5 – EGL379378 Flat 6 – EGL383697 Flat 7 – EGL380868 Flat 8 – EGL380883 Flat 9 – EGL383793 Flat 10 – EGL380542 Flat 11 – EGL380866 Flat 12 – EGL380890 Flat 13 – EGL379654 Flat 14 – EGL395888 Flat 15 – EGL383303 Flat 16 – EGL380880 Flat 17 – EGL380864 Flat 18 – EGL379647 Flat 19 – EGL380877 Flat 20 – EGL381496 Flat 21 – EGL380894 Flat 22 – EGL393273 Flat 23 – EGL383704 Flat 24 – EGL383710 Flat 25 – EGL383580 Flat 26 – EGL380966 Flat 27 – EGL383588 Flat 28 – EGL383720 Flat 29 – EGL383598 Flat 30 – EGL383600 Flat 31 – EGL383724 Flat 32 – EGL383715

11 Flat 33 – EGL383594 Flat 34 – EGL382536 Flat 35 – EGL381914 Flat 36 – EGL382532 Flat 37 – EGL381498 Flat 38 – EGL383585 Flat 39 – EGL383726 Flat 40 – EGL383729 Flat 41 – EGL383718 Flat 42 – EGL383731 Flat 43 – EGL399522 Flat 44 – EGL409854 Flat 45 – EGL397738 Flat 46 – EGL392153 Flat 47 – EGL403553 Flat 48 – EGL410690 Flat 49 – EGL380908 Flat 50 – EGL414315 Flat 51 – EGL387319 Flat 52 – AGL483000 AGL483003 Flat 53 – EGL397502 Flat 54 – EGL413958 EGL413985 Flat 55 – EGL402560 Flat 56 – EGL380916 Flat 57 – EGL384478 Flat 58 – EGL389086 Flat 59 – EGL389559 Flat 60 – EGL388717 Flat 61 – EGL393790 Flat 62 – EGL382817 Flat 63 – EGL380913 Flat 64 – EGL400255 Flat 65 – EGL386752 Flat 66 – EGL387002

12 Flat 67 – EGL391020 Flat 68 – EGL404839 Flat 69 – EGL390277 Flat 70 – AGL225368 Flat 71 – EGL399266 Flat 72 – EGL385914 Flat 73 – EGL385917 Flat 74 – EGL457551 Flat 75 – EGL406966 Flat 76 – EGL414108 Flat 77 – EGL392423 Flat 78 – EGL391973 Flat 79 – EGL399670 Flat 80 – EGL405405 Flat 81 – EGL399517 Flat 82 – EGL404502 Flat 83 – EGL384650 Flat 84 – EGL384672 Flat 85 – EGL384305 Flat 86 – EGL391733 Flat 87 – EGL389367 Flat 88 – EGL403281 Flat 89 – EGL399387 [NAME] – EGL402492 Flat 91 – EGL400567 Flat 92 – EGL403076 Flat 93 – EGL404737 Flat 94 – EGL400412 Flat 95 – EGL403083 Flat 96 – EGL402512 Flat 97 – EGL400489 Flat 98 – EGL402251 Flat 99 – EGL400495 Flat 100 – EGL400587

13 Annex Two New Service Charge Proportions (in percentage - %) for flats (apartments) in [ADDRESS] [POSTCODE] Flat 1: 1.21 Flat 2: 0.82 Flat 3: 0.82 Flat 4: 0.82 Flat 5: 0.82 Flat 6: 0.82 Flat 7: 0.82 Flat 8: 0.82 Flat 9: 0.82 Flat 10: 0.82 Flat 11: 0.82 Flat 12: 0.87 Flat 13: 1.49 Flat 14: 0.83 Flat 15: 0.83 Flat 16: 0.83 Flat 17: 0.78 Flat 18: 0.82 Flat 19: 0.82

14 Flat 20: 1.21 Flat 21: 0.70 Flat 22: 1.21 Flat 23: 0.82 Flat 24: 0.82 Flat 25: 0.82 Flat 26: 0.82 Flat 27: 0.82 Flat 28: 0.82 Flat 29: 0.82 Flat 30: 0.82 Flat 31: 0.82 Flat 32: 0.82 Flat 33: 0.88 Flat 34: 0.83 Flat 35: 0.83 Flat 36: 0.83 Flat 37: 1.21 Flat 38: 0.78 Flat 39: 0.82 Flat 40: 0.82 Flat 41: 0.98

15 Flat 42: 0.70 Flat 43: 1.21 Flat 44: 1.50 Flat 45: 1.50 Flat 46: 1.50 Flat 47: 1.50 Flat 48: 1.50 Flat 49:0.67 Flat 50: 1.31 Flat 51: 1.31 Flat 52: 1.31 Flat 53: 1.29 Flat 54: 1.31 Flat 55: 0.97 Flat 56: 0.70 Flat 57: 1.25 Flat 58: 1.50 Flat 58: 1.50 Flat 59: 1.50 Flat 60: 1.50 Flat 61: 1.50 Flat 62: 1.50

16 Flat 63: 0.69 Flat 64: 1.46 Flat 65: 1.31 Flat 66: 1.31 Flat 67: 1.29 Flat 68: 1.31 Flat 69: 1.73 Flat 70: 1.76 Flat 71: 1.34 Flat 72: 1.34 Flat 72: 1.34 Flat 73: 1.34 Flat 74: 1.34 Flat 75: 1.34 Flat 76: 1.34 Flat 77: 1.34 Flat 78: 1.34 Flat 79: 1.34 Flat 80: 1.34 Flat 81: 1.04 Flat 82: 1.29 Flat 83: 1.34

17 Flat 84: 1.34 Flat 85: 1.34 Flat 86: 1.29 Flat 87: 1.34 Flat 88: 1.34 Flat 89: 2.41 [NAME]: 8.75 Flat 91: 7.01 Flat 92: 9.21 Flat 93: 8.78 Flat 94: 7.18 Flat 95: 9.21 Flat 96: 8.82 Flat 97: 7.11 Flat 98: 9.21 Flat 99: 12.30 Flat 100: 12.42

Total: 100%