First-tier Tribunal Rejects Landlord's Claims Over Breach of Covenant and Charges

OUTCOME: Dismissed

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FIRST-TIER TRIBUNAL [NAME_1] CHAMBER ([NAME_1]) Case References : LON/00AN/LBC/2024/0027, LON/00AN/LAC/2024/0010 and LON/00AN/LSC/2024/0227

[NAME_1] : [ADDRESS] [POSTCODE] Applicant : [redacted] and Fulham Representative :

[NAME_2] of Counsel instructed by Applicant’s in-house legal department Respondent : [redacted] : Not represented Types of Application : (1) Determination as to breach of covenant, (2) Determination as to payability of administration charges and (3) Determination as to payability of service charges Tribunal Members :

Judge P [NAME_4]

Date of hearing : 13 November 2024 Date of decision : 5 December 2024

DECISION

2 Description of hearing

The hearing was a face-to-face hearing. Decisions of the tribunal (1) Breaches of covenants contained in the following clauses/paragraphs of the Lease have occurred:- • paragraph 17 of Part I of the Fifth Schedule; • paragraph 1 of Part II of the Fifth Schedule; • paragraph 2 of Part II of the Fifth Schedule; • paragraph 4 of Part II of the Fifth Schedule; and • paragraph 5 of Part II of the Fifth Schedule. (2) There has been no breach of any other covenants. (3) In relation to the Applicant’s administration charge application, none of the administration charges covered by its application are payable. (4) In relation to the Applicant’s service charge application, none of the service charges covered by its application are payable. The applications 1. The Applicant seeks a determination pursuant to section 168(4) of the Commonhold and Leasehold Reform Act 2002 (“CLARA”) that one or more breaches of covenant have occurred under the lease of the [NAME_1].

2. The Applicant also seeks a determination pursuant to Schedule 11 to CLARA as to the payability of certain administration charges by the Respondent.

3. The Applicant also seeks a determination pursuant to section 27A of the Landlord and Tenant Act 1985 as to the payability of certain service charges by the Respondent.

4. The Applicant is the freehold owner of the building (“the Building”) of which the [NAME_1] forms part, and the Respondent is the leasehold owner of the [NAME_1]. The Respondent’s lease (“the Lease”) is dated

3 25 September 2000 and was made between the Applicant (1) and the Respondent (2). Respondent’s lack of involvement in these proceedings 5. The Respondent has not made any written or oral submissions in the context of these proceedings, nor has he communicated with either the Applicant or the tribunal.

6. From the information available to the tribunal, it appears that the Respondent is currently in prison, although the ‘[NAME_5]’ has been unable (or unable due to data protection issues) to confirm this. Nevertheless, and as confirmed at the hearing, we are satisfied that the Applicant has used its best endeavours to trace the Respondent. General observation about the Applicant’s case 7. As observed by the tribunal at the hearing, despite being required to do so by the tribunal’s directions, the Applicant has not filed a statement of case in relation to any of the applications. It has provided witness statements, but these are very limited in their scope and do not set out any actual statement of case. The Applicant’s case is therefore limited to the brief comments contained in the application forms. Breach of covenant issue 8. The relevant parts of section 168 of CLARA provide as follows:- “(1) A landlord under a long lease of a dwelling may not serve a notice under section 146(1) of the Law of [NAME_1] Act 1925 in respect of a breach by a tenant of a covenant or condition in the lease unless subsection (2) is satisfied.

(2) This subsection is satisfied if – (a) it has been finally determined on an application under subsection (4) that the breach has occurred, (b) the tenant has admitted the breach, or (c) a court in any proceedings, or an arbitral tribunal in proceedings pursuant to a post-dispute arbitration agreement, has finally determined that the breach has occurred.

(4) A landlord under a long lease of a dwelling may make an application to a leasehold valuation tribunal for a determination that a breach of a covenant or condition in the lease has occurred.”

9. The way that the Lease is structured in relation to the tenant’s covenants is that clause 3 of the Lease contains a tenant’s covenant to observe and perform the covenants etc set out in Part I and Part II of

4 the Fifth Schedule and in the Ninth Schedule. All of those covenants are in favour of the landlord although (whilst this is not relevant for our purposes) some are also in favour of the other tenants.

10. A summary of the Applicant’s case in respect of each alleged breach of covenant as clarified at the hearing is set out below, preceded in each case by the text of the relevant part of the relevant clause or paragraph in the Lease and then followed by the tribunal’s comments.

11. Paragraph 7 of Part I of Fifth Schedule To comply with all local bye-laws statutory requirements and other lawful requirements applicable to the Demised Premises and to keep the [NAME_6] indemnified against all costs claims demands and liability arising thereon Applicant’s case 12. The Applicant states that the [NAME_1] has been used for criminal activity in that on 14 January 2023 the police attended the [NAME_1] following reports of a smashed door and found drugs, a ‘zombie’ knife, a baseball bat and nunchucks inside the [NAME_1]. The police created a crime refence number, and there is some supporting documentary evidence in the hearing bundle. Tribunal’s comments 13. The tribunal notes the Applicant’s submissions but is not persuaded that it has demonstrated that there has been a breach of this particular covenant. The Applicant does not specify which bye-laws or statutory or other requirements have not been complied with, and the existence of a crime reference number does not prove that a crime has been committed. The presence on the [NAME_1] of the items listed by the Applicant does not show that they belonged to the Applicant or that they were used (or used in an illegal manner) at the [NAME_1] and in any event the Applicant has failed to articulate what breach it is relying on, supported by suitable evidence. Therefore, we are not satisfied that there has been a breach of this covenant.

14. Paragraph 11 of Part I of Fifth Schedule In accordance with the Lessee’s covenants in that behalf hereinafter contained to repair decorate cleanse and make good all defects in the repair decoration and condition of the Demised Premises of which notice in writing shall be given by the [NAME_6] to the Lessee such works to be carried out to the satisfaction in all respects of the [NAME_6] within three calendar months after the giving of such notice

5 Applicant’s case 15. The Applicant states that the Respondent has failed to repair, decorate, cleanse, and make good defects in the [NAME_1] and it has provided evidence of disrepair including photographs. Tribunal’s comments This covenant only requires the tenant to repair etc where written notice of the disrepair etc has been given by the landlord. The Applicant has provided no evidence that written notice was given, nor does the Applicant even seem to be arguing that written notice was given. Therefore, on the evidence before us there has been no breach of this covenant.

16. Paragraph 17 of Part I of Fifth Schedule Not to use the Demised Premises or any part thereof nor allow the same to be used for the purposes of any trade or business or for any illegal or immoral purposes but to use the same as a private dwellinghouse only Applicant’s case 17. The Applicant states that on 26 August 2022 its officers attended the [NAME_1] and found that the Respondent had been illegally using the mains electricity supply in the Building for his personal use. A copy of the officer’s attendance note is in the hearing bundle. Then on 14 January 2023 the police attended the [NAME_1] following reports of a front smashed door and suspicious behaviour. When the police arrived, they found that the locks on the main entrance street door had been forced open and the residents were using a fridge pushed against it on the inside to keep the door closed. The police found drugs at the [NAME_1] and they arrested a man who was inside the [NAME_1] for possession with intent to supply drugs. The police also found a ‘zombie’ knife, baseball bat and nunchucks in the [NAME_1]. The Respondent was not in, but the police found another man inside who was a known drug user. Then on 25 January 2023, the police obtained a Closure Order which prohibited access to the Building to all persons except necessary personnel. A copy of the Closure Order and the statement relied upon are in the hearing bundle.

18. Counsel for the Applicant submitted at the hearing that the Respondent’s behaviour amounted to using the [NAME_1] for an illegal purpose in breach of the covenant contained in paragraph 17 of Part I of the Fifth Schedule. When pressed for a more specific statement as to what the illegality consisted of, she said that the use of the mains

6 electricity supply in the Building for the Respondent’s personal use was contrary to section 13 of the Theft Act 1968. Tribunal’s comments 19. Section 13 of the Theft Act 1968 reads as follows: “A person who dishonestly uses without due authority, or dishonestly causes to be wasted or diverted, any electricity shall on conviction on indictment be liable to imprisonment for a term not exceeding five years”. Based on the report of the police’s findings, the evidence contained in a letter from the solicitors acting for the owner of the top floor flat, and the witness statement of [NAME_7], and [NAME_11] employed by the Applicant, we are satisfied that the Respondent has been illegally using the mains electricity supply in the Building for his personal use contrary to section 13 of the Theft Act 1968. We also accept that this constitutes a breach of the covenant “Not to use the Demised Premises or any part thereof nor allow the same to be used … for any illegal … purposes”.

20. It is unclear from the Applicant’s submissions whether it is also relying on any other matters as constituting a breach of this clause, but we are not satisfied that it has demonstrated that anything else occurred that constitutes a breach of this covenant. For example, drugs seem to have been found at the [NAME_1] but it is not clear that those drugs belonged to the Respondent, and the Applicant has not articulated what the breach would be if the drugs belonged to someone else or were even there without the Respondent’s prior knowledge.

21. In conclusion, the illegal use by the Respondent of the mains electricity supply in the Building for his personal use constitutes a breach of the covenant.

22. Paragraph 29 of Part I of Fifth Schedule To indemnify and keep indemnified the [NAME_6] from liability in respect of any injury to or the death of any person damage to any [NAME_1] movable or immovable the infringement disturbance or destruction of any right easement or privilege or otherwise by reason or arising directly or indirectly out of the repair state of repair or condition of the Demises Premises or of any permitted alteration thereto and from all proceedings costs claims and demands whatsoever in respect of any such liability or alleged liability Applicant’s case 23. The Applicant states that it has been advised by the lessee of the second and third floor flat that he has been unable to rent out his flat due to the condition of the [NAME_1] and the antisocial behaviour of the

7 Respondent and/or his visitors/acquaintances in the communal areas of the Building, and he is demanding compensation from the Applicant as a result. Tribunal’s comments 24. This covenant is a covenant of indemnity. Even if it is the case that the condition of the [NAME_1] has caused loss to another person (in this case, the lessee of the second and third floor flat) for which the Applicant has become liable, the Applicant has not demonstrated that there has been a breach of this covenant because there is no evidence before us that the Respondent has been asked to indemnify the Applicant in respect of that liability and then failed to do so. Therefore, on the evidence before us there has been no breach of this covenant.

25. Paragraph 32 of Part I of Fifth Schedule At all times to keep the [NAME_6] indemnified against all actions proceedings costs damages claims demands and liability for or in respect of any breach during the said term of (i) any of the covenants or agreements on the part of the Lessee contained in this lease and (ii) any restrictive covenant or other agreement for the benefit of third parties affecting the Demised Premises Applicant’s case 26. Again, the Applicant states that it has been advised by the lessee of the second and third floor flat that he has been unable to rent out his flat due to the condition of the [NAME_1] and the antisocial behaviour of the Respondent and/or his visitors/acquaintances in the communal areas of the Building, and he is demanding compensation from the Applicant as a result. Tribunal’s comments 27. Again, this covenant is a covenant of indemnity. Even if it is the case that the Applicant has become liable for any costs etc and/or proceedings have been issued against the Applicant in connection with any breach by the Respondent, there is no evidence before us that the Respondent has been asked to indemnify the Applicant in respect of that liability and then failed to do so. Therefore, on the evidence before us there has been no breach of this covenant either.

28. Paragraph 1 of Part II of Fifth Schedule To keep the whole of the Demised Premises and additions and improvements thereto (excluding any portion thereof which the [NAME_6]

8 covenants to repair in the Sixth Schedule hereto) and the [NAME_6]’s fixtures and fittings and the sanitary and heating and electrical apparatus installed in or affixed to the Demised Premises and the door and window furniture glass and sash cords (if any) thereof in good and substantial repair and condition and in particular (but without prejudice to the generality of the foregoing) to support shelter and protect all such parts of the building which adjoin or lie above or beneath the Demised Premises Applicant’s case 29. The Applicant states that the Respondent has failed to keep the [NAME_1] in good and substantial repair and condition. The following defects were noted on 30 May 2022 by the Applicant’s Senior Building Control Officer: (i) an area of lath and plaster to the walls had been removed, (ii) pipework in the rear two rooms had been removed, (iii) the bath had been removed, (iv) the rear room had had floorboards removed, (v) the front sash window to the first floor had been removed and (vi) there was loose glazing as the window had been smashed and crudely boarded from the inside. The hearing bundle contains copy colour photographs in support. Tribunal’s comments 30. We note the Applicant’s uncontested evidence as regards the condition of the [NAME_1], and we have considered the copy photographs and other supporting evidence in the hearing bundle. On the basis of that evidence, we are satisfied that the [NAME_1] was at the relevant time in disrepair and therefore in a condition which constitutes a breach of this covenant. Therefore, a breach of this covenant has occurred.

31. Paragraph 2 of Part II of Fifth Schedule At all times to keep the interior of the Demised Premises in good decorative repair Applicant’s case 32. The Applicant states that the Respondent has failed to keep the [NAME_1] in good decorative repair and has provided colour copy photographs in support. Tribunal’s comments 33. Whilst it is possible that the Respondent could have said something in his support in respect of these photographs, we have no evidence from him and no basis for concluding that the photographs are not of the

9 [NAME_1] or were not taken during his period of ownership. We accept that these photographs show parts of the [NAME_1] to be in very poor decorative condition and we accept that this constitutes a breach of this covenant. Therefore, a breach of this covenant has occurred.

34. Paragraph 3 of Part II of Fifth Schedule To make good all damage caused through the act or default of the Lessee (a) to any part of the Building or to the appointments or the fixtures and fittings thereof and (b) to any other occupier or tenant of the Building and their licensees and in each case to keep the [NAME_6] indemnified from all claims expenses and demands in respect thereof Applicant’s case 35. The Applicant states that the Respondent has failed to make good the damage caused to the Building through his act or default. Tribunal’s comments 36. The Applicant asserts that the Respondent has caused damage to the Building but has not provided any persuasive evidence to support this assertion. The witness evidence indicates that the Respondent caused an obstruction and accessed the mains electricity supply in the Building for his personal use, but there is nothing contained in the Applicant’s witness evidence or elsewhere in the hearing bundle that demonstrates that the Respondent himself has caused damage to any part of the Building, and neither is there a properly argued case that he has caused damage to any other occupier or tenant or licensee. Therefore, no breach of this covenant has occurred.

37. Paragraph 4 of Part II of Fifth Schedule Not to do or omit to permit or suffer to be done or omitted any act deed matter or thing whatsoever whereby the risk or hazard of the Demised Premises or the Building being destroyed or damaged by fire or any other risk against which the [NAME_6] has insured may be increased or which may require any additional premium for insuring the same or which may make void or voidable any policy for such insurance and to give notice to the [NAME_6] of any act thing or matter done or brought on to the Demised Premises which may lead to an increase in the premium for insuring the same and to pay any increase in the insurance premium attributable to the Demised premises or the Building by reason thereof

10 Applicant’s case 38. The Applicant states that on 2 August 2022 its fire safety officer attended the [NAME_1] and noted that the Respondent and/or his visitors/acquaintances had damaged the electrical meter in the Building and had run a wire from the mains which was hazardous. In addition, the Respondent had allowed rubbish to accumulate in the [NAME_1]. Wooden floorboards, some broken, had been exposed, as had the wooden frames of the plaster walls. The condition of the gas, cooker and other electrical appliances within the [NAME_1] was also very poor, and the condition of the wiring was also a concern. All of these problems are considered by the Applicant to be a fire risk to the entire Building and to neighbouring properties. Tribunal’s comments 39. For reasons given previously, we accept the Applicant’s uncontested evidence regarding the use of the mains electricity supply for his personal use, and we accept that by damaging the electrical meter and running a wire from the mains electricity supply he was acting in a manner “whereby the risk or hazard of the Demised Premises or the Building being destroyed or damaged by fire or any other risk against which the [NAME_6] has insured may be increased or which may require any additional premium for insuring the same or which may make void or voidable any policy for such insurance”. Likewise, we accept the Applicant’s uncontested evidence that the Respondent allowed rubbish to accumulate and have seen relevant copy photographs. We accept that this will have increased the fire risk and also had the potential adversely to affect the insurance in breach of this covenant.

40. Therefore, a breach of this covenant has occurred.

41. Paragraph 5 of Part II of Fifth Schedule Not to do or omit or permit or suffer to be done or omitted upon or in connection with the Demised Premises anything which shall be or tend to be a nuisance or annoyance or cause of damage to the [NAME_6] or the other occupants of the Building or to any neighbouring adjoining or adjacent [NAME_1] or the owner or occupiers thereof Applicant’s case 42. The Applicant states that the Respondent caused damage to the electrical meter by installing a wire to bypass the communal electrics. The Respondent has also caused nuisance or annoyance to the Applicant and to the occupiers of neighbouring properties by keeping a significant amount of furniture and other items from the [NAME_1] in

11 the communal hallway. There are colour copy photographs in the hearing bundle illustrating the condition of the communal areas. Tribunal’s comments 43. On the basis of the Applicant’s uncontested evidence we accept that the Respondent has done the things set out by the Applicant.

44. The covenant itself prohibits acts or omissions “which shall be or tend to be a nuisance or annoyance or cause of damage” to the landlord or occupiers of the Building or the owner or occupiers of neighbouring buildings. The Applicant states that the Respondent has caused nuisance or annoyance, but ‘nuisance’ has a specific meaning which is harder to prove than mere ‘annoyance’. At the hearing the Applicant was unable to say on what basis the Respondent’s actions will have amounted to ‘nuisance’, but we accept that the actions listed by the Applicant will at the very least have annoyed other occupiers, and therefore the Respondent has caused annoyance to all or some of those categories of person listed in paragraph 5 of Part II of Fifth Schedule.

45. Therefore, a breach of this covenant has occurred. Administration charge issue 46. The Applicant states that, as a direct consequence of the Respondent's breaches of covenant, repair works costing the sum of £1,609.01 have been undertaken by the Applicant, details of which are set out in the hearing bundle. The Applicant then goes on to state that as a consequence of the Respondent's breach of covenant certain repair works have had to be undertaken by the Applicant at a cost of £8,412.50.

47. Paragraph 1(1) of Part I of Schedule 11 to CLARA reads as follows: In this Part of this Schedule “administration charge” means an amount payable by a tenant of a dwelling as part of or in addition to the rent which is payable, directly or indirectly – (a) for or in connection with the grant of approvals under his lease, or applications for such approvals, (b) for or in connection with the provision of information or documents by or on behalf of the landlord or a person who is party to his lease otherwise than as landlord or tenant,

12 (c) in respect of a failure by the tenant to make a payment by the due date to the landlord or a person who is party to his lease otherwise than as landlord or tenant, or (d) in connection with a breach (or alleged breach) of a covenant or condition in his lease.

48. There was some discussion at the hearing as to the legislative basis for the Applicant’s claim for payment of administration charges, as this was not clear from the application itself and there is no separate statement of case.

49. As a result of the discussion at the hearing, Counsel for the Applicant said that the Applicant’s case was based on paragraph (d) of paragraph 1(1) of Part I of Schedule 11 to CLARA, namely that the payment is sought in connection with a breach (or alleged breach) of a covenant or condition in the Lease. She was then asked to specify what the relevant breaches were.

50. Counsel for the Applicant first referred the tribunal to paragraph 10 of Part I of the Fifth Schedule to the Lease, which reads “… to pay all charges and expenses incurred by the [NAME_6] in abating a nuisance … in obedience to a Notice served by the Local Authority or any other Authority”. However, ultimately she accepted that it did not apply as there was no evidence of any such notice having been served. She then referred the tribunal to paragraph 32 of Part I of the Fifth Schedule, which reads “… to keep the [NAME_6] indemnified against all actions proceedings costs damages claims demands and liability for or in respect of any breach … of … any of the covenants or agreements on the part of the Lessee contained in this Lease …”. Finally, she referred the tribunal to paragraph 5 of the Ninth Schedule relating to the obstruction of the common parts but then in discussion accepted that it was not relevant. This leaves the covenant in paragraph 32 of Part I of the Fifth Schedule as being the only one which is potentially relevant.

51. There are, though, some problems with this claim for payment of an administration charge. First of all, there has been no actual demand for this sum, let alone one that has been accompanied by the necessary summary of tenants’ rights and obligations. Secondly, the application itself seems confused as to how much is being claimed; is it £1,609.01 or £8,412.50 or is it both sums? Thirdly, in discussion at the hearing with the Applicant’s witnesses and with Counsel for the Applicant, it was accepted by the Applicant that there was nothing in the hearing bundle which demonstrated how the figures themselves had been arrived at. There is a generalised schedule of costs and a list of some of the items needing repair but no other details, let alone any proper costings. Fourthly, of the clauses in the Lease relied upon by the Applicant, the only one that can even possibly be relied on is the indemnity in paragraph 32 of Part I of the Fifth Schedule, and we are

13 not convinced that the Applicant has necessarily done enough to demonstrate the causal link between any breach or breaches of the Lease by the Respondent and the costs incurred by the Applicant.

52. In conclusion, therefore, the sum or sums sought is/are not payable. Service charge issue 53. The Applicant seeks a determination that the service charges demanded for the years 2011/12 to 2023/24 inclusive are payable. The application contains in respect of each year a statement as to the amount estimated to be payable and (if different) the amount actually payable, and it also includes an amount stated to be payable by way of accrued interest.

54. As explained at the hearing, interest (if and to the extent payable) is an administration charge, not a service charge. Also, the hearing bundle contains no explanation as to how the interest was calculated, and the Applicant’s representatives at the hearing were unable to provide any information on this.

55. The tribunal cross-examined [NAME_8], the Applicant’s Leasehold Income Support Officer, at the hearing in relation to the service charge calculations. [NAME_8] accepted that there were no copy service charge demands in the hearing bundle. She said that it was the [NAME_1] to serve service charge demands, but she was unable to confirm that service charge demands had actually been served on the Respondent in respect of these specific charges (or, even if they were, that those demands were valid ones). She also accepted that there were no breakdowns of the service charge amounts in the hearing bundle.

56. In the circumstances, none of these service charges is payable. The Applicant has failed to make a ‘prima facie’ case to show that the charges are reasonable and payable in practice, as it has provided no information other than the total amount charged in each year. We therefore have no way of knowing whether the amount charged for each service in each year was reasonable. The Applicant has also been unable to produce evidence to show that the service charge was ever demanded, or even if it was demanded that it was demanded validly. If the service charges themselves are not payable it follows that the interest charges on the unpaid service charges are not payable either. Cost applications 57. There were no cost applications.

Name:

Judge P Korn

Date:

5 December 2024

14 RIGHTS OF APPEAL

A. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber) a written application for permission must be made to the First-tier Tribunal at the regional office dealing with the case.

B. 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.

C. If the application is not made within the 28 day time limit, such application must include a request for extension of time and the reason for not complying with the 28 day time limit; the Tribunal will then look at such reason and decide whether to allow the application for permission to appeal to proceed despite not being within the time limit.

D. The application for permission to appeal must identify the decision of the Tribunal to which it relates (i.e. give the date, the [NAME_1] and the case number), state the grounds of appeal, and state the result the party making the application is seeking.