First-tier Tribunal Rules on Reasonable Administration Charges for Subletting

OUTCOME: Allowed

FIRST-TIER TRIBUNAL

PROPERTY CHAMBER

(RESIDENTIAL PROPERTY)

Case reference : LON/00BF/LVA/2021/0001

HMCTS code (paper) : P: PAPERREMOTE

Property : [ADDRESS] [POSTCODE]

Applicants : [redacted]

(2) [COUNSEL] [NAME] : In person

Respondent: [redacted]

Tribunal members :

Judge Daley

Mrs Flynn MRICS MA

Venue : 10 [ADDRESS] [POSTCODE]

Date of decision : 1 October 2021

DECISION

Covid-19 pandemic: description of hearing

This has been a remote hearing on the papers which has been not objected to by the parties. The form of remote hearing was [P: PAPERREMOTE]. A face-to-face hearing was not held because all issues could be determined in a remote on paper]. The documents that I was referred to are in a bundle of [255] pages, the contents of which I have noted. The order made is described at the end of these reasons.

Decisions of the tribunal

(1) The tribunal determines that the sum of £420.00 is payable by the Applicant in respect of [NAME] for the years 2019.

(2) The tribunal determines that the sum of £150.00 is payable by the Applicant in respect of [NAME] for the years 2020, and that no further charge is payable in respect of the year 2021, for the consent renewal.

(3) The tribunal makes an order under Paragraph 5 A in respect of the cost of these proceedings which is set out below.

(4) The tribunal makes an order under section 20C of the Landlord and Tenant Act 1985 so that none of the landlord’s costs of the tribunal proceedings may be passed to the lessees through any service charge.

(5) The tribunal determines that the Respondent shall refund the charges over the sums found payable by the Tribunal.

The application

1. The Applicant seeks a determination pursuant to and Schedule 11 to the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”)] as to the amount of [NAME] charges payable by the Applicant in respect of the grant of consent to sub-let the premises known as The Firs [ADDRESS].

2. Directions were issued on 18 May 2021. Paragraph (2) of the Directions stated-: The tribunal has identified the following issues to be determined though these may be amplified by the parties in their statements of case that the issues to be determined include

(i) The amount being sought by the landlord is £720 which the managing agent claim there is an annual fee for the consent of the landlord to allow subletting of the property in accordance with the terms of the lease.

(ii) The applicant disputes the reasonableness of the payment of this sum and this is the only matter in dispute.

(iii) The applicant has made an application under both S20C of the Landlord and Tenant Act 1985 and Paragraph 5A schedule 11 of the 2002 Act for an order to limit payment of the landlord’s costs in this matter.

The hearing

3. The Directions provide that this case should be allocated to the paper track and Determined on the basis of written representations. At the hearing the Tribunal noted that there had been no objection to this case being determined on the basis of the papers. Further the Tribunal having considered the bundle decided that all of the issues in this matter could be determined without a hearing.

Accordingly, the Tribunal determined these issues on the basis of the documents.

The background

4. The property which is the subject of this application is a 2 bedroomed flat in a purpose-built block of flats. [brief description].

5. The Applicants holds a long lease of the property under the terms of the lease the Applicants covenanted under clause 3 (8) (b)-: Not to assign underlet or part with possession of the whole Demised Premises without the prior consent in writing of the [NAME] (Such consent not to be unreasonably withheld or delayed). (d) Not to underlet the whole of the Demised Premises unless (i) the underlease is on an assured shorthold tenancy agreement or any other tenancy agreement whereby the tenant does not obtain security of tenure on expiry or earlier termination of the term; (ii) the underlease contains covenants substantially the same as those contained in the Restrictions and Stipulations contained in the Sixth Schedule; and (iii) the underlease provides that the undertenant must not do anything that would or might cause the Lessee to be in breach of the Lessees covenants in this Lease. (9) …to give written notice thereof to the [NAME] and to produce to them a certified copy of every instrument effecting or evidencing the same and to pay to the [NAME] a fee of Twenty-five Pounds (together with Value Added Tax or any other tax payable thereon) or such other reasonable sums as the [NAME] shall determine for the registration of such notice.”

6. The Sixth Schedule, included covenants for the use of the premises, for example not to do or permit to be done any act or thing which may render void or voidable any policy of insurance (Clause 11 Sixth Schedule).

7. The Chronology and the history of the correspondence between the parties is helpfully set out in the Written submissions on behalf of the Respondent, and for ease of understanding they are reproduced below-: The Tenants paid the fee (a total of £420) on 25 March 2019.

8. On 2 April 2019 Mr [RESPONDENT] emailed Mr [RESPONDENT] confirming that the Landlord was happy to consent to an underletting but subject to some conditions set out in his email. At paragraph 6 of that email, it was made clear that “This consent is for a single underletting as set out in the tenancy document that you are to provide. Any renewal or extension of the tenancy at the end of its term is to be treated as a new underletting as far as the terms of your Lease are concerned, i.e., for which the [NAME]’s consent in writing will be required.” 064 4 9. On 9 April 2019 Mr [NAME] suggested to add some clauses in the Tenants’ tenancy document to sublet so that the tenancy would comply with the terms of the Lease therefore enabling the Landlord to grant consent to underlet. Consent to underlet on 21 January 2020 10. On 19 January 2020 Mr [NAME] was informed that the Tenants’ letting agent informed the Tenants that they had a new sub-tenant moving in on 1 February 2020. For a reason unbeknownst to the Respondent, the Tenants thought that they had to pay the Landlord £25 for the management fee before the sub-tenant could move in. 11. [NAME] responded via email on 20 January 2020: “I note that you wish to underlet your property to a new prospective tenant. If you look back to your previous emails with me you will remember that you need to seek your landlord's consent to such an underletting and to pay the landlords costs in dealing with such consent. In the first instance you will need to send me a copy of the proposed underletting agreement between you and your proposed new tenant such that I can check that the terms of the proposed underletting agreement are in accordance with the requirements that are set out in the lease between you and [RESPONDENT] [COMPANY].” 12. The Tenants paid £300 (£250 plus VAT) on 21 January 2020.

13. On the same day Mr [NAME] emailed Mr [RESPONDENT] and the letting agents confirming that the Landlord agreed to grant its consent to underlet on the basis of the conditions set out in her email. “The Landlord hereby grants its consent to underlet on the basis of the following conditions: 1) the consent is for the underletting that is set out in the draft underletting agreement that you sent to me attached to your email dated 21st January 2020 i.e., for the tenancy proposed to commence on 25th January 2020 and ending on 24th January 2021. 2) the wording of the underletting agreement requires that the attached Schedule be attached i.e., that was used with the previous tenancy...”

8. At the end of the shorthold assured tenancy the landlord wrote to the Applicants requesting details of whether a new tenancy was being entered into reminding the Applicants of the need to obtain consent. The Applicants wrote that the tenant was remaining in the property under the same lease. The Landlord subsequently wrote to indicate that as it was a renewal, they would make a modest charge of fifty pounds plus vat for confirming consent for the new period tenancy.

9. In their written submissions the Applicant challenges the [NAME] charges on three grounds that is that “A demand for the payment of an [NAME] charge must be accompanied by a summary of the rights and obligations of tenants of dwellings in relation to [NAME] charges.” In accordance with Schedule 11 paragraph 4 (2)

10. The Applicants also considered that the charge that had been made by the Landlord did not comply with the terms of clauses 3, (8) and (9) of the lease, in particular the requirement to apply every year and the sums of money charged. The Applicants also considered that the sums charged were not a reasonable [NAME] charges for the grant of permission to sublet the lease.

11. Having considered all the written evidence and submissions from the parties and considered all of the documents provided, the tribunal has made determinations on the various issues as follows.

Did the service charges comply with 4 (1) of The Commonhold and Leasehold Reform Act 2002?

12. The Tribunal carefully considered the Respondent’s submission, the Tribunal noted that the Respondent did not deal with this issue. However, in considering Paragraph 4 (1) of Schedule 11 of the Commonhold and Leasehold Reform Act 2002, the Tribunal noted that the wording is quite clear that regardless of whether the [NAME] is variable or not any demand for payment of the charge must be accompanied by a summary of rights and obligations in a prescribed form.

13. The form must be as prescribed by [NAME] (Summary of Rights and Obligations) (England) Regulations 2007. The Tribunal has no evidence that the Respondent complied with this requirement and the Respondent is silent on this point.

The tribunal’s decision

14. The Tribunal on reading the evidence of the Applicants accepts that the Respondent did not comply with the requirements. This means that although the charges have been paid, they were not lawfully due.

15. However, once the Landlord has complied with the requirements the charge would be payable, for this reason the Tribunal have considered and addressed the other issues raised by this application.

Did the Landlord comply with the terms of clauses 3, (8) and (9) of the lease

Reasons for the tribunal’s decision

16. Clause 3 (9) of the lease specifies-: to give written notice thereof to the [NAME] and to produce to them a certified copy of every instrument effecting or evidencing the “...same and to pay to the [NAME] a fee of Twenty-five Pounds (together with Value Added Tax or any other tax payable thereon) or such other reasonable sums as the [NAME] shall determine for the registration of such notice.”

17. The Tribunal consider that this clause gives the Respondent landlord discretion to charge such other reasonable sums as the [NAME] shall determine. This means in our view this does not limit the [NAME] to the sum of twenty- five pounds, however there is a stipulation that the sum must be reasonable.

18. The parties provided the Tribunal with caselaw in which the Upper Tribunal had looked at the issue of the reasonableness of the [NAME]. However, these cases although suggestive of principles were dated and fact specific.

19. The Tribunal considered the work involved in granting the consent. The Tribunal noted that there was discussion concerning the terms of the tenancy agreement to ensure that it complied with the terms of the lease, and that the landlord needed to review the lease and made suggestions. The Tribunal accept that when undertaking the grant of consent for the first time for the Applicant that more work would have been involved. The Tribunal consider that the sum of £420.00 is within the range of charges that a reasonable landlord may charge for such work. For this reason, the Tribunal has decided not to interfere with this charge and finds that the sum of £420.00 is reasonable.

20. However, the Tribunal considers that once the Respondent has set out what is required and the shorthold agreement is in the required format, the landlord should have been able to carry out the work of reviewing the documents for the grant of consent and registering the tenant’s details at a lower cost.

Accordingly, the Tribunal considers that the [NAME] charge of £300.00 is not reasonable, the Tribunal in using its knowledge and experience has determined that the sum of £ 150.00 plus VAT is payable.

21. The Tribunal consider that once consent has been granted to sub-let to a tenant, that no further charge should be made in respect of that tenancy even if the tenant continues as a statutory tenant. This is because nothing has changed and nothing in the lease can be construed as requiring an annual charge to be made. Accordingly, we find that nothing is payable in respect of the period 2021.

The Landlord’s Legal fees.

22. The landlord provided a schedule of the costs in relation to these proceedings.

23. The Tribunal noted that there were two fee earners one at an hourly rate of £400.00 per hour, [NAME] [NAME] and [NAME]. Within the schedule, the Tribunal noted the sum of £990.00, within the schedule and counsel fees of £1,300, however, there is no information concerning the brought forward sum of £4250.00. The total cost claimed for what is a case involving one issue, which was considered by the Tribunal as a paper determination is £6724.00. The Tribunal considers this sum is disproportionate.

24. The Tribunal noted the Applicants’ submission in respect of legal costs. The Tribunal in deciding whether to grant the relief sought has considered whether it is just and equitable to grant the relief sought.

25. The Tribunal noted that the Respondent had not complied with the requirements for levying the [NAME] charges, and that the Applicant raised legitimate issues for determination, which ought to have been determined by the Tribunal. Accordingly, the Tribunal finds it just and equitable to grant the application sought under 5A of CLARA 2002.

The tribunal’s decision

26. The tribunal finds that although the sums have been paid, they were not formally due until the landlord complies with the obligation to provide a summary of the tenants' rights and obligation.

27. In respect of the reasonable sum to be paid for granting permission, the Tribunal finds that sum of £ 570.00 is reasonable and payable.

28. Application under s.20C and refund of fees

29. Having read the submissions from the parties and taking into account the determinations above, the tribunal does not order the Respondent to refund any fees paid by the Applicant.

30. In the application form and in the statement of case the Applicant applied for an order under section 20C of the 1985 Act. taking into account the determinations above, the tribunal determines that it is just and equitable in the circumstances for an order to be made under section 20C of the 1985 Act, so that the Respondent may not pass any of its costs incurred in connection with the proceedings before the tribunal through the service charge.

Name: Judge Daley 1.10.21

Rights of appeal

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 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).