Leasehold case law update 2017

As we move into 2017 this briefing looks at three significant legal cases heard during the year which will have implications for leasehold management teams.

The cases, decisions and what each will mean for landlords are set out below.

Foundling Court v Camden (2016) – Major Works Consultation

In a ground-breaking decision of the Upper Tribunal, it was decided that in all circumstances, where the freeholder of a property wishes to undertake major works to its property and wants to pass on the full costs of those works, it must consult with its leaseholder and also all sub-tenants who are in actual occupation of the property. In this case, the freeholder consulted its leaseholder in respect of major works to the property.

The leaseholder then provided its own sub-tenants with the freeholder’s consultation documents. The Upper Tribunal held that that, although the freeholder has no direct relationship with the sub-tenants, they should have consulted with both the leaseholder and the sub-tenants.

A (Freeholder)

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C (Head lease)

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C’s Sub-tenants of Individual Flats

  • A consulted C on qualifying works
  • C provided its subtenants with A’s notices.

Upper Tribunal Held

  • Although freeholder has no direct relationship with sub-tenants, it should have consulted with C AND the sub-tenants.

What does this mean for landlords?

What does this mean for landlords?
Freeholders should now request their leaseholders to provide them with the names and contact details of any sub-tenants in circumstances where they are considering major works. The freeholder will need to consult with both the leaseholder and sub-tenant in future, and leaseholders should check whether they have already provided the freeholder with names and contact details of any sub-tenants and, if they have not already provided this information, they should now do so.

Cardiff Housing Association v Kahar (2016) – What information to include in a Tenancy Agreement?

In an important decision by the Court of Appeal, the court considered a standard tenancy agreement where the list of the services which the landlord would provide, had been left blank in error.

The tenancy agreement stated that the tenant would pay £14.60 per week, which included a contribution towards services provided by the landlord. The services provided were not listed in the tenancy agreement. The tenant argued that she should not have to pay for services if they were not listed in the tenancy agreement. The court decided that even though the services were not listed in the tenancy agreement, thelandlord had provided services and the tenant had paid for them.

Criteria

  • Standard lease but list of services the landlord would provide had been left blank in error. The lease stated that tenant would pay £14.60 per week
  • Were service charges recoverable?
  • The landlord had provided services and tenant had paid them. Although “services” were not defined, they could be defined from the conduct of both parties.

What does this mean for landlords?
Even though Cardiff Housing Association was able to show that services were being provided and that the tenant had been paying for them, the landlord should, in all circumstances, list the services that they provide in the tenancy agreement so that the tenant knows what he/she is paying a service charge for.

Willow Court Management v Alexander (2016) – Costs Orders in Tribunal

The Upper Tribunal has the discretion to order costs where a party has behaved unreasonably. This discretion is used sparingly. The Upper Tribunal gave guidance on the first stage test to apply when determining a cost order.

It must firstly be established that the conduct complained of does not meet the standard of reasonable conduct. Then, once considering all the facts, it can be decided whether it is appropriate to exercise such discretion. If discretion is exercised, the Tribunal must consider the form and quantum of a costs award.

This guidance sets a “high bar” for discretion to be exercised as the Tribunal made it clear that cost orders should not become routine, and should not be used to discourage access to the Tribunal or be allowed to become major disputes in their own rights.

Criteria

  • The Tribunal has discretion to order costs where a party has behaved unreasonably. This discretion is used sparingly
  • The Upper Tribunal gave guidance on the first stage test to apply when determining costs orders:

(a)Is the conduct complained of to meet the objective standard of reasonable conduct?

(b)Considering all the facts, is it appropriate to exercise its discretion?

(c)Tribunal (in its discretion) must consider the form and quantum of a costs award.

The guidance sets a high bar and emphasises “discretion”. The Upper Tribunal was clear that costs orders “should not become routine, should not be used to discourage access to the Tribunal and should not be allowed to become major disputes in their own rights”.

What does this mean for landlords?
The First Tier and Upper Tribunal, while able to do so, will very rarely make an adverse costs order against a tenant/leaseholder, even in circumstances where they are unsuccessful in challenging the nature and cost of service provision provided by the landlord. It is only when the leaseholder/tenant behaves in an entirely unreasonable way, ie, repeatedly ignores directions made by the Tribunal or wilfully withholds information from the Tribunal that adverse costs could be made against them.

For more information please contact: Lindsay Felstead, Partner, 0345 209 1804 and Lauren Pond, Paralegal 0345 209 1708.

This article has been reproduced based on the original written byJonathan Hulley and Lauren Pond for HQN. For more information aboutHQN, please contact: Richard Waft, Lead Associate for the LeaseholdExcellence Network, 0190 455 7150,

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