A recent case in the Upper Tribunal: Lands Chamber provided information in respect of lease variations proposed pursuant to section 35 of the Landlord and Tenant Act 1987. 

This section of the Act enables a party to a long lease to seek an order varying the provisions of the lease if the lease contains inadequate provisions relating to the repair and maintenance of the flat or building. 

Compensation is often payable as a result of any ordered variation, calculated by reference to the harm suffered by the leaseholder, less a discount for the increased capital value in having a properly ordered lease.

Facts

  • A basement flat tenant resisted an application to vary the service charge provisions in its Lease under section 35 to make it contribute towards the repairs to the structure of the building and the cost of the Landlord employing staff or agents.
  • The Lease only required the Tenant to contribute towards the cost of external decoration. 
  • There were four flats in the building and the freehold was owned by the Tenants of the other three flats. 
  • The basement flat had its own entrance accessible by steps from the common frontage and it did not share any of the common parts of the building.
  • All four leases contained different service charge provisions and there was not 100% recovery of any item of expenditure other than the buildings insurance.
  • The Landlord sent a service charge demand to the Tenant containing various items arguably not included within 'external decoration'.

First Tier Tribunal (FTT)

The Tenant applied to the FTT for an order as to whether a service charge was payable under the Lease.  The Tenant submitted that many of the items included within its service charge demand could not be classed as external decoration.

At the same time the Landlord made a cross application to vary the terms of the Lease under section 35.

The FTT held that the Lease should be varied to provide for the Tenant to contribute one quarter of the cost of repair and renewal of the main structure of the building and the cost of any staff employed by the Landlord.

Upper Tribunal

The Tenant appealed. 

The Tenant argued that there was nothing unsatisfactory about the different tenants paying the different proportions of the expenses as they were merely subject to different contractual provisions that did not appear to cause any difficulty in interpretation or application.  The building was in good repair and the other tenants made good the shortfall in the service charge, which was not a large amount.

The Upper Tribunal allowed the appeal. 

Although it acknowledged the badly drafted leases and the difficulty involved in determining whether a particular item constituted repair or the external painting, the Lease was not unsatisfactory within the meaning of section 35.

Matters for consideration

The case highlights that for an order for variation to be made, there must be evidence of an actual problem.  The purpose of section 35 is not to allow the FTT update old leases or standardise poorly drafted leases.

There was no evidence of any actual problem in this case – the service charge provision was unusual but was not affecting the proper management of the building and the service charge shortfall paid by the other tenants was not a material sum.

Had the application been made in response to a specific service charge collection issue involving larger sums, it would be interesting to see how the outcome would have differed.   

The case highlights the need for taking careful advice prior to making or responding to any application made under section 35.  It is also important to be aware that there may be alternative routes to achieving variation i.e. where the building is not being properly managed or a statutory lease extension is proposed.