MARTINVALE DEVELOPMENTS LIMITED LRX/90/2004

UPPER TRIBUNAL

LANDS CHAMBER

LRX/90/2004

Case No LRX/90/2004

Between

MARTINVALE DEVELOPMENTS LIMITEDApplicant

Before

George Bartlett QC

Date 30 June 2005

Property: 119 Berryfield Road, Sheldon, Birmingham B26 3UN

Catchwords: SERVICE CHARGES – administration charge – payment in respect of breach of covenant – whether charge made not payable by reason of failure of landlord to accompany demand with summary of tenant’s rights – whether admission by tenant that charge payable – whether admission as to amount – reasonableness of amount – Commonhold and Leasehold Reform Act 2002 Schedule 11

[1]This is an appeal against a decision of the Leasehold Valuation Tribunal for the Midland Rent Assessment Panel on applications made by the tenant of a house, 119 Berryfield Road, Sheldon, Birmingham B26 3UN, under Schedule 11 to the Commonhold and Leasehold Reform Act 2002 and section 20C of the Landlord and Tenant Act 1985. Schedule 11, which, so far as relevant, I set out below, enables a tenant to apply to an LVT for a determination as to whether an administration charge is payable and, if so, the amount that is payable. The administration charge in question was an amount said to be payable under the tenant’s lease in connection with the grant of approval to breaches of covenants contained in the lease. The LVT held that there was no liability to pay the administration charge because the landlord’s demand for it was not accompanied by a summary of tenants’ rights and obligation as required by paragraph 4(1) of the Schedule. It disallowed the landlord’s costs in connection with the proceedings under section 20C. The landlord now appeals following the permission that I granted. The tenant does not respond to the appeal. The appeal is being dealt with under the written representations procedure.

[2]In the written case submitted to the LVT on behalf of the applicant by Paul Rocky FRICS, it was stated that the applicant, Mrs Marjorie Bennett held the property under a lease dated 17 February 1950 for a term of 99 years from 25 December 1949 at a current (fixed) ground rent of £6.50 per annum. In a signed statement that was before the LVT Mrs Bennett said that she had acquired the property with her late husband in May 1954, at which time the property already had at the rear a small lean-to conservatory. In 1958 two small living rooms were converted into one.

[3]Clause 2(10) of the lease, as quoted in the landlord’s representation to the LVT, provides as follows: “That the Lessee will not at any time during the said term without the licence in writing of the lessors first obtained erect or suffer to be erected any new buildings on the said premises or make or suffer to be made any alterations additions whatsoever in or to the said premises or any buildings which may be erected on the said premises without such licence as aforesaid either externally or internally or make any alteration in any boundary”.

[4]Schedule 11, so far as material, provides: “Meaning of ‘administration charge’

[1](1) 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 …. 2 (d) in connection with a breach (or alleged breach) of a covenant or condition in his lease … (3) In this Part of this Schedule ‘variable administration charge’ means an administration charge payable by a tenant which is neither – (a) specified in his lease, nor (b) calculated in accordance with a formula specified in his lease … Reasonableness of administration charges

[2]A variable administration charge is payable only to the extent that the amount of the charge is reasonable. Notice in connection with demands for administration charges

[4]

(1) A demand for the payment of an administration charge must be accompanied by a summary of the rights and obligations of tenants of dwellings in relation to administration charges.

(2) The appropriate national authority may make regulations prescribing requirements as to the form and content of such summaries of rights and obligations.

(3) A tenant may withhold payment of an administration charge which has been demanded from him if sub-paragraph (1) is not complied with in relation to the demand… Liability to pay administration charges

[5]

(1) An application may be made to a leasehold valuation tribunal for a determination whether an administration charge is payable and, if it is, as to – (a) the person by whom it is payable, (b) the person to whom it is payable, (c) the amount which is payable, (d) the date at or by which it is payable, and (e) the manner in which it is payable.

(2) Sub-paragraph (1) applies whether or not any payment has been made.

(3) The jurisdiction conferred on a leasehold valuation tribunal in respect of any matter by virtue of sub-paragraph (1) is in addition to any jurisdiction of a court in respect of the matter.

(4) No application under sub-paragraph (1) may be made in respect of a matter which – (a) has been agreed or admitted by the tenant, (b) has been, or is to be, referred to arbitration pursuant to a post-dispute arbitration agreement to which the tenant is a party, (c) has been the subject of determination by a court, or (d) has been the subject of determination by an arbitral tribunal pursuant to a post-dispute arbitration agreement. 3

(5) But the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment…” The charge in issue in the present proceedings is £250. The circumstances in which it came to be demanded were set out in Mrs Bennett’s statement as follows:

“In Autumn of 2003, I made an enquiry of the Freeholder as to the price he would require for his interest. A man attended my property and subsequently I received a letter alleging that Freeholder’s consent had not been obtained. The Freeholder demanded a payment of £250. I paid this, as I understood that he would not give me a price unless I did. After paying the £250, he then asked for another £125 on account of the formal valuation. When this happened, I was furious and consulted Mr Rocky, who is Voluntary Surveyor to the Solihull Citizens Advice Bureau.”

[6]The demand was made in a letter dated 6 November 2003. In its decision the LVT quoted the letter as saying this:

“In the circumstances can you please let me have a remittance in the sum of £250. Upon receipt of this we will then be in a position to quote you terms for the freehold interest.”

It appears that a reminder was sent on 18 November 2003, following which Mrs Bennett’s solicitors wrote on 26 November 2003 to the landlord enclosing a cheque for £250.

[7]In her statement Mrs Bennett said that she was sure that her husband or their solicitor would have checked when the house was bought in 1954 that the necessary consent to the conservatory had been obtained. She was also sure that her husband would have obtained the landlord’s consent to the internal conversion, but she could not find any records. In the written representation made to the LVT on her behalf it was contended that the landlord should not be able to demand a fee for retrospective consent, when there was considerable uncertainty about whether consent had been given to works carried out about 50 years ago. It was argued that the landlord, who acquired the freehold in 1982, should through its acceptance of the transfer be deemed to have given implied consent for the works. Even if it was certain that no consent had been obtained for the works, a fee of £50 would be more than adequate, given that the inspection which gave rise to the administration charge was intended to be for the purpose of providing a valuation of the freehold, which Mrs Bennett had expressed an interest in acquiring. It was further said on Mrs Bennett’s behalf that the demand was not accompanied by a statement of her rights in relation to administration charges, and the landlord had therefore failed to comply with the Act.

[8]The landlord in its written representation to the LVT said that it received a large number of requests each week for the price of the freehold of property they owned. In order to carry out such valuations inspections had to be undertaken in order to assess the relevant value, and, as only about 10% of all inquiries actually led to a sale of the freehold, a fee was required for visiting each property and carrying out the relevant valuation. In the event of the sale being completed the fee which had been paid was credited to the valuation and sale price. The 4 suggestion by the tenant’s agent that £50 would be ample to carry out the inspection of the property under the terms of the lease was not reasonable in view of the time and expense involved in visiting the property and reporting.

[9]The landlord further referred to paragraph 5(4)(a) to Schedule 11, which provided that no application could be made to an LVT under paragraph 5(1) in respect of a matter which had been agreed or admitted by the tenant. The letter of 26 November 2003 from the tenant’s solicitors enclosing the cheque for £250 and asking for retrospective consent showed that the claim for this amount was admitted.

[10]The LVT concluded that the demand for £250 was for a variable administration charge as defined in the Schedule. It drew attention to the reference in the landlord’s letter of 18 November 2003 to “a remittance for the outstanding breach of covenants”. It rejected the landlord’s contention that the tenant was not entitled to make application under paragraph 5(1) because she had admitted her liability to the charge. It referred to paragraph 5(5), which qualifies sub-paragraph (4) by stating that the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment. The decision went on:

“In the present case it is clear from the evidence presented that the Applicant paid the demanded fee of £250 in order to progress the possible purchase of the freehold, it having been made clear in correspondence from the freeholders’ agent that the one was conditional on the other (see the final paragraph of the letter from Mr Fell to Mrs Bennett of 6th November 2003, ‘In the circumstances can you please let us have a remittance in the sum of £250. Upon receipt of this we will then be in a position to quote you terms for the sale of the freehold interest.’ In their covering letter of 26th November enclosing the requested cheque for £250 the Applicant’s solicitors simply refer to the fact that their ‘client has instructed us to forward the enclosed cheque for £250 to you and we should be pleased if you would let us have in return formal consent to the conservatory and the enlargement of the lounge and dining room into one room.’ (The letter then goes on to ask for terms to be quoted for the sale of the freehold to their client.) It will be noted that the wording of the letter does not agree or admit anything; it simply states that the solicitors have been instructed to send the requisite cheque and the following request again serves to reinforce the view that payment of the £250 was seen by the Applicant as a precondition to obtaining a quotation for the freehold.”

[11]The LVT went on to consider the contention advanced on behalf of the tenant that the landlord had failed to comply with the requirement in paragraph 4(1) that a demand for the payment of an administration charge must be accompanied by a summary of the rights and obligation of tenants of dwellings in relation to administration charges. Since paragraph 4(3) allowed the tenant to withhold payment of an administration charge where sub-paragraph (1) has not been complied with, the LVT concluded that the demand for payment in the letter of 6 November 2003 was invalid so far as Schedule 11 was concerned, and the tenant was entitled to withhold payment. The decision went on to say that considerations of reasonableness and quantum did not arise as the tenant was not liable to pay the administration charge. 5

[12]The landlord contends in its grounds of appeal that the LVT erred in concluding that the letter of 26 November 2003 did not constitute, for the purpose of paragraph 5(4), an admission of liability and an agreement to pay the sum demanded; and that it also erred in concluding that the landlord had failed to comply with the requirement of paragraph 4(1). It goes on to say that at the time the payment was made it had not been told that the tenant believed that consent had been given, and, that it been aware of the uncertainty about this, it would only have demanded a modest fee – no more than £50. Different issues would have arisen on the proper valuation fee for the freehold.

[13]The basis of the contention now advanced by the landlord in relation to paragraph 4(1) is that sub-paragraph (2) provides for the appropriate national authority (ODPM) to make regulations prescribing the form and content of the summaries of the rights and obligations and that no such regulations have been made. The requirement in sub-paragraph (1), it is said, is to provide a summary with the form and content prescribed by the regulations, so that if there are no regulations there is no such requirement. I incline to the view that the LVT was correct in its refusal of permission to appeal in saying that the requirement to provide a summary under sub-paragraph (1) is not dependent on there being regulations under sub-paragraph (2) prescribing the form and content of such summaries (hard though the absence of any such prescription makes the landlord’s task in providing the summary). Where the LVT was not correct, in my judgment, was in treating the provisions of sub-paragraph (3), which states that the tenant may withhold payment if sub-paragraph (1) is not complied with, as determinative of the issue arising under paragraph 5 as to whether the administration charge is payable. The fact that the tenant is entitled to withhold payment because the requirement of sub-paragraph (1) was not complied with when a demand for payment was made does not mean that the administration charge which was the subject of the demand can never be payable. If a further demand were to be made and it was accompanied by the required summary, I can see no reason why the charge, if it was contractually due, should not be payable. Paragraph 4(3) does not, in my judgment, have any relevance to the issue that an LVT has to decide under paragraph 5, and the LVT was in error in treating it not only as relevant but as determinative.

[14]The appellant landlord contends, as I have said, that the LVT was wrong to conclude that the letter of 26 November 2003 enclosing payment of the £250 was not an agreement or admission by the tenant that the sum was payable. The LVT based itself on paragraph 5(5), which provides that the tenant is not to be taken to have agreed any matter by reason only of having made any payment. I do not think that the LVT was right in this respect. The important word is “only”. The letter from the tenant’s solicitors enclosing the payment said that they would “be pleased if you would let me have in return formal consent to the conservatory and the enlargement of the lounge and dining room into one room.” It is in my view necessarily implicit in these words that the solicitors were acknowledging the liability to make payment for the consent to the breaches of covenant. It was these words accompanying the payment that constituted an admission that an administration charge was payable.

[15]However, I do not think that there was any admission that the amount payable for the grant of approval (paragraph 1(1)(a)) or in connection with the breaches of covenant (paragraph 1(1)(d)) was £250. The reason for this is that the landlord itself did not regard the £250 as being the amount attributable solely to the breaches of covenant. It is clear from the landlord’s written representations to the LVT (referred to in paragraph 8 above) that the 6 amount was referable also to the prospective valuation of the property. An inspection was needed if the property was to be valued for the purpose of a sale, and the amount charged clearly reflected this. If, therefore, the £250 was not, as far as the landlord was concerned, the amount attributable to the breaches of covenant alone (because it reflected this other consideration as well), there could clearly be no agreement or admission on the part of the tenant that it was the amount so attributable. Although the LVT had no power to determine whether an administration charge was payable in respect of the breaches of covenant, for the reason that the letter of 26 November 2003 admitted this, they did have power to determine the amount that was payable in respect of these since there was no agreement or admission in relation to this matter.

[16]Because the LVT determined that no administration charge was payable (because of the failure to comply with paragraph 4(1)) it did not address the question of the amount. It is necessary that I should do so. Under paragraph 2 of the Schedule a variable administration charge is payable only to the extent that the amount of the charge is reasonable. The landlord’s grounds of appeal (on which it relies for the purposes of this decision) make clear, as I have said, that if the uncertainty about the consents for the works had been brought to its attention it would have dealt with the matter differently, and the fee would have been no more than £50. I am satisfied in the light of this that £50 would be a reasonable amount, and accordingly that is the amount payable as the administration charge.

[17]The appeal is allowed, and I determine that the amount payable as the administration charge is £50. Dated 30 June 2005 George Bartlett QC, President 7