Forest House Estates Ltd v Al -Harthi [2013] UKUT 0479 (LC)

IN THE MATTER OF AN APPEAL AGAINST A DECISION
UT Neutral citation number: [2013] UKUT 479 (LC)Venue OF A LEASEHOLD VALUATION TRIBUNAL FOR THE, SOUTHERN RENT ASSESSMENT PANEL, BETWEEN Forest House Estates Ltd Appellant, and, Dakhil Allah R Al-Harthi Respondent, Re: Flat 43, Forest House, 1 Russell Cotes Road, Bournemouth, Dorset, BH1 3UB, Before: Peter McCrea FRICS, Decision on Written Representations, The following case is referred to in this decision:, GHM (Trustees) Limited v Glass (LRX/153/2007), DECISION, Introduction
Between
Forest House Estates LtdAl -Harthi
[1]This appeal is against a decision of the Leasehold Valuation Tribunal for the Southern Rent Assessment Panel (the LVT) given on 17 September 2012. Forest House Estates Ltd (the appellant) is the freehold owner of Forest House, 1 Russell Cotes Road, Bournemouth, (Forest House), which includes Flat 43 (the Flat). The Flat is let on a long lease to Mr Dakhil Allah R Al-Harthi (the respondent). The appellant had applied to the LVT under section 168(4) of the Commonhold and Leasehold Reform Act 2002 (the 2002 Act) for a determination that a breach of covenant had occurred in respect of the flooring within the flat, in that the respondent had laid wooden flooring, whereas he was obliged to lay and maintain carpet and underlay.[2]The LVT inspected the Flat on 17 September 2012, by which time carpeting had been laid, and decided that there was no breach of covenant, or if there had been a breach it had been remedied by the time of the LVT’s inspection.[3]The appeal is brought as an appeal by way of review with a view to rehearing with the permission of the Tribunal (Sir Keith Lindblom, President) granted on 13 February 2013 on the grounds that it was arguable that the LVT did not address the correct question under s168(4) of the Commonhold and Leasehold Reform Act 2002, which was not whether any breach of covenant had been remedied, but whether a breach had in fact occurred. With the agreement of the parties this appeal is determined on the basis of written representations. The relevant statutory provision 4. So far as material, section 168 of the 2002 Act provides as follows:
“168 No forfeiture notice before determination of breach (1) A landlord under a long lease of a dwelling may not serve a notice under section 146(1) of the Law of Property Act 1925 (restriction on forfeiture) 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. (3) But a notice may not be served by virtue of subsection (2)(a) or (c) until after the end of the period of 14 days beginning with the day after that on which the final determination is made. (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.”
The relevant facts[5]From the statement of agreed facts and issues I take the following facts as the basis of my decision.[6]Forest House comprises a purpose built block of 74 flats. Each of the flats is let on a long lease and most of the tenants, including the respondent, are shareholders in the appellant company. The lease of the Flat is dated 2 February 2003 and is between the appellant (the landlord), the respondent (the tenant) and Forest House (Bournemouth) Management Company Limited (the company) for the purpose of the covenant to maintain and insure. The term of the lease is from 2 February 2003 to 25 December 3000.[7]The alleged breach is of the respondent’s covenant in respect of carpeting. Under Clause 3(15) of the lease the tenant covenants to observe and perform the restrictions and stipulations in the second schedule to the lease. Clause 17 of the second schedule obliges the tenant “forthwith to provide and thereafter at all times to maintain throughout THE FLAT (with the exception of the kitchen and bathroom) good quality carpeting and underlay”[8]On 2 April 2012 the company’s managing agents Napier Management Services Ltd (Napier) wrote to the respondent stating that they understood the respondent was in the process of having wooden flooring laid, that the work needed to cease immediately as it was against the terms of the lease, and that this had been notified to the respondent’s local representative Mr Yeltsin who had advised that the work would continue. Napier requested written confirmation of the respondent’s intentions by return.[9]On 23 April 2012 Napier wrote to the respondent expressing disappointment at not having received a response or acknowledgement to their letter of 2 April and again reiterating the request for written confirmation of his intentions by return.[10]By a letter of 3 May 2012 the respondent replied to Napier stating that wooden flooring had been laid over the original installation, plus additional insulation, and that it would subsequently be 95% covered by good quality rugs.[11]Apprehending that the respondent’s letter of 3 May 2012 was an admission of a breach of covenant on 22 May 2012 the appellant served notice on the respondent under section 146 of the Law of Property Act 1925 notifying the respondent that there had been a breach of covenant and requiring the respondent to remedy it within a reasonable time.[12]The appellant then had second thoughts. It considered that the respondent’s letter of 3 May 2012, whilst admitting wooden flooring had been laid, was not an admission of a breach of covenant as the lease does not contain a covenant not to lay wooden flooring. The covenant is to provide and thereafter at all times maintain throughout the Flat (with the exception of the kitchen and bathroom) good quality carpeting and underlay and that there is a regulation that floors must be covered with fitted carpets and underlay and sound board insulator with the exception of kitchens and bathrooms. Concluding that there was no admission by the respondent of a breach of this covenant the appellant applied to the LVT on 27 June 2012 for a determination under section 168(4) of the 2002 Act that a breach of covenant had occurred in this respect.[13]By letter dated 12 July 2012 the respondent wrote to the LVT stating it had been necessary to totally change the flooring of his apartment. This had been achieved by removing the original carpeting but leaving in place the original underlay, laying additional underlay then laying wooden flooring on top, on which he positioned rugs covering some 95% of the floor. This letter contained a denial that he was in breach of covenant, on the grounds that the floor covering was much more effective than just underlay and carpets.[14]The flat was not carpeted on the 3 August 2012 but fitted carpets were laid to the hall, two bedrooms, lounge and dining room of the Flat some time after 3 August 2012 and before the LVT inspected the Flat on 17 September 2012.[15]I infer from the Respondent’s letter of 3 May 2012 that the wooden flooring had been laid by that date. There was thus a period of 3 months or more during which the only carpeting was in the form of rugs which left some part of the wooden surface uncovered. The LVT’s Decision 16. Following an inspection of the Flat on 17 September, the LVT found in its Decision of that date, that:
“ a. The Respondent/Leaseholder’s letters dated 3 May 2012 and 12 July 2012 appear to acknowledge that wooden flooring had been laid in the premises b. However, at the time of the [LVT’s] inspection, fitted carpets had been laid in the hall, two bedrooms, lounge and dining room c. The [LVT] is unable to make any findings in relation to any floor coverings in the room which was locked, and which the [LVT] was therefore unable to inspect d. The carpets appeared to be of good quality e. Although the [LVT] was unable to see whether there was any underlay underneath the fitted carpets, the presence of offcuts of carpets and underlay in one of the bedrooms was an indication that underlay had been laid f. Although the floors of the bathroom and kitchen were tiled, the lease specifically excepts those rooms from the requirement for carpeting and underlay g. At the time of the [LVT’s] inspection there was accordingly no evidence of a breach of paragraph 17 of the second schedule to the lease”
The Issues 17. The parties ask the Tribunal to consider two issues; a) Whether the LVT addressed the correct question under section 168(4) of the 2002 Act in determining that a breach of covenant did not exist at the date of its inspection or whether it should have determined whether or not a breach had occurred. b) If the LVT did not address the correct question under s168(4), whether or not a breach of covenant had occurred.[18]I consider it more logical to deal with these in reverse order. If a breach of covenant had not occurred, the issue of whether the LVT should have found that one had falls away. Whether or not a breach of covenant had occurred[19]The proceedings before the LVT included the issue of whether the laying of wooden flooring covered with rugs, as opposed to fitted carpets, would be a breach of Clause 17 of the second schedule of the lease. The proceedings included discussion as to what constituted carpeting, but the only sensible interpretation of the clause, given that the tenant had to provide and maintain carpeting “throughout” (with the exception of the kitchen and bathroom) is that fitted wall to wall carpeting and underlay was to be provided and maintained, principally to reduce noise.[20]From the agreed facts it is apparent that the Flat did not have carpeting “throughout” from about April 2012 until after 3 August 2012.[21]The respondent accepted in his letters of 3 May and 12 July 2012 that wooden flooring had been laid. It is clear from those letters that the respondent did not, at that point, intend laying fitted carpets on top but instead intended to, and later had, laid rugs on 95% of the wooden flooring. I find that this was in breach of the covenant to provide and thereafter at all times maintain throughout (with the exception of the kitchen and bathroom) good quality carpets and underlay.[22]The respondent did not indicate that fitted carpets would be installed. That they were installed by the time of the LVT’s inspection may have been in response to the section 146 notice served on 22 May, or may simply suggest that the respondent anticipated that the LVT would consider the wooden flooring and rug arrangement to be a breach of covenant. Whether the LVT addressed the correct question[23]The issue is whether the LVT should have considered whether there had been a breach, or whether there was a breach at the time of their inspection.[24]In its refusal of permission to appeal to this Tribunal, the LVT gave further explanation, saying that “the relevant date at which the [LVT] has to decide whether a breach “has” occurred is the date of the [LVT’s] determination, and not, as seems to be suggested in the application for permission to appeal, the date of the application, because only if a breach of covenant were occurring at the date of the [LVT’s] determination would there be a breach in respect of which a landlord would be able to serve a notice under section 146(1) of the Law of Property Act 1925”. This statement is not part of the LVT’s decision under appeal, but it provides some insight into its thinking.[25]The appellant contends that the LVT neither determined that a breach had occurred nor that it had not occurred at the date of application. Its duty was to determine whether a breach of covenant had occurred at all, not to determine whether a breach had occurred at the date of its inspection.[26]The LVT appears to have accepted that that there had been a breach of the lease by the laying of wooden flooring, but “however” at the time of their inspection that breach had been remedied. They seem to stop short of stating explicitly that there had been a breach. 27. The appellant refers to the decision of the Tribunal in GHM (Trustees) Limited v Glass (LRX/153/2007) where the President (Mr George Bartlett QC) said; “in my judgement the LVT was in error in refusing to make a determination that a breach had occurred on the ground that the breach had been remedied by the acquisition of the landlords of knowledge on the tenants’ identity. The jurisdiction to determine whether a breach of covenant has occurred is that of the LVT. The question whether the breach has been remedied, so that the landlord has been occasioned no loss, is a question for the Court in an action for breach of covenant”[28]Whilst that case was in respect of a tenant’s covenant to inform the landlord of an assignment or underletting, as opposed to the subject covenant in respect of carpeting, the principle remains applicable. That a breach had not occurred because at the date of the LVT’s inspection any breach had been remedied was a decision not open to the LVT. Conclusion[29]By fitting wooden flooring with the intention of covering this with rugs, the respondent was in breach of the covenant in clause 17 of the second schedule of the lease which required him to provide and thereafter at all times to maintain throughout the Flat (with the exception of the kitchen and bathroom) good quality carpeting and underlay. The problem is not the nature of the flooring or the quality of the rugs, but the failure to cover the floor throughout the Flat (with the exception of the kitchen and bathroom). The respondent’s letter of 12 July admits facts which amount to a breach of that obligation. The breach may have been temporary, and perhaps even trivial, but it was clearly a breach.[30]The appellant is correct in arguing that the LVT’s decision is inconsistent with the reasoning of the Tribunal in GHM (Trustees) Limited v Glass . The question of whether a breach had been remedied by the time of the LVT’s inspection was not an issue for determination by the LVT. Questions relating to remedy, damages for breach and forfeiture are matters for the Court. The LVT was entitled to record the fact that the breach had been remedied by the time of its inspection, but that finding was peripheral to its main task under section 168(4) of the 2002 Act. The LVT should have made an explicit determination that there had been a breach of covenant, notwithstanding that the breach had subsequently been remedied at the time of the LVT’s inspection. Disposal[31]The appeal is allowed.[32]I determine that there was a breach of Clause 3(15) and clause 17 of the Second Schedule of the lease dated 2 February 2003 by the respondent’s failure to provide and at all times to maintain throughout the Flat (with the exception of kitchen and bathroom) good quality carpet and underlay between April 2012 and 3 August 2012. Dated: 26 September 2013 Peter McCrea FRICS

Cited in 1 later judgment