In a recent case before the Leasehold Valuation Tribunal (“LVT”), 19-21 Rendezvous Street – Shepway: Midland: Birmingham (Service Charges) [2012] EWLVT CHI/LV/SVC/29UL/0140 (19 January 2012), the landlord had served a section 146 notice on the tenant in an attempt to recover unpaid service charge and administration costs. The tenant accepted that the service charge was due, so the LVT only had to determine whether the tenant was also liable for the administration costs.

The landlord was relying on the following tenant covenant in the lease in trying to recover the administration costs: “To pay all expenses (including solicitors’ costs and surveyors’ fees) incurred by the Landlord incidental to the preparation and service of notice under Section 146 of the Law of Property Act 1925 notwithstanding that forfeiture is avoided otherwise than by relief granted by the court.”

The LVT held that the administration costs were too remote to be considered “incidental to the preparation and service” of a section 146 notice. It also held that if the clause was wider in scope then the recovery of administration costs may have been possible. However, in this case the LVT held that the actual administration costs were not reasonably incurred, as the landlord should have commenced legal proceedings rather than spending money on instructing a debt collection agency.

Landlords need to carefully consider the construction of the costs and expenses clause in the lease when managing a tenant breach. Even if the clause is widely drafted, the costs must be incurred “in contemplation of proceedings”. Therefore landlords should also consider which course of action to take in order for any administration costs to be considered “reasonably incurred”.

In this case the tenant had exercised its option to break the lease, which was conditional on the rent being paid up to date on the break date and the tenant giving vacant possession. It was not conditional on the state and repair of the property. The break clause did, however, allow the landlord to waive conditions if they were not satisfied, although it was not obliged to.

The tenant served a valid break notice but decided that it wanted to carry out any repairs to the property itself to keep costs down and avoid a dilapidations claim. The repair works were not completed by the break date and the landlord had not responded to the tenant’s request for extra time to complete the repairs. After the break date the tenant instructed its workmen to re-enter the property and complete the repair works.

The county court found in favour of the landlord, concluding that the tenant had not terminated the lease, as it had not given vacant possession because its workmen had stayed on the property. The court also held that there had been no waiver by the landlord, as the making of arrangements to collect the keys was not an unequivocal assertion that any breach by the tenant was waived, and the landlord’s agent had not realised that the tenant’s conduct amounted to a failure to give vacant possession. The court of appeal upheld this ruling, stating that vacant possession in these circumstances required the property to be empty of people, the landlord to be able to assume and enjoy immediate and exclusive possession, occupation and control of the property and the property to be empty of contents (unless this did not substantially prevent or interfere with the enjoyment of the right of possession of a substantial part of the property).

As the landlord had not agreed to any extension of time, the court stated that the tenant should have moved everyone out of the property on the break date and delivered the keys to the landlord on the break date. The tenant then should have contacted the landlord the following day to request permission to complete the remaining repair works as a licensee.

Churchill v Temple and others [2010] EWHC 3369 (Ch) concerned a property over which there was a restrictive covenant requiring consent from “the Vendors” to demolishing and rebuilding the property. The High Court had to decide whether the reference to “the Vendors” included their successors in title (the current owners of the adjoining property). If it decided that successors in title were not included, the Court then had to decide whether this meant that the death of “the Vendors” freed the owners of the property from needing to obtain consent, or made it impossible for them to obtain consent (making the prohibition on carrying out works absolute).

Because the conveyance which contained the covenant was inconsistent in its use of terms “the Vendors” and “the Vendors and their successors in title”, there was some ambiguity as to the meaning of “the Vendors”. However, the Court held that a literal reading of the covenant would not cause any absurdity in the outcome and therefore concluded that “the Vendors” did not include successors in title. Consequently, the owners of the property did not need to obtain consent to the works from the current adjoining owners, as the Court found that the restrictive covenant had been discharged on the death of “the Vendors”.

The Churchill case highlights that, in assessing the effect and enforcement of a restrictive covenant, you must look at the exact wording of the covenant in the context of the document, in which it is contained, as a whole. It is also a warning to solicitors to be consistent in their drafting.

John is also a supervising solicitor at Kaplan Law School’s Pro Bono Legal Advice Centre at 3 Cathedral Street, London Bridge, which provides free legal advice to members of the public on matters ranging from contract and real estate law to employment and family law.

John’s interests are triathlon, photography, food and wine and languages (being fluent in French and German).

The court ruled that despite the notice being addressed to the wrong person, a reasonable recipient would not have been misled about the tenant’s intention to terminate the lease.  As the tenant had acted in reliance on the agent’s confirmation (which amounted to a waiver of the landlord’s right to challenge the break notice), the court ruled that the landlord was estopped from challenging the validity of the form or manner of service of the notice.

This case shows that tenants must be careful to address the notice to the correct party and serve it in the correct manner as prescribed by the lease, as tenants will not always be able to rely on a waiver by the landlord.  Conversely, in response, landlords should be aware that if they wish to challenge the validity of the notice, any response should only acknowledge receipt and not confirm acceptance of the break.

The LTA 1985 (as amended by the Commonhold and Leasehold Reform Act 2002) requires a landlord to:

Stage One:

• Give notice of its intention to the leaseholders and any recognised tenants’ association (“RTA”), explaining why the proposed works are necessary. The notice must also invite written observations from the leaseholders and RTA and the landlord must take any written observations received into account.

Stage Two:

• Seek estimates from contractors. The leaseholders and RTA have a right to nominate alternative contractors. If any are nominated, the landlord must ask for estimates from nominated contractors.
• Issue a statement setting out the estimated cost from at least two of the contractors, and a summary of observations received in Stage One, along with the landlord’s responses to them.
• Give notice of when and where all the estimates may be inspected. The notice should also invite written observations on the estimates within 30 days of the date of the notice. The landlord must have regard to any written observations received within the given time frame.

Stage Three:

• Give reasons to the leaseholders and RTA for choosing the successful contractor.

The LTA 1985 only allows the Land Valuation Tribunal (“LVT”) to dispense with the above requirements “if satisfied that it is reasonable” to do so. Importantly, if a landlord fails to comply with the consultation requirements and the LVT chooses not to dispense with such requirements, the contribution of each tenant to the landlord’s works is limited to £250.

In Daejan, the landlord wanted to carry out works on its property totalling £270,000. Whilst the landlord carried out some of the consultation requirements, it failed to comply with all such requirements.  The LVT refused to grant dispensation from compliance as, in failing to comply, the landlord had caused substantial prejudice to the tenants.  The contributions of the five tenants were therefore limited to £250 each.

Consequently, the landlord was responsible for the remainder of the £270,000.  Whilst this may seem disproportionately harsh on the landlord, the LVT (and later the Court of Appeal) held that it could not take this into account in judging whether it was reasonable to grant dispensation from compliance. The Court of Appeal noted that it would be strange if the higher the service charge, the more readily dispensation was granted. The Court of Appeal commented that dispensation may be granted in cases where the integrity or importance of the consultation procedure was not affected, for example emergency works, cases where only one specialist contractor could do the works or where there was a minor procedural breach which did not prejudice the tenants’ rights.

In order to assist landlords in complying with the requirements of the LTA 1985, The Leasehold Advisory Service (LEASE) has produced model notices, which can be found at http://www.lease-advice.org/publications/

In Barratt and another v Ashford Borough Council [2011] EWCA Civ 27, the owners of a property were not allowed to rely on errors in the name, address and description of the property in the list of listed buildings in order to carry out works to the property which required listed buildings consent. In this case, there were other identifiers of the property (i.e. references to an Ordnance Survey sheet and annotated map) which the Court confirmed were sufficient to identify the property as that on the list.

The Court also commented that place names may change over time and as such, changes of name should not defeat a property’s listed status. Instead, the description of the property on the list must be looked at as a whole in the context of the circumstances.

As the sanctions for demolishing, intentionally damaging or carrying out works to a listed building without consent include criminal penalties, listed property owners should be aware that attempts to circumvent PLBCA 1990, by reason of discrepancies in the property’s description on the list, are likely to fail. Purchasers of listed buildings should obtain advice before making any alterations to their property.

As such, if service of such notices cannot wait until registration of the purchase has completed, you should require the seller to serve the notices on your behalf.  Please drop us a line if you would like more information on this, or any other real estate matter.

• be in writing;
• contain all of the terms that the parties have expressly agreed in one document or where contracts are to be exchanged, in each document; and
• be signed by, or on behalf of, each party.

If these requirements are not complied with, there is no contract. In this case, the transfer was void for not complying with the requirements of the Act (although the Court of Appeal held that there was a constructive trust).