Most landlords expect tenants to be responsible for a variety of costs and charges. However, the Commonhold and Leasehold Reform Act 2002 introduced controls to protect residential tenants from excessive administration charges. As a result, these charges must be reasonable.
The legislation defines an administration charge as an amount payable: (i) directly or indirectly for approvals or applications for approvals under a lease; (ii) for the provision of information or documents by or on behalf of the landlord or other parties to the lease; (iii) arising from non-payment of sums to the landlord; and (iv) arising in respect of breaches (or alleged breaches) of the lease.
The Government’s intention was to cast the net widely and tenants have certainly taken advantage of these provisions. In Two Brooks Valley Ltd v Shenstone Properties Ltd unreported 7 February 2007 (MAN/30UF//LAC/2006/006), a landlord initially proposed charging £37,500, plus legal costs for a licence permitting a tenant to convert three flats into one or two dwellings. The leasehold valuation tribunal (LVT) determined that a reasonable fee would be £75. In Crammond v Theodore Gregory Ltd unreported 26 July 2007 (LON/00AW/LSC/2007/0168), it confirmed that legal costs for preparing and serving a section 146 notice constituted an administration charge and reduced the charge from £957.50 plus VAT to £275 plus VAT. In Sandler v Copping Joyce unreported 14 May 2007 (LON/00AU/LAC/2007/0005) a landlord charged for information provided to a tenant so that he could sell his flat. The LT reduced the charge from £275 plus VAT to £150 plus VAT.
However, the decision of the Upper Tribunal of the Lands Chamber in Mehson Property Co Ltd v Pellegrino [2009] UKUT 119 (LC); [2009] PLSCS 224 demonstrates that residential landlords still have scope to levy charges that fall outside the ambit of the statutory controls. The tenant challenged charges totalling £911.25 (£500 plus legal costs) made for a deed of variation of her lease. The variation was effected to ensure that the landlord was obliged to repair the tenant’s house and to enforce the covenants made by other tenants on the estate. As a result, the tenant received an improved lease (to which she was not legally entitled).
The judge dismissed the tenant’s claim. Self-evidently, a charge for entering into a deed of variation is not an amount payable for an approval under a lease and the charge was not made in respect of the non-payment of sums due to the landlord or resulting from a breach of the lease.
Was the charge levied for the provision of information or documents by the landlord? The judge ruled that the words used to define an administration charge could not be read as extending to the provision of documents varying parties’ responsibilities under leases where a landlord is charging not only for the provision of the document but also for the substance of the variation (which may involve the landlord being less advantageously placed as a result). Consequently, the tribunal had no jurisdiction to consider the reasonableness of or to reduce the charge.
Allyson Colby is a property law consultant
