Leasehold valuation tribunal (LVT) – Jurisdiction – Respondent tenant failing to pay insurance premium – Appellant landlord applying to LVT for determination breach of covenant to insure– Section 168(4) of Commonhold and Leasehold Reform Act 2002 – LVT declining jurisdiction on ground that breach relating to non-payment of service charge in sum less than £500 – Whether section 169(7) ousting section 168(4) jurisdiction regarding service charges – Whether relevant that amount less than £500 – Appeal allowed
The respondent tenant held a 999-year lease of a maisonette in a block of which the appellant was the freeholder. The lease contained a covenant requiring the respondent to contribute to buildings insurance. In April 2008, the appellant wrote to the respondent complaining that she had failed to pay the insurance premium that was due in January. The appellant subsequently applied to the leasehold valuation tribunal (LVT), under section 168(4) of the Commonhold and Leasehold Reform Act 2002, for a determination that the respondent was in breach of covenant.
The LVT decided that it did not have jurisdiction to determine the application because: (i) the insurance premium was a service charge within section 18 of the Landlord and Tenant Act, to which section 168(4) did not apply by reason of section 169(7) of the 2002 Act; and (ii) even if that were not the case, the sum fell below the £500 limit set by statute that entitled a landlord to exercise a right of re-entry or forfeiture. Accordingly, it dismissed the application.
The appellant appealed. She contended that even if the insurance premium was a service charge, section 169(7) did not oust the LVT’s jurisdiction to determine under section 168(4) whether the respondent was in breach of covenant. Moreover it was irrelevant that the unpaid premium was less than £500.
Held: The appeal was allowed.
The relevant clause was a covenant by the lessee to keep the property insured with a named insurer through the agency of the lessor, failing which the lessor would be entitled to insure the property and recover the premiums and incidental expenses from the lessee on demand. The appellant’s maintained that the respondent had failed to take out insurance as required by the covenant, not simply that she had failed to pay a premium. In those circumstances, the LVT’s reasoning was flawed and it had jurisdiction to determine whether the covenant had been breached.
The LVT would have had jurisdiction even if the alleged breach of covenant had been solely a failure to pay a sum in respect of an insurance premium. It was arguable that such an application should have been made under section 81 of the Housing Act 1996, rather than section 168(4) of the 2002 Act. However, the LVT should have entertained the application and treated it as having been made under the relevant statutory provision, rather than declining jurisdiction simply because the wrong section was referred to in the application.
Furthermore, even if the breach complained of was the non-payment of a service charge in a sum less than £500, that did not mean that the LVT lacked jurisdiction. The 2002 Act did not indicate that section 168(4) was limited to cases where the breach complained of involved a sum of more than £500.
Although section 167(1) restricted a landlord’s right of re-entry or forfeiture to cases where the unpaid rent or service charge exceeded the prescribed sum, in some cases an unpaid amount of less than £500 could be admitted, with the landlord then alleging a further unpaid amount, also less than £500, whereupon both sums together would exceed the £500 limit. In these circumstances, the landlord might seek a determination from the LVT under section 168(4) because if the tenant were found to be in breach of covenant by its failure to pay the disputed amount, the landlord could rely on that and the admitted amount together as exceeding the £500 threshold and justify re-entry or forfeiture. The LVT would have to make the determination as to whether the unpaid amount was less than £500. It should not direct itself that it had jurisdiction only to consider an alleged breach constituted by a failure to pay an amount of less than £500 if it could be satisfied that an answer favourable to the landlord would result in that landlord being entitled to forfeit the tenant’s lease.
The matter was remitted to the LVT to reconsider the appellant’s application on its merits.
The case was decided on written representations.
Sally Dobson, barrister
