How much should a tenant have to pay for a licence to underlet a flat? What is the consequence of overcharging and is there any statutory restriction on the fee for registering the dealing with the landlord? These were all questions that arose in Proxima GR Properties Ltd v McGhee [2014] UKUT 59 (LC); [2014] PLSCS 73.
The dispute concerned a flat in London. The tenant’s lease prohibited it from granting underleases without the landlord’s consent, which was not to be unreasonably withheld in the case of an assured shorthold tenancy agreement. The lease required the tenant to register any underleases with the landlord within 28 days and to pay a reasonable registration fee for doing so.
The Upper Tribunal overturned the Leasehold Valuation Tribunal’s decision that the landlord was not entitled to charge for the grant of a licence to underlet because the lease made no provision for this. The operation of section 19(1) of the Landlord and Tenant Act 1927, which applies where a landlord cannot unreasonably withhold its consent to an assignment or underletting and stipulates that this does not preclude the landlord from charging a reasonable sum to cover its legal and other expenses, does not depend on whether the landlord has included a charging clause in its lease: Holding & Management (Solitaire) Ltd v Norton [2012] UKUT 1.
However, it was important to decide whether the landlord’s charges were reasonable because, if they were not, the tenant would be free to proceed without the landlord’s consent and would not have to pay any charges at all. The tribunal explained its reasoning as follows. A consent that is granted subject to compliance with an unreasonable condition is a consent that is being withheld unreasonably – which will release the tenant from its obligation to obtain the landlord’s consent for the transaction to which its application relates: Treloar v Bigge (1884) LR 9 Ex 151 and FW Woolworth & Co v Lambert [1937] Ch 37.
The landlord had asked the tenant to pay £95 for a licence to underlet and £95 to register the underlease. The tribunal warned landlords against imposing standard fees without considering the work needed to deal with an application, and also against charging for tasks that were inappropriate. For example, there was no need to check for arrears of rent or service charge before granting a licence to underlet, because the relationship between the landlord and tenant would remain unchanged.
The tribunal found it difficult to believe that it was reasonable to charge £95 for a routine licence to underlet a flat, especially as the managing agents were demanding a registration fee in an equivalent sum. Nonetheless, it upheld the charge on the ground that the tenant had made a retrospective application for a licence, and had also asked the managing agents to justify their fees, which had caused additional work.
However, the registration fee was not a variable administration charge for the purposes of the Commonhold and Leasehold Reform Act 2002 because it was not payable for the grant of an approval under the lease. Consequently, the tribunal was unable to consider whether it was reasonable or not.
Allyson Colby is a property law consultant
