Landlord and tenant – Lease containing prohibition on underletting without prior written consent of landlord – Application for retrospective consent – Appellant landlord charging fee for costs incurred in granting consent – Respondent tenants challenging amount of fee – LVT finding that fee an unreasonable administration charge since lease making no provision for such charge – Whether LVT lacking jurisdiction to determine appellant’s entitlement to charge for consent – Whether erring in finding amount of charge unreasonable – Appeal allowed
The respondents were the tenants under a lease that contained a prohibition on underletting the whole of the demised premises without the prior written consent of the appellant landlord, such consent not to be unreasonably withheld. The respondents underlet the whole of the premises in breach of the lease. When the appellant found out, it required the respondents to apply for retrospective consent and to pay a £165 standard charge to cover its costs of consenting to the underletting.
The respondents issued an application to the leasehold valuation tribunal (LVT), by which they sought a determination, under Part 1 of Schedule 11 to the Commonhold and Leasehold Reform Act 2002, that the sum demanded was an unreasonable administration charge. In their pre-issuance email, they had indicated that they were not averse to paying an administration charge but did not agree to the amount.
The LVT held that the charge was unreasonable since the lease contained no clear and unambiguous obligation on the respondents to pay for consent to underletting. It found that the appellant was under a statutory duty, imposed by section 1 of the Landlord and Tenant Act 1988, to give consent to a request for an underletting unless it was reasonable not to give consent and that the duty was not subject to any precondition that the tenant should pay the landlord’s costs of considering an application. The LVT further found that, had it been reasonable to make a charge, then £135 would have been within the bracket that could be considered reasonable.
The appellant appealed. It contended that the LVT: (i) had lacked jurisdiction to determine whether the appellant was entitled to require payment of its costs of consenting to underletting, since that matter was agreed by the respondents and did not form part of their application; and (ii) had wrongly decided that issue, since it was implicit in section 19 of the Landlord and Tenant Act 1927 that a landlord was entitled to require payment of its costs incurred in consenting to underletting. The appellant further challenged the finding that £165 was unreasonable.
Decision: The appeal was allowed.
(1) The LVT had no jurisdiction to determine the issue of the appellant’s entitlement to require payment of its costs of consenting to underletting. It lacked jurisdiction for two reasons. First, that issue had not been raised in the respondent’s application: Birmingham City Council v Keddie [2012] UKUT 323 (LC); [2012] PLSCS 210 and Holding & Management (Solitaire) Ltd v Norton [2012] UKUT 1 (LC); [2012] 26 EG 98 applied. The appellant could not be criticised for failing to identify the legal basis of its entitlement to charge for those costs where that matter was not challenged by the respondents. Second, the respondents had earlier made it clear that they accepted the appellant’s entitlement to require such payment but merely challenged the reasonableness of the sum demanded. They were precluded from challenging the appellant’s ability to demand payment since that matter had been “agreed or admitted by the tenant”, within para 5(4) of Schedule 11 to the 2002 Act. The Act did not prescribe any particular form or formality as to how agreement or admissions were to be made. Logically, they had to pre-date the making of the application, but there was no reason why they could not be made informally. Although not expressed as an agreement or admission, it was implicit in the respondents’ statement that they were “ not averse” to paying an administration charge that they admitted the appellant’s ability to demand payment for its costs of consenting to underletting. That implicit agreement or acceptance sufficed for the purposes of para 5(4).
(2) In any event, the LVT had erred in law in finding that the appellant was not entitled to require payment of the costs incurred in consenting to underletting. The terms of the lease entitled the appellant to withhold its consent to underletting provided it did not do so unreasonably. A landlord could impose terms or conditions on the granting of consent provided they were reasonable. A commonly imposed term or condition was to require the tenant to pay a reasonable sum in respect of any legal or other expenses incurred by the landlord in connection with consenting to underletting. If the amount charged were reasonable, then, if the tenant refused to pay, it would not be unreasonable for the landlord to withhold consent on that ground. Accordingly, the ability to require such payment was a function of, or permitted by, the lease, rather than by section 19 of the 1927 Act. Further, the 1988 Act did not preclude the appellant from charging for consent. That Act was concerned, not with the terms or conditions on which consent could be granted or withheld, but with the granting or withholding of consent within a reasonable time and the giving of reasons. The 1988 Act did not circumscribe the way in which the landlord could exercise its right to impose terms and conditions when deciding whether or not to grant consent.
(3) The charge for consent to underletting was a variable “administration charge” within para 1 of Schedule 11 to the 2002 Act. Consequently, the LVT had jurisdiction to determine the issue of its reasonableness. However, it had erred in imposing some sort of standard charging bracket without evaluating or explaining what that bracket was or how it applied to the subject transaction. The LVT was entitled to apply its own robust common sense on how long the work on the transaction would take, it was not entitled to impose a charging bracket and had failed to take into account that the transaction was more complex than the usual consent to underletting since it involved a retrospective application for consent. The LVT had erred in finding that £165 was unreasonable; that figure was reasonable in the circumstances of the case.
The appeal was determined on the written representations of the parties.
Sally Dobson, barrister
