Landlord and Tenant Act 1987 – Variation of leases – Appellant landlord applying to vary leases of flats under sections 27 and 28 of 1987 Act – LVT permitting variations to permit replacement of communal heating and hot water system with individual boilers in each flat – LVT refusing “non-consequential” variations to permit recovery through service charge of costs of enforcing lease covenants – Whether application having single object of achieving change to heating system – Whether that object satisfactorily achieved without non-consequential variations – Whether such variations unreasonable and prejudicial to respondent tenants – Appeal dismissed
The appellants were the landlords of three blocks of flats containing a total of 365 flats let to tenants. They applied to the leasehold valuation tribunal (LVT), with the approval of the requisite number of tenants, to vary the terms of the leases under sections 37 and 38 of the Landlord and Tenant Act 1987 to permit the replacement of the communal heating and hot water system with individual boilers in each flat, with consequential provision for recovery of those costs through the service charge. In addition, the appellants sought other, non-consequential variations to enable them to recover, through the service charge, the reasonable costs of all proper steps that they deemed necessary in enforcing lease covenants. Their evidence was that the tenants had agreed to the non-consequential variations as part of a deal in return for the new heating and hot water system. The respondents were four tenants who opposed the variations.
The LVT allowed the variations concerned with the heating and hot water system but refused the non-consequential variations relating to enforcement of covenants. They found that the single object of the application was to achieve the replacement of the old heating and hot water system and that the non-consequential variations were unnecessary to achieve that object, were unreasonable and would prejudice the respondents, such that the requirements of sections 37 and 38 were not met. They considered that the proposed variations gave more to the appellants than was justified and that it would be inappropriate to permit them substantially to improve their position as landlords in respect of the recovery of costs against recalcitrant lessees to the detriment of other lessees. The appellants appealed.
Decision: The appeal was dismissed.
(1) The LVT had given proper and intelligible reasons for its decision and had been entitled to find that there was a single object to be achieved by the proposed variations to the leases. It was for the appellants, not the LVT, to identify the object of the application by adducing evidence of what they were trying to achieve by the variations and why. Without that information or evidence, the tribunal could make no findings as to the “object” and could not properly exercise its discretion, which included an evaluation of the proposed variation. Although there could be either single or multiple objects, the appellants had presented their non-consequential variations in the context of a single objective, namely to replace the communal heating and hot water system with individual boilers. The LVT had been entitled to assess the proposed variations by reference to that single object.
(2) The next question, under section 37(3), was whether the “object” could be satisfactorily achieved by the proposed variation without varying all the leases; that raised two issues of whether the proposed variation achieved the object and, if so, whether all of the leases needed to be varied in order satisfactorily to achieve that object. In that regard, it was not the case that the majority view prevailed unless the section 38(6) grounds for refusing variation were made out. The purpose of section 37 was to enable the majority to apply to the LVT for a variation to achieve a particular object; if they could not bring themselves within its requirements, then there was no jurisdiction to entertain the application or consider it further. The jurisdiction was relatively narrow and was not intended to allow rewriting of leases merely because that was the will of the majority. The LVT had properly concluded that the replacement of the communal heating and hot water system could be achieved without any of the non-consequential variations. They had found that the landlords were using the replacement of the communal heating system to obtain non-consequential variations that were not required to achieve that object. Although the appellants and the majority of tenants were entitled to reach such an agreement, if they could not point to any other object to be achieved by those variations then they failed to satisfy the requirement of section 37(3) and the applications failed.
(3) The LVT had further been entitled to find that the non-consequential variations were likely to cause substantial prejudice to the respondents and others and were not reasonable in the circumstances, within the meaning of section 38(6)(a) and (b). The non-consequential amendments considerably widened the nature, scope and effect of the provisions as to what costs the appellants could recoup from the tenants through the service charge, since they covered not just the normal costs to be expected in managing a block of flats but also the costs of enforcing covenants at the initiative of the landlords and/or the tenants, as well as the landlords’ own forfeiture proceedings and enforcement of covenants of particular interest to the landlords and their reversions. They went considerably further than the conventional and perfectly adequate provisions of the existing lease provisions in that regard. There was no evidence that there had been any practical difficulties in enforcing the lease covenants. The proposed variations greatly improved or enhanced the landlords’ position but were likely to worsen the tenants’ position because they shifted all financial risk from landlord to tenant and gave the appellants an incentive to enforce, rather than reach a consensual agreement, knowing that all costs would be contractually recoverable from the tenants through the service charge. That would fundamentally alter the relationship between landlord and tenant. The LVT had been correct to conclude that it was inappropriate for landlords to use circumstances such as the replacement of the heating and hot water system as an opportunity to substantially improve their contractual position, by demanding new covenants that were unrelated to, and not consequent on, achieving the object.
Howard Lederman (instructed by Teacher Stern LLP) appeared for the appellants; the respondents appeared in person.
Sally Dobson, barrister