Landlord and tenant – Variation of lease – Consent – Section 37 of the Landlord and Tenant Act 1987 – Respondent freeholder successfully applying to vary service charge provisions in leases of flats to provide for equal apportionment between leaseholders – Leaseholders’ consent to variation obtained only after application issued – Whether respondent obtaining consent of requisite 75% majority of parties concerned – Whether such consent required to be obtained before date of application – Appeal allowed
The respondent was a company in which the freehold of a block of 29 flats in Westgate-on-Sea, Kent had vested following an enfranchisement by the leaseholders of the flats; the respondent had 29 shareholders, namely one shareholder per flat. The appellant was the leaseholder of one of the flats. In a ballot conducted in April 2013, 21 out the 29 leaseholders voted in favour of a proposal that the service charge should be equally between them, in order to remedy a problem with the existing service charge provisions. When the respondent was added to that number, the outcome was just shy of the 75% majority that was required to vary the leases on an application under section 37 of the Landlord and Tenant Act 1987.
In May 2013, the respondent applied under section 37 for the lease to be varied and wrote to leaseholders seeking their agreement. Although enough positive responses were obtained to achieve the required majority, it later emerged that the wording of the proposed variation did not in fact bring into effect the apparent intent of making each leaseholder equally liable for the service charge. The first-tier tribunal (FTT) found that the respondent’s letter to the leaseholders was insufficiently clear about the effect of the variation, such that there was no informed consent for the purposes of section 37(5)(b); it dismissed the application accordingly.
In June 2014, the respondent issued a new application to vary the terms of the leases. On the same day, it again wrote to the leaseholders, enclosing the terms of variation, corrected to have the effect which had been proposed in the April 2013 ballot. A sufficient majority of leaseholders agreed to the proposal and the FTT allowed the application. It rejected the appellant’s submission that the requisite majority had been obtained too late since section 37(5)(b) required it to be obtained by the time the application was issued.
The appellant appealed. The respondent contended that, even if the appellant were correct in its interpretation of section 37(5)(b), the requirements were satisfied since it was evident from the previous application that a majority had consented to the principle of equal apportionment of the service charge.
Held: The appeal was allowed.
(1) On a straightforward, natural construction of section 37, the requisite consent to the application for variation had to have been achieved at the time when the application was issued. That result flowed from the mandatory wording of section 37(5), so far as it provided that any such application “shall only be made if” the requisite majority consented to it: Marshall Dixon v Wellington Close Management Ltd [2012] UKUT 95 (LC) applied. That interpretation was reinforced by a more detailed consideration of section 37(5)(b), which imposed two jurisdictional prerequisites or hurdles which had to be satisfied to give the applicant locus standi to make an application under section 37(1): first, that the application was not opposed by more than 10% of the parties concerned and, second, that it was consented to by 75% of them.
There were sound practical reasons for that approach, since the variation of leases could be contentious, expensive and time-consuming and it would be a waste of time and money to allow the application to be made without first establishing whether it was sufficiently supported or insufficiently opposed. Further, applications to vary should not be issued without due notification and unnecessary pressures of time should not be imposed on leaseholders, who should have an opportunity to discuss and consider the proposed variation. Even in apparently straightforward cases, leaseholders should be given an opportunity of considering and consenting to the proposed wording.
(2) The respondent could not succeed in its June 2014 application by contending that, approaching the matter in a practical, factual way, the leaseholders had clearly consented to the principle of equality of apportionment. Such an argument was artificial and involved using so-called “consents” for a purpose for which they had never been intended. It cut right across the clear meaning and requirements of section 37(5), failed to satisfy the two pre-requisites to the applicant having locus standi to issue the application and did not begin to address the practical considerations. An applicant should not be permitted to scratch around and look at whatever might constitute “consent” to its application even though that consent was never intended for such a purpose. It would complicate an essentially simple and straightforward statutory process aimed at providing clarity and ensuring that the parties concerned, so far as was possible, knew where they stood.
It was relevant that the leaseholders had not been provided with the wording of the proposed variation on the June 2014 application, or even informed about that application, before it was issued. The April 2013 ballot had not produced a 75% majority in favour of the equality of apportionment. The 2013 application had been issued without any consents having been obtained and the “consents” subsequently obtained were to wholly defective wording and had been treated as insufficient by the FTT hearing that application. While there might subsequently have been consent by 75% to the principle of equality, that was not a consent to the respondent’s 2014 application in circumstances where there was no evidence that the parties concerned, apart from the respondent itself, even knew that such an application was to be issued.
The appellant appeared in person; Lynette Calder (instructed by Boys & Maughan, of Margate) appeared for the respondent.
Sally Dobson, barrister
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