Landlord and tenant – Administration charges – Respondent claiming costs under covenant entitling recover of costs incurred in contemplation of forfeiture proceedings – Costs only recoverable in respect of period prior to the right to re-enter being waived – Whether First-tier Tribunal having jurisdiction to decide question of waiver – Whether respondent able to waive right to forfeit lease in respect of forfeitable breach of covenant during statutory moratorium on right of re-entry or forfeiture – Appeal allowed in part
6 Ladbroke Gardens, London W11 (the building) was a grade 2 listed mid-Victorian house with stucco frontage divided into five units, each held on a long lease. The appellants were lessees of the top maisonette. The freehold of the building was vested in the respondent, a management company owned by the lessees, each of whom owned a share in the respondent.
Clause 2(vi) of the lease contained a covenant by the lessee to pay to the lessor on demand all costs charges and expenses (including legal costs and surveyor’s fees) which might be incurred by the lessor in proceedings in respect of the maisonette under sections 146 or 147 of the Law of Property Act 1925 or in preparation and service of any notice thereunder, notwithstanding that forfeiture was avoided otherwise than by relief granted by the court.
In March 2016 the respondent decided to carry out major repairs which required substantial funds. The appellants refused to pay the sum demanded. In the light of a proviso for re-entry contained in the lease, there arose a right for the respondent to re-enter and forfeit the lease for non-payment after 21 days had elapsed from 1 April 2016 with the relevant demand still unpaid.
The appellants paid the sum demanded following a ruling by the First-tier Tribunal (FTT) but the respondent sought to recover from the appellants, by way of an administration charge pursuant to clause 2(vi) of the lease, the costs it had incurred in the proceedings which had led to the FTT’s decision. Payment was not forthcoming and the respondent applied to the FTT to determine the appellants’ liability to pay. The appellants contended, amongst other things, that the respondent had waived the right to forfeiture of the lease for non-payment. The FTT concluded that it had no jurisdiction to consider the waiver point. However, pursuant to clause 2(vi), the appellants were liable to pay the respondent £26,381.98, by way of reasonable administration charge.
Held: The appeal was allowed in part.
(1) The FTT was wrong to conclude that it had no jurisdiction to decide whether there had been a waiver of the right to forfeit the lease for non-payment of the relevant demand. Having regard to the decision in Barrett v Robinson [2014] 3 EGLR 42; [2014] EGILR 51, the FTT could only decide the matter before it (namely the amount payable by way of a reasonable administration charge) if it reached a conclusion on the question of whether (and if so when) the right to re-enter for non-payment of the relevant demand was waived. Accordingly, the FTT had jurisdiction to decide the matter and the tribunal would consider whether there had been a waiver.
(2) It was possible for the respondent to waive the right to forfeit the lease prior to it being in a position to exercise a right to forfeit. It was not necessary to await the finding of the FTT as to what if anything was properly payable on 1 April 2016, pursuant to the relevant demand, prior to there being any possibility to waive a right to forfeit for non-payment of that instalment. It was possible to make an unequivocal choice between two inconsistent rights prior to being in a position immediately to exercise each of them. There were various statutory fetters upon a landlord’s right immediately to forfeit a lease for breach of covenant. Where a landlord knew of the facts upon which a right to re-enter arose, there was no difference in kind between the position of such a landlord if the right immediately to exercise a right to re-enter was constrained by need to comply with section 146, section 81 of the Housing Act 1996 or section 168 of the Commonhold and Leasehold Reform Act 2002. In each case the landlord knew of facts upon which a right to re-enter arose and was not yet in a position to exercise that right because the statutory procedures had not yet been worked through. Where the breach of covenant was irremediable it was not the law that a landlord was unable to waive a right to re-enter because a section 146 notice has not yet been served or has not yet expired. By parity of reasoning, a landlord was able to waive a right to re-enter because some other fetter upon exercising a right of re-entry, for an irremediable breach, had not yet been worked through: Central Estates (Belgravia) Ltd v Woolgar [1972] 1 QB 48; Central Estates (Belgravia) v Woolgar (No 2) [1972] 1 WLR 1048 and Yorkshire Metropolitan Properties Ltd v Co-Operative Retail Services Ltd [2001] L&TR 26 considered.
(3) The right approach to waiver was to consider objectively whether in all the circumstances the act relied on as constituting waiver was so unequivocal that, when considered objectively, it could only be regarded as being consistent with the lease continuing. Where a landlord knew of the facts giving rise to a right to re-enter, a demand for rent falling due after the landlord had such knowledge constituted a waiver of the right to re-enter. There was a distinction between waiver based upon a demand or acceptance of rent and a waiver based upon some other action. In the present case, the respondent on 3 September 2016, through its agent, demanded the further instalment of on-account service charge payment which was reserved as additional rent. That amounted to a waiver of the right to forfeit for non-payment of the relevant demand. In the circumstances, pursuant to clause 2(vi), the respondent was entitled to recover by way of administration charge the amount of the reasonable costs incurred by the respondent prior to 3 September 2016 in contemplation of the forfeiture, but not the costs incurred on and after that date. The reasonable amount was £10,766: Greenwood Reversions Ltd v World Entertainment Foundation Ltd [2008] HLR 31 considered.
Nicholas Trompeter (instructed by Hughmans Solicitors) appeared for the appellants; James Sandham (instructed by D & S Property Management) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Stemp and another v Ladbroke Gardens Management Ltd
