A breach of covenant enables a landlord to forfeit a lease. Before this occurs, the landlord must first serve the tenant with a notice under section 146 of the Law of Property Act 1925. When a long leaseholder is in breach, section 168(4) of the Commonhold and Leasehold Reform Act 2002 provides that a landlord cannot serve a section 146 notice unless the tenant has either admitted the breach or it has been determined by the appropriate tribunal.
What level of detail is required in such a determination? This was the question posed in Marchitelli v 15 Westgate Terrace Ltd [2020] UKUT 192 (LC); [2020] PLSCS 122.
The facts
The landlord, 15 Westgate Terrace Ltd, owned a building situated at 15 Westgate Terrace, London SW10. Fiorella Marchitelli was a long leaseholder of flat 1. By virtue of paragraph 3 of the fourth schedule to the lease, Marchitelli covenanted “not to do or permit or suffer in or upon the [flat] or any part thereof any illegal or immoral act or any act or thing which may be or may become a nuisance or annoyance… to the Lessors or the tenants of the Lessor or the occupiers of any part of the Building”.
In 2017, Marchitelli engaged Flavio Torino, whom she believed to be “a reputable agent”, to act as her lettings and managing agent. Marchitelli had decided to sublet her flat as she was no longer living there and was undergoing medical treatment for a serious illness at the time. The flat was let from September 2017.
In early October 2017, the landlord began receiving complaints from other lessees that the flat was being used as a brothel. It was alleged that there was an increased number of male visitors to the flat at night, which caused a nuisance and disturbance to other occupiers in the building. It was alleged by one lessee that his tenant had been “propositioned for sex by a late-night caller” who mistakenly believed her to be the occupier of the flat.
The other lessees of the building discovered that the flat was being occupied by Natalie Ferraz. Further investigations carried out by other residents of the building uncovered “internet advertisements for Natalie Ferraz, a transvestite, offering services of a sexual nature to men”.
The section 168 determination
In February 2019, the landlord applied to the First-tier Tribunal for a determination under section 168 of the 2002 Act that there had been a breach of covenant. By this time the nuisance had abated. Ferraz no longer occupied the flat and Marchitelli had placed its management in the hands of experienced agents.
Marchitelli, in response to the application, denied that the flat was being used as a brothel or that she had permitted or suffered the use of the flat for prostitution. She had claimed that she had not seen any “compelling evidence” of prostitution.
The FTT rejected Marchitelli’s evidence. It found that although there was “no direct evidence of any act of flagrante delicto, the circumstantial evidence that the property was being used as a brothel or for business purposes or an immoral purpose [was] considerable”.
In respect of the allegation that Marchitelli had permitted or suffered the flat to be used for prostitution, the FTT commented that, apart from contacting Torino, she had taken minimal active steps to tackle the situation and rid herself of Ferraz.
Attention to detail
Marchitelli appealed on two grounds. First, she argued that there was insufficient evidence before the FTT to support a finding that the flat was being used as a brothel. Secondly, the FTT had not made any direct findings that she had permitted or suffered the flat to be used for prostitution.
The first ground of appeal was dismissed by the UT. There was sufficient evidence before the FTT from which the inference could be drawn that the flat was being used for prostitution. Direct evidence of any “flagrante delicto” was not required.
The second ground of appeal succeeded. The UT found that, just as a section 146 notice was required to clearly set out the breaches alleged, the FTT was also required to apply the same degree of transparency in its determination of breach. It was not sufficient for a determination that a serious breach of covenant had taken place to be inferred from generalised statements.
Without specific findings of fact being made by the FTT, the county court would face “an impossible task” when required to determine whether to forfeit the lease or to grant relief from forfeiture. In the absence of such certainty, it may be necessary for the county court to rehear evidence already presented to the FTT. That was not what section 168 of the 2002 Act envisaged and it would be rendered nugatory if it did. The FTT had simply made no adequate findings of fact concerning Marchitelli or Torino’s culpability.
Key point
- In a determination under section 168 of the Commonhold and Leasehold Reform Act 2002, the FTT was required to apply the same degree of transparency as was required for a section 146 notice to clearly state the breaches alleged
Elizabeth Dwomoh is a barrister at Lamb Chambers
