Simon v St Mildreds Court Residents Association Ltd [2015]

Proper consideration and planning should be given when varying a lease

Whether consents of the majority to vary a lease were to have been acquired when the application was issued.

St Mildreds Court is a block of 29 separate flats, the freehold of which is held by the Respondent. Only 26 leaseholders were shareholders in the Respondent company as 3 tenants did not participate in the enfranchisement action.

The case concerned an application made under s.37 of the Landlord and Tenant Act 1987, whereby:

“…an application may be made to a leasehold valuation tribunal in respect of two or more leases for an order varying each of those leases in such manner as specified in the application.

…any such application shall only be made if…it is not opposed for any reason by more than 10% of the total number of the parties concerned and at least 75% of that number consent to it.”

An application to vary the leases was made by the landlord; under the leases, service charge was to be apportioned according to rateable values. However, 3 flats did not have a rateable value so the landlord wished to vary the leases to allow for service charge to be paid for equally between all tenants.

Accompanying the application was a document headed ‘Agreement’, by which each tenant was to indicate whether or not they accepted the proposed variation. 23 tenants plus the freeholder accepted the variation, giving a majority.

The Law

The First-Tier Tribunal was satisfied that informed consent to the variation had been given by 26 tenants. The Appellant argued that the majority had been obtained too late, and that consents should have been obtained before, or at the same time, as the application was issued. The Appellant sought to rely on Marshall Dixon v Wellington Close Management Ltd [2012]. Citing the Marshall judgment, the Upper Tribunal noted:

“The requisite numbers have to be established when the application to the LVT is made, and it follows that an consent received or opposition expressed after that time is not material to the question of compliance with s.37(5)(b).”

The Decision

The Respondent accepted that the requisite majority consent had not been obtained by the time the application was issued but argued that such a majority had been obtained by the time of the hearing, which it felt was sufficient.

The Upper Tribunal upheld the Appellant’s appeal. In the judgment, HHJ Gerald held that at least 75% of the consents required must have been obtained prior to the application being made:

“This is, as the appellant submitted and was said in Marshall Dixon, a simple question of fact of whether 75% of the parties concerned had consented to the application to vary on 10 June 2014 to which the answer is “no”.”

In his comments, HHJ Gerald stated that the reasons for obtaining consent before an application is made make practical sense. Varying leases can be a tricky process and, where an application is made without requisite support having been obtained, it could prove to be a waste of time and money. Tenants should have opportunity to discuss and consider the proposed variation.

JB Leitch’s Phil Parkinson comments on the judgment:

“This case is a warning to landlords who may act too quickly in making applications to vary. The tenant here, acting in person, put forward a straightforward argument which agreed with the Upper Tribunal’s practical approach; there is no point, and it is wasteful of the parties’ time and resources, to putting in an application before tenants have had opportunity to consider and gather support (or otherwise agree to oppose). Landlords are well advised to take their time and plan the application process thoroughly.”