RESIDENTIAL PROPERTY TRIBUNAL
RE: LANDLORD & TENANT ACT 1987 – SECTION 35
LANDLORD & TENANT ACT 1985 – SECTION 20
PREMISES: LOWESWATER HOUSE, SOUTHERN GROVE, LONDON E3 4PY
B E T W E E N:
EASTEND HOMES LTD
THE LEASEHOLDERS OF LOWESWATER HOUSE, SOUTHERN GROVE, LONDON E3 4PY
RESPONDENTS’ SUBMISSIONS - filed and served pursuant to paragraph 14 of the LVT’s directions made on 14th September 2010
Introduction, the Contended Procedural Defects and Request for Further Disclosure
Applicant does not appear to have bought this Application with the
benefit of any specialist legal advice. In order to avoid the
Respondents incurring further irrecoverable expenditure in opposing
this claim (which, it is submitted is largely without any
jurisdictional basis), it is respectfully requested that the Applicant
do so now.
- It is not
evident, either on the face of the Application, or otherwise, that
notice of this Application has been given to the Respondents’
mortgagees: As holders of registered charges over those of the
leasehold interests that are mortgaged, it is self-evident that
mortgagees are “persons likely to be affected by any variation specified in the Application”:
see regulation 4 of the Leasehold Valuation Tribunal (Procedure)
(England) Regulations 2003 (“the 2003 Regs”) as to the obligation to
give notice of any Application under Part 4 of the 1987 Act to all
known affected persons. See also the power under section 39(3) to award
damages for breach of statutory duty in respect of an Applicant's
failure to serve a notice on known persons likely to be affected by a
variation order and the power under section 39(4) to cancel or modify a
variation order on the Application of affected persons who are not
served with notice of the Application.
to any argument to the contrary that the Applicant may have, it is
respectfully submitted that the Application should be struck out,
alternatively, stayed in order to allow notice of the Application to be
given to the mortgagees of all of the flats whose leases it is proposed
should be amended by this Application.
is not known when the Applicant became the landlord under the
Respondents’ leases, however, it occurred by way of a stock transfer
from the local housing authority to the Applicant who is an RSL. In
doing so, the Applicant knowingly and voluntarily assumed the rights
and obligations of the landlord under the terms of the Respondents’
leases. In this connection, disclosure is sought of the contract
governing the stock transfer, and all warranties and indemnities given
by the local authority to the Applicant in respect of the obligations
that the Applicant has assumed by becoming the landlord under the
The proposed amendment to clause 3
respect, this proposed amendment is simply breath-taking. Its effect
would be to remove any concept of a level playing field and negate one
of Parliament’s principal intentions in transferring service charge
disputes to the LVT, namely, that they be adjudicated on in a cost
proposed amendment would have the effect of creating a serious
asymmetry on the cost dynamics of litigation before the LVT in that,
win or lose, the landlord would, as a matter of contract, be entitled
to recover its costs of the proceedings and, win or lose, the
leaseholder would bear its own costs: it is precisely the sort of
unfair, unbalanced and disproportionate provision that the Office of
Fair Trading considers to be an unfair term in a tenancy agreement
(residential tenancies falling, as they do, within the Unfair Terms in
Consumer Contracts Regulations 1999). Attention is drawn to the Office
of Fair Trading Guidance on Unfair Terms in Tenancy Agreements. If this
type of provision is contained in any leases that the Applicant has
already granted, the Applicant is invited to disclose whether it has
sought the guidance of the Office of Fair Trading and, if not, whether
it proposes to do so.
general expressions of outrage, are not necessary. It is clear that the
LVT does not have jurisdiction to order the proposed amendment. The
Applicant relies on section 35(2)(e), which provides for the variation
of leases if they do not make satisfactory provision for:
recovery by one party to the lease from another to it of expenditure
incurred or to be incurred by him, or on his behalf, for the benefit of
that other party or of a number of persons who include that other
order to fall within this provision, expenditure must be incurred by
one party to the lease (in this case the landlord incurring the costs
of bringing proceedings in either a court or tribunal or similar body
against the lessee to recover arrears) that are for the benefit of the
other party (in this case the lessee against whom the postulated
proceedings have been bought.
having proceedings brought against you is in no way a benefit to you.
In ordinary practical terms being the object of legal proceedings is
very much a detriment. It is therefore respectfully submitted that
there can be no question of this proposed amendment falling within the
or in the alternative, if the proposed amendment were to fall within
section 35(2)(e), it is submitted that extending the landlord’s
contractual powers to recover its costs of litigation would be
substantially prejudicial to the Respondents within the meaning of
section 38(6) and therefore cannot be ordered.
the further alternative, it is submitted that, if the proposed
amendment were to fall within section 35(2)(e), and that the LVT were
not precluded from making the order by section 38(6), then, the
variation could only be ordered if substantial compensation were
granted to each of the leaseholders under section 38(10). No such offer
of compensation is proposed by the landlord.
completeness, it is queried whether, if the proposed amendment were
made, the sums payable under it in respect of court and tribunal
proceedings would fall within the statutory definition of “service
charges” and therefore be subject to a debarring order under section
20C. The point being that it is not obvious that such charges would be
“service charges”, as defined by section 18 of the Landlord &
Tenant Act 1985, rather than “administrative charges” falling within
schedule 11 to the Commonhold and Leasehold Reform Act 2002: if they be
administrative charges, then, they would not fall within the scope of
the protection afforded by section 20C.
- The Applicant is invited to set out its views on this point in its Reply to this Response.
The proposed amendment to clause 4(1)
it is submitted that this proposed amendment, which is to extend the
scope of the lessee’s repairing covenant so as to obligate lessees to
provide annual gas and electricity safety certificates, is not within
the scope of section 35(2).
lease already provides for the repair of gas and electrical apparatus
(clause 4(1)) by the lessee. Moreover, the lessee is covenanted to
comply, at its own cost, with the provisions of any statute, statutory
instrument, rule, order or regulation and of any other direction or
requirement made or given by any authority or the appropriate Minister
or Court so far as the same affect the demised premises (clause 3(12).
It is respectfully submitted that a combination of these two provisions
makes satisfactory provision for the repair and maintenance of the gas
and electrical installations so as to ensure a reasonable standard of
accommodation, taking such factors as the safety and the security of
the flat and its occupants into account.
or in the alternative, requiring annual gas safety certificates for all
lessees (including owner occupiers) will fall into one of the following
two mutually exclusive categories:
there is a current obligation, as a matter of general law, to do so. In
which case the lessees are already covenanted to do so under clause
3(12) and therefore the proposed amendment adds nothing of substance to
the pre-existing position; or
isn't a current obligation as a matter of general law to do so, in
which case for, reasons that are not articulated, the Applicant seeks
to impose a more exacting standard on leasehold owners of flats in this
block than are imposed on leasehold owners of flats elsewhere in London
and the rest of the country under the general law.
the first alternative (paragraph 14.1) it is submitted that the
proposed amendment adds nothing ad therefore cannot be/alternatively
should not be ordered. In the second alternative (paragraph 14.2), it
is submitted that the obligations and protections conferred by the
general law are sufficient to secure for the occupants of the flats a
reasonable standard of accommodation within the meaning of the
applicable provisions of the 1987 Act.
the further alternative, it is submitted that imposing an obligation in
excess of the general law, which is inevitably going to put
leaseholders to considerable annual expense, is likely to be
substantially prejudicial within the meaning of section 38(5) and is
therefore an amendment that the LVT cannot order.
the further alternative, if such an order is an order that may be made,
it should only be made on terms that compensation is payable to
affected leaseholders under section 38(10). As to which, it is noted
that the landlord makes no proposals as to compensation.
is noted that this may, in theory, be the sort of amendment that could
be made under section 37 (Application by majority of parties for
variation of leases) should the landlord be able to command the
requisite level of support to bring a majority application for a
The proposal to introduce an interest penalty for late payments
- It is admitted that this proposal falls within the jurisdiction conferred by the LVT under section 35.
it is submitted that the order should not be made for reasons including
that it is likely to be substantially prejudicial within the meaning of
section 38(6) to leaseholders, who, under the terms of the leases that
they have taken, are not burdened with any such obligation.
Accordingly, it is submitted that this proposed variation therefore
cannot be ordered by reason of the operation of section 38(6).
the alternative, if such a variation is one that may be ordered, it
should only be ordered on terms that compensation is payable to
leaseholders under section 38(10): - the compensation to equate with
any interest charges as may be levied against leaseholders in the
- It is noted that, in
support of this proposed amendment the Applicant relies upon its
charitable status and its funding arrangements. Full particulars of all
of the Applicant’s sources of funding are requested, including details
of how it presently funds any shortfall in service charge recoupment.
The proposed amendment to clause 3(9)
- This proposed amendment is also disputed.
presently drawn, these leases allow for the recoupment of 100% of the
service charge expenditure. It is therefore submitted that the LVT has
no jurisdiction under section 35 to order this variation. It simply
cannot be said that the leases in their present form “fail to make satisfactory provision with respect to the computation of a service charge payable”, within the meaning of section 35(2)(f) & 35(4) of the 1987 Act.
paragraph 1(2) of the fifth schedule to the LBTH Leases the lessees are
covenanted to pay a “reasonable proportion” of the Total Expenditure
(which expression is defined at paragraph 1(1)). The GLC Leases have a
rateable value apportionment mechanism and a floor area apportionment
mechanism in default. Accordingly, under both types of the leases, the
landlord is able to recover the whole of its relevant expenditure as
statutory definition of a failure (for the purposes of subsection
35(2)(f)) to make satisfactory provision with respect to the
computation of a service charge is prescribed by the three cumulative
limbs of sub-section 35(4). Attention is drawn, in particular, to the
wording of the third limb of this test at subsection 35(4)(c), which
requires, in order for the failure to make satisfactory provision test
to be made out, the following :
aggregate of the amounts that would, in any particular case, be payable
by reference to the proportions referred to in paragraphs (a) and (b)
would either exceed or be less than the whole of such expenditure.”
as noted above, the leases in their present form allow for the full
recoupment of service charge expenditure. Consequently the service
charge recoupment provisions of the leases are not defective within the
meaning of the legislation. Therefore the LVT simply has no
jurisdiction to vary the apportionment mechanism under section 35.
would of course be open to the Applicant to consider an application
under section 37 (Applications by the majority of parties for variation
of leases) if it were prepared to consult with leaseholders and
generate sufficient leaseholder support for such an application.
essence of the Applicant’s case seems to be a perceived problem in
accommodating dwellings in new builds (that will not have a rateable
value) within the existing service charge regime.
problem does not apply at all in respect of the GLC leases, which
already have a floor area apportionment mechanism where rateable values
are not available. As to what to do with the LBTH leases that have the
reasonable proportion machinery established by the existing leases,
with respect, the answer is clear. The answer is to simply continue to
charge those leaseholders holding under the existing LBTH leases a
reasonable proportion and to also charge the leaseholders holding under
any leases demising new build units a reasonable proportion:- whether
assessed across all of the dwellings on an estate (both older dwellings
with rateable values and new builds without rateable values) on a floor
area, or some other reasonable basis of apportionment. It is simply a
matter of ensuring that all new leases that granted contain a covenant
to contribute a reasonable proportion of the total service charge.
should be respectfully noted that there is a potentially serious
drafting/ logic error in the proposed amendment to para 1(2) of the
Fifth Schedule - the effect of it, as drafted, is to only trigger a
floor area apportionment in circumstances where the flat (i.e. the
premises demised by the existing lease in question) does not have an
historic rateable value. All of the flats in Loweswater House have
historic rateable values as the building was built before 1990. Going
forward into the future all of these flats will continue to have
historic rateable values whether or not any additional new build units
are added to the estate and (under the proposed new clause) the
obligation of the existing leaseholders to contribute would not change
upon the introduction of any additional units. Hence, the very problem
that the Applicant seeks to address (i.e. of what happens if and when
additional new build units without rateable values are introduced) is
not addressed by the proposed amendment. For example, under the
proposed new wording, additional units could be added e.g. on the roof
of the existing building, or in the grounds, which would not have
rateable values, yet the leaseholders of the existing flats would still
be liable to pay their current proportionate share calculated by
reference to the historic rateable value of their flat .
is to say, under the proposed amendment, the leases would end up paying
the whole of the cost of maintaining the estate in the event that any
new units were added. Whereas, under the terms of their existing LBTH
leases, they would only pay a reasonable proportion and hence, if more
units were added to the estate their proportionate share would go down.
That is to say, the proposed amendment, as drafted, is entirely
- It is
not for the Respondents to tell the Applicant how to re-draft its
proposed amending provisions (even if the LVT had jurisdiction to order
the variation)- but surely, the default floor area apportionment
mechanism should be triggered by the introduction into the service
charge scheme of any additional units that do not have a rateable value.
- For the reasons set out above all of the proposed amendments are disputed.
the Respondents seek an order under section 20C preventing the
Applicant from exercising any contractual power it may have (if any) to
include the cost of this Application as part of the service charge.
addition, the Respondents seek an order under paragraph 10 of schedule
12 to the 2002 Act for their costs up to the maximum that the LVT may
order by reason of the Applicant’s unreasonable conduct in making an
application the bulk of which is outside the LVT's jurisdiction.
The Respondents believe that the facts stated in this Response are true
 as these mortgages are registered, the Applicant must be taken to have at least constructive or deemed notice of them.