UPPER TRIBUNAL (LANDS CHAMBER)

	
UT Neutral citation number: [2015] UKUT 0508 (LC)
   UTLC Case Number: LRX/8/2015

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

LANDLORD AND TENANT – Variation of Lease –whether appropriate consents are required before an application to vary a lease is made under section 35(1) of the Landlord and Tenant Act 1987 (as amended) pursuant to section 37(5)(b) of that Act

IN THE MATTER OF AN APPEAL AGAINST A DECISION
OF THE FIRST TIER TRIBUNAL (PROPERTY CHAMBER)

BETWEEN:

JOHN PETER SIMON
Appellant
and
ST MILDREDS COURT RESIDENTS ASSOCIATION LTD
Respondent

Re: St Mildreds Court,
Beach Road,
Westgate-on-Sea
CT8 8AE

Sitting at: Royal Courts of Justice, Strand, London WC2A 2LL
on
14 September 2015

The Appellant was self-represented.
Ms Calder of Counsel for the Respondent

© CROWN COPYRIGHT 2015

The following case is referred to in this decision:

Marshall Dixon v Wellington Close Management Ltd [2012] UKUT 95 (LC)

DECISION
Introduction
1.	St Mildreds Court, Beach Road, Westgate-on-Sea, Kent CT8 8AE is a block of flats comprising 29 separate flats.  The freehold was enfranchised some while ago and is now vested in the respondent being St Mildreds Court Residents Association Ltd which has 29 shareholders being one per flat although 26 are described as freehold shareholders because 3 of the flat owners did not participate in the enfranchisement.
2.	This appeal concerns the question of whether or not the requisite consents to an application to vary the leases had been acquired at the time of the application under section 35 of the Landlord and Tenant Act 1987 (as amended).  It is convenient at the outset to recite the relevant provisions.  
3.	By section 35:
	“(1)any party to a long lease of a flat may make an application to a leasehold valuation tribunal for an order bearing the lease in such manner as is specified in the application.”
4.	An application to vary may be made by the majority of flat owners under section 37, which provides as follows: 
	“(1)Subject to the following provisions of this section, 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. 
	 “(2)Both leases must be long leases of flats under which the landlord is the same person, but they need not be leases of flats which are in the same building, nor leases which are drafted in identical terms.
	 “(3)The grounds on which an application have been made under this section are that the object to be achieved by the variation cannot be satisfactorily achieved unless all the leases are varied to the same effect.
	 “(4)An application under this section in respect of any leases may be made by the landlord or any of the tenants under the leases.
	 “(5)Any such application shall only be made if –
“(a) In a case where the application is in respect of less than 9 leases, or all but one, of the parties concerned consent to it; or
“(b) In a case where the application is in respect of more than 8 leases, 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.”
5.	For the purposes of calculating whether or not 75% of the parties concerned have consented to the application, the landlord constitutes one of the parties (section 37(6)(b)) and therefore the 75% is calculated by reference to a total of 30.  
6.	The problem which has occurred in relation to the leases of the subject premises revolve around the service charge provisions.  They provide that the service charge shall be apportioned amongst lessees according to rateable values.  The problem is that 3 of the 29 flats do not have rateable value.  This emerged during the course of an application relating to the service charge brought by the appellant in separate proceedings.  
7.	In April 2013 there was a ballot amongst lessees inviting them to accept or reject the following proposal, namely: 
“A ballot paper to accept the proposal or reject the proposal that this service charge is payable equally between all lessees.”
The ballot paper went on to provide 
“I/We accept the proposal that this service charge is payable equally between all lessees.
“I/We reject the proposal that the service charge is payable equally between all lessees.”
There is then provision for the lessees signature and Flat No. and also for it to be dated.  
8.	21 of the 29 lessees accepted the proposal that the service charge be payable equally between all lessees which, when added to the freeholder, brings the total in favour to 22 which is 73.3% - just shy of the 75% majority, one additional vote being required.  
9.	On 7 May 2013 the respondent issued an application for the lease to be varied in order to carry into effect the ballot which had previously been held – even though that had not attained the necessary majority and no proposed wording, just the agreement in principle, had been circulated to lessees.  At that point in time it follows that there were insufficient numbers supporting the application even assuming that the prior ballot was sufficient for the purposes of section 37(5)(b).
10.	Two days later, on 9 May 2013, the applicant’s solicitors wrote to each of the lessees seeking their agreement or disagreement to the proposal.  That letter briefly explained what was proposed and attached to it draft alterations to the leases which it was then thought would carry into effect the intention of making the service charge payable equally between all lessees as well as enclosing a consent or agreement form which had the following wording:

“I [name] owner of Flat [no.] St Mildreds Court, Beach Road, Westgate-on-Sea, Kent CT8 8AE hereby acknowledge receipt of the Application for the variation of my Lease and confirm my agreement/disagreement (delete as appropriate) to the amendment proposed.”
There is then provision for the signature, the full name of the lessee and his or her address and its date.
11.	Over the course of the following month 23 lessees replied in the affirmative which, when added to the landlord applicant’s self-evident consent, totalled 24 out of 30 which was the requisite majority of 75% consenting to the proposed variation, assuming that this procedure was sufficient to satisfy the requirements of section 37(5)(b).
12.	It was not until 22 May 2014 that the application came before the LVT as it then was.  By that stage, and I am told also during the cause of the hearing, it had become apparent that the proposed variation to the leases did not bring into effect the apparent intent of making each lessee equally liable for the service charge.  
13.	There was I am told discussion as to whether or not the hearing should be adjourned in order for appropriate steps to be taken, but it is quite clear that the F-tT declined to adopt that approach because it dismissed the application.  The reasons for the dismissal of the application were because so far as the F-tT was concerned the provisions of section 37(5)(b) had not been complied with.  As the F-tT put it in paragraph 11 of its decision (which has not been appealed):
	“Although a number of consents to the proposal had been received, the Tribunal was not satisfied that the letter about the application sent to the lessees was sufficiently clear as to the consequences of the individual lessees and therefore was not satisfied that there had been informed consent. There was also the fact that the variation was by 22nd May 2014 not exactly the same as had been suggested to the lessees.”
It does not appear that the F-tT was concerned as to the fact that the “consents” had all been obtained subsequent to issuance of the application, and I am told that the appellant did not take this point before that F-tT. 
14.	It was, I am told, clear during the oral hearing that the application would be dismissed and that the F-tT indicated that if any renewed application was to be made it should be done within 21 days.  The reason for that was that it was necessary to have this, the variation of the service charge provisions, decided sooner rather than later and in any event prior to the determination of the appellant’s outstanding application in relation to the service charge, the proposed variation intending to be retro-active so as to address the issues raised by the appellant’s outstanding application.

15.	It was against that background that on 10 June 2014 the respondent issued a new application to vary the terms of the leases.  As a matter of fact, it is accepted, the applicant had not before that date circulated the new improved proposed draft variation to the lease to carry into effect what had been resolved by majority back in April 2013 when the lessees were balloted or to seek explicit consent to the new application. Whether the lessees were all the same a year later is unclear, although it appeared to be agreed that they probably were. 
16.	However, by letter bearing the same date, 10 June 2014, the applicant invited the lessees to agree or disagree with the application which that day had been issued.  Enclosed with the covering explanatory letter was a copy of the application and the proposed new terms of the lease as well as a piece of paper entitled “Agreement” which was to provide the lessees with an opportunity to accept or reject the proposal.  It provides as follows:
	“I have seen the letter dated 10 June 2014 from Messrs Boys & Maughan and the Application Notice to the LVT as well as the illustration of the changes to the service charges and how they will effect me.
	“Please indicate whatever applies:-
	“I am/am not satisfied that I understand that the Application will change the way that the service charge is collected to mean that each flat owner (as defined in the lease) pays the same amount.
	“I am/am not satisfied that the Tribunal should be asked to backdate the change.
	“I agree/disagree to the Application.
	“I further understand that I will be informed of the date and time of the making of this application and can attend at the Tribunal myself if I wish to do so.”
There is then provision for the so-called agreement to be signed and the name of the
lessee and his or her flat number to be stated.
17.	A total of 23 lessees consented which, when added to the applicant freeholder, totalled 24 thereby garnering the requisite majority. (Although the last paragraph of that sheet of paper would indicate a prospective application was in mind, it was in actual fact clear from the covering letter that the application had already been issued and, as I have said, a copy of it was enclosed with that letter.)
18.	The matter came before the by then F-tT on 7 October 2014 and a relatively lengthy decision was given on 31 October 2014.  So far as material, the decision of the F-tT is dealt with succinctly in the following paragraphs:

	“49. Mr Simon advanced a number of points in respect of the consents.  For example, he drew attention to the flats where there were joint lessees but only one lessee had signed the consent.  The Tribunal was satisfied that the signature of one lessee was sufficient.  The Tribunal was also satisfied in respect of Flat 21 that although the list of lessees at p 122 showed Mr and Mrs Ibbetson as a lessee and the copy Land Registry entry showed the proprietor as the Property Impact Limited,  the Ibbetson’s were in control of Property Impact Limited and that there was no reason to suppose that the letter had been sent to the wrong person.  In any event, no reply had been received from the lessee of Flat 21 and therefore that consent was not relied on by the Company. As to Flat 6, at p 21 the proprietor’s address is said to be in Brussels.  That information is also given at p 121 and there is a note “write to property address”.  There is no reason to propose that the consent at p 131 signed by anyone other than the lessee.
	“50. The Tribunal considered all the points raised and was satisfied on the balance of probability that informed consent to the variation had been given by 26 of the lessees and that none of the points raised affected the validity of the number of consents required to comply with the provisions of the 1987 Act.”
19.	One of the specific submissions made by the appellant before the F-tT was that the requisite majority had been obtained too late: it should have been obtained before or at any rate at the time of issuance of the application as required by section 37(5)(b) of the 1987 Act, reliance being placed upon Marshall Dixon v Wellington Close Management Ltd 2012 UKUT 95 (LC).
20.	On 27 February 2015 the Deputy President of this Tribunal, observing that that point was not addressed by the F-tT in its decision, gave permission to appeal as a review as a view to rehearing
“…restricted to the issue of whether the application was defective because it was not supported by the requisite majority of the lessees at the time it was made, and whether an order ought to be made under section 20C, Landlord and Tenant Act 1985.”
21.	Before me, and notwithstanding the length and detail of his notice of appeal and skeleton argument, the appellant confined himself to the simple proposition that the requisite majority was obtained “too late”. Fleshing that out, he submitted that as a matter of natural construction of section 37(5)(b), the consent of at least 75% of the total number of the parties concerned must have been obtained before the application is made because that is what the section says, specifically, “any such application shall only be made if” the requisite majority has approved. He relied upon Marshall Dixon.
22.	The respondent submitted that whilst it was accepted that the consent of the requisite majority had not been obtained at the time when the application was issued on 10 June 2014, it had been obtained at the time when an application in relation to the hearing and at the time of the hearing itself which, as a matter of construction, was sufficient. In the alternative, and by way of respondent’s notice, it was submitted that section 37(5)(b) was satisfied because a majority had consented to the proposal to vary the lease so as to apportion the service charge equally amongst lessees as was evident from the previous application. 
23.	In my judgment, the requisite consent to “the application … for an order varying each of those leases in such manner as is specified in the application” (section 37(1)) must have been achieved at that time of issuance of the application because of the mandatory wording of section 37(5) that “any such application [that is one made under sub-section (1)) shall only be made if” the requisite majority “consent to it”. I can do no better than adopt the following passage from the judgment of the then President of this Tribunal in Marshall Dixon, albeit that that involved the question of whether the application was opposed by more than 10% of the parties concerned:
	“13. The first question which needs to be addressed is by reference to what point in time the issue of whether the application is not opposed for any reason by more than 10% of the total number of the parties concerned needs to be addressed.  It is at the time the application was made, or as the LVT thought, the date of the LVT hearing?  In my judgment, in the light of the wording of the provision, which says that the application “shall only be made if” (etc), it can only be the former.  The requisite numbers have to be established when the application to the LVT is made, and it follows that any consent received or opposition expressed after that time is not material to the question of compliance with section 37(5)(b).” 
24.	Whilst I am not bound by that decision, it in my judgment is unassailable as a straightforward, natural construction of the statutory provision. It is reinforced by a more detailed consideration of section 37(5)(b). What that sub-sub-section imposes are two jurisdictional pre-requisites or hurdles which must – “shall” – be satisfied to give the applicant locus standi to make an application under section 37(1): first, that the application is not opposed by more than 10% and, secondly, that it is consented to by 75% of the parties concerned.  
25.	There are sound practical reasons for that: varying leases can be contentious, expensive and time-consuming affairs; it would be to put the cart-before-the-horse, and a complete waste of time and money, to allow the application to be made without first establishing whether it is sufficiently supported or insufficiently opposed; and it is better that lessees have an opportunity to discuss and consider the proposed variation and perhaps reach or at any rate have an opportunity to reach an accommodation before application is made. Necessarily, leases are valuable “commodities” involving not always straightforward consideration such that applications to vary should not be issued without due notification and without the imposition of unnecessary pressure of time.
26.	Ms Calder, for the respondent, sought to persuade me that in this case the matter should be approached in a practical, factual way. It was clear, she submitted, that the lessees had consented to the principle of equality of apportionment. Whilst the only sufficient majority consent was in respect of the defectively drafted variation in respect of the first application, given that they had (albeit late, being after the issuance of that application) as a matter of fact consented to the principle of equality of apportionment that was sufficient for the purposes of satisfying the requirements of section 37(5)(a) in respect of the second application especially as the 21 day time-limit was to some extent at the behest of the F-tT and it was not complex. 
27.	As was made clear, Ms Calder continued, in Marshall Dixon, that there is no particular form in which the consent must be obtained, and there was some suggestion that an agreement in principle, even if the odd minor drafting point remained in issue, was sufficient (this is a reference to paragraph 16 of that decision). There is not even a need under statute for the lessees to see the actual wording of the proposed variation before they consent to it – all that is required is an agreement to the principle involved which, in this case, is simple and straightforward (even though the first draft was so defective that the whole application was dismissed).
28.	This submission is by way of respondent’s notice, and requires, or may require, the permission to adduce additional evidence because there was no evidence relating to the April 2013 ballots before the F-tT and it is unclear whether all of the evidence now relied upon relating to the consent forms in relation to the first application were before the F-tT. To the extent that permission is required, I grant it. (I should say that the appellant objected to the respondent’s notice because a form had been served a few days late: that was of no consequence as the appellant had been notified therefore within time.)  
29.	I am unable to accept this submission. In my judgment, it cuts right across the clear meaning and requirements of section 37(5), fails to satisfy the two pre-requisites to the applicant having locus standi to issue the application and does not begin to address the practical considerations which I have referred to above and are important contextual considerations to the section. In the passage referred to in Marshall Dixon (paragraph 16), it is plain that the lessee in question agreed to the substance of the proposed variation but had a few minor reservations about some of the wording. That was treated by the President as a “consent”. This is a world away from the lessee not even being provided with the wording of the proposed variation let alone even being informed about the proposed application before it was issued. 
30.	It is also, in my judgment, a perilous path to go down to allow an applicant to scratch around and look at whatever might constitute “consent” to the instant application even though that consent was never intended for such purpose. It would complicate what is intended to be an essentially simple and straightforward statutory process aimed at providing clarity and ensuring that the parties concerned, so far as is possible, know where they stand: instead of the intended applicant sending the parties concerned a copy of the proposed variation with explanatory covering letter and inviting them to consent or not, they would not even know what the proposed wording was if they only had to agree to the principle and might not even know that an application was going to be made. 
31.	Looking at the facts and matters relied upon, the most that can be said is that the April 2013 ballot did not produce a 75% majority in favour of the equality of apportionment; the first application was issued without any consents having been obtained; the subsequent “consents” were to wholly defective wording which would not have carried out the purpose enunciated by the previous ballot and also the covering letter and in any event were not treated as sufficient by the F-tT hearing that application (see paragraph 11 of its decision cited above); whilst the ex post facto “consent” to the first application might be treated as consent of 75% to the principle of equality, it can not be a consent to the second application because there is no evidence that the parties concerned, apart from the applicant company, even knew that a second application was to be issued; further, even in apparently straightforward cases (not that variations to leases are ever straightforward – vide the first application), lessees should be given an opportunity of considering and if so consenting to the proposed wording. 
32.	In conclusion, in my judgment, using what had gone before the issuance of the second application is artificial, using so-called consents to something which did not carry out the intended purpose for a purpose for which they were never intended. The fact that the appellant did not object on the ground he is presently appealing to the legitimacy of the first application is not in point. 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”.
33.	I therefore allow this aspect of the appeal.
34.	The final matter to deal with is whether an order should have been made under section 20C of the Landlord and Tenant Act 1985 which enables the F-tT and this Tribunal disallow the recovery of costs in that they are “not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the tenant or an other person or persons specified in the application” if it considers same to be “just and equitable in the circumstances”: sections 20C(1) and (3). 
35.	In my judgment, where an applicant on not one but two separate occasions issues applications to vary leases which are defective on such a mundane level as these were it is just and equitable that so far as the respondent to each application and the appellant in this, that is Mr Simon, the costs of the applicant company in relation to both applications and the attendant appeal should not be regarded as relevant costs and should be prevented from recovering them from Mr Simon.
36.	So far as the first application is concerned, had the proposed variation been granted it would not have carried the apparent intent of equality of apportionment. That was not the fault of the appellant but of the applicant. It is in my judgment quite striking that consent was obtained from lessees on the footing that it would vary the leases as apparently desired when it would not. So far as the second is concerned, it is plain that the applicant was aware of the requirement for consent and indeed had the assistance of solicitors but, for reasons best know to itself and wholly unrelated to the appellant, it took no steps to comply with the requirements of section 37(5). 
37.	I therefore allow this aspect of the appeal and order that the applicant company be debarred from treating any of the costs of and associated with either application (including this appeal) as “relevant costs” and recoverable under the service charge from Mr Simon. 
								Dated: 16 September 2015

								His Honour Judge Gerald