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Tribunal has Broad Power to Vary Leases to Achieve Fairness

Georgian HousesThe extent of the discretion of the Leasehold Valuation Tribunal (LVT) to vary the terms of leases to cure defects and achieve fairness between the parties has been clarified by the Upper Tribunal (UT). Emphasising the broad terms of the power contained within section 38(1) of the Landlord and Tenant Act 1984, the UT ruled that it enabled amendments to be made both prospectively and retrospectively.

The landlord of a group of mansion blocks in central London had the right under the various leases to levy service charges on tenants so as to recoup 100% of the cost of maintaining and repairing the buildings. However, after certain tenants exercised their rights to collective enfranchisement and bought the freehold of their flats, the proportion of costs that the landlord could recover under the leases from remaining tenants fell to 85.55%.

The landlord attempted to obtain tenants’ agreement to variations of their leases so that it could resume recouping 100% of its costs. However, after such agreement was not forthcoming, the landlord applied to the LVT. The LVT agreed to vary the leases with effect from the date of the landlord’s application. However it ruled that it had no jurisdiction to back-date those amendments to the date in 2006 when the freeholds were transferred.

Allowing the landlord’s appeal, the UT noted that section 38(1) confers a wide power on the LVT to make such variations as it thinks fit to achieve a just result and contains no bar on the making of retrospective amendments. Observing that tenants had, over an extended period, enjoyed the landlord’s services for less than 100% of the cost of providing them, the UT said that to refuse to back-date the variation of the leases would confer upon tenants ‘an unintended and undeserved windfall’.

Brickfield Properties Limited v Botten. Case Number: LRX/133/2011