As we have discussed previously, in most long leases (leases for 21 years or longer) a freeholder is entitled to require a leaseholder tenant to obtain consent from the landlord before sub-letting and to require the leaseholder to pay costs in relation to that consent. A tenant is only required to pay to the extent that the fee being charged “for or in connection with the grant of approvals under [the] lease” is reasonable paragraph 3, schedule 11, Commonhold and Leasehold Reform Act 2002.
An application may be made to the Leasehold Valuation Tribunal (LVT) (First-tier Tribunal (Property Chamber) from 1 July 2013) by the tenant or landlord to determine whether the fee being charged is reasonable. However, No application may be made in respect of a matter which has been agreed or admitted by the tenant.
For applications to the LVT (First-tier Tribunal (Property Chamber) from 1 July 2013)generally, see the very useful Leasehold Advisory Service website.
Mr Sachdev was the leaseholder owner (tenant) of one flat in a block which was owned by the freeholder Crosspite Ltd. The lease contained a usual term requiring the leaseholder tenant to obtain consent from the freeholder landlord before sub-letting was allowed, such consent could not be unreasonably withheld. Crosspite Ltd sought to charge £165.00 but Mr Sachdev considered that no more than £100 was reasonable but did accept that a fee was payable. Mr Sachdev made an application to the LVT.
At the LVT hearing, it was held that there was no entitlement under the lease for Crosspite Ltd to make any charge whatsoever for any payment for consent.
Crosspite Ltd appealed to the Upper Tribunal on the grounds that the issue of contractual liability had not been argued by either party and that Mr Sachdev had accepted that a fee was payable (albeit at a lower amount). In any event, it submitted, the right to charge a fee was a permissible condition of giving consent.
The appeal, Crosspite Ltd v Sacheev [2012] UKUT 321 (LC) was allowed. Neither party had argued whether the lease allowed a fee to be charged and Mr Sachdev had accepted that a fee was payable. The LVT had no jurisdiction to consider whether a fee was payable (or not) in these circumstances paragraph 5(4)(a), schedule 11, 2002 Act. It was commented at the end of the judgment by the Upper Tribunal:
It should be noted that this is the fourth recent appeal (cf Fairhold Mercury Limited v Merryfield RTM company Limited 2012] UKUT, LRX/134/2011; Beitov Properties Limited v Martin [2012] UKUT 133 (LC); LRX/59/2011; and Birmingham City Council v Keddie LRX/54/2011) of an LVT of its own motion taking a point or issue not raised by the parties and deciding the case on that basis. In Fairhold and, probably, Beitov the points were within the broad scope of the application. In Keddie and the instant case the issues were outside the broad scope of the application and involve issues which were in effect against not just one but both parties. In all four cases considerable costs have been run up in appealing the LVT. It is hoped that the LVT will hesitate before raising novel points, and if it feels compelled to do so will take care to invite comment on them from all parties before deciding whether it is indeed appropriate or necessary to so and, if so, before deciding the point or issue.
In respect of the £165.00 consent fee being charged, the Upper Tribunal pointed out that the consenting to underletting was somewhat more complex than usual in this case which also involved a retrospective application for consent. In addition, Mr Sachdev had merely asserted that £50 – £100 was a reasonable fee but had provided no evidence to support that assertion. It was held that as there was no evidence to show that the charge was unreasonable, the charge of £165.00 could be made by Crosspite Ltd.
