The judgment recently handed down by the Court of Appeal in Whitehall Court London Limited v The Crown Estate Commissioners will be of interest to anyone in the field of leasehold enfranchisement because it provides, amongst other things, clarity as to the extent of the valuation provisions in the Leasehold Reform, Housing and Urban Development Act 1993 (“the Act”).

In this particular case the valuation process for a lease extension was complicated because the headlease required payment of a rent to the freeholder worked out as a percentage of the headlessee’s total income from the block above a certain fixed sum.

The rents on all unextended leases of flats in the building doubled in 2029 taking the total income above the fixed sum.

When valuing the loss in value to the freehold and headlease respectively resulting from the grant of a new lease of the subject flat, the valuers needed to know if they were to treat as certain that the rents of all the other flats would double in 2029, or should allow for potentially diminishing rents due to future lease extensions under the Act.

The Court of Appeal therefore had to decide the extent of the no-Act assumption.

Deciding the issue in the freeholders favour the Court held that the “no-Act” assumption on lease extensions extends not only to the flat but the block containing the flat.

The Court also considered whether the headlessee had to include payments received from transactions entered into in breach of covenant when accounting for income received.

Giving the lead judgment Lord Justice Floyd answered this issue in the affirmative. The Court held that the parties would have understood that, where a breach of covenant occurred, the freeholder could waive the breach, thereby making the transaction lawful.

Adam Palmer

Solicitor

Colman Coyle were recently instructed to defend an application brought by two tenants for a determination of their liability to pay and reasonableness of certain service charge items in the Property Chamber, First-Tier Tribunal. The application was brought against a background of a series of earlier applications made by the same tenants in previous years involving the same service charge items and in circumstances where the service charge items have been paid by all the other tenants.

Colman Coyle successfully obtained a determination in favour of its client in respect of which the tenants were required to pay all of the contested service charge items and as a result of this, the Tribunal actively invited an application to be made for costs pursuant to Rule 13 of the First-Tier Tribunal Rules.

Colman Coyle are pleased to report that they subsequently obtained a Costs Order against the tenants to pay a significant proportion of their client’s fees.

Whether tenant or landlord a party should think carefully before going to litigation and should seek professional advice. Where a party acts unreasonably in bringing or during the course of proceedings this is not without risk and they may subsequently find themselves facing a significant costs order.

If you are a landlord or a managing agent and you are experiencing difficulties recovering service charges from your tenants or, alternatively, if you are a tenant and you want to challenge your service charge items, you should contact Mr Adam Palmer on 020 7354 3000 or adam.palmer@colmancoyle.com.

Adam Palmer

Solicitor

In the recent decision of COS Services Limited -v- Nicholson [2017] UK UT 0382 the Upper Tribunal (Lands Chamber) dismissed a landlord’s appeal against a decision of the First Tier Tribunal concerning insurance premiums charged to tenants under the terms of their leases.

The decision should be of interest to landlords and tenants alike because the Tribunal held that in determining the reasonableness of an insurance premium whilst it would not be necessary for a landlord to show the insurance premium is the lowest that can be obtained in the market, a landlord is expected to explain the process by which a particular policy and premium have been selected with reference to the steps taken to assess the current market.

Further still the Tribunal held that whilst a landlord may obtain a block policy which results in a higher premium being charged to the tenant than under an alternative policy, landlords are expected to show that the insurance policy carries with it significant advantages for tenants compensating them for the extra costs.

Colman Coyle regularly act for landlords and tenants on a variety of service charge disputes. If you are a landlord seeking to recover outstanding service charges or, alternatively, a tenant looking to challenge your service charge and you require any advice you should contact Mr Adam Palmer on 020 7354 3000 or adam.palmer@colmancoyle.com.

Adam Palmer

Solicitor