Administration Charge for consent to sub-let deemed fair

Administration Charge for consent to sub-let deemed fair

In the case of Freehold Managers (Nominees) Ltd V Martina Piatti and Polo Piatti [2012] UKUT 241 (LC), the recent appeal against the Leasehold Valuation Tribunal for the London Rent Assessment Panel (the LVT) succeeded. 
The result of the appeal means that the Appellants’, Freehold Managers, administration charge of £165.00 plus VAT for provision of consent to sub-let is a reasonable charge.
The appeal was submitted because initially the LVT gave a decision that Freehold Managers, as Landlord, could not charge a fee for granting a licence to sub-let to the Respondents, the Tenants.
Freehold Managers hold the freehold of the building containing 40 Wetherden Street (the Property), having acquired it in around 2008.  
The Property was demised, via a Lease for a term of 99 years in 1973, to the Respondents’ predecessor in title, by Freehold Managers’ predecessor in title.  Covenants by the Lessee, contained in that Lease, included:
“(17) Not to transfer assign underlet or part with possession of the demised premises or any part thereof without the written consent of the lessor such consent however not to be unreasonably withheld in the case of a respectable and responsible person.
(18) That the lessee will within three calendar months next after any absolute transfer assignment charge or devolution or his interest under this present lease in the demised premises or any part thereof give notice in writing of such transfer assignment charge or devolution to the lessor or its Solicitor and produce to him the instrument of such transfer assignment charge or devolution and pay to him the fee of three pounds fifteen pence for the registration of such notice”.
Sometime in or around 2000 the Respondents’ predecessors in title assigned the remainder of the term of the Lease to the Respondents who, it appeared, purchased the Property for investment purposes on a buy-to-let basis and had never resided at the Property.
The Respondents, having been advised by their Solicitor that, the terms of the Lease required them to obtain consent for only the first sub-let, were assured that once the Landlord had consented to the first sub-let this consent would cover all future sub-lettings.
Following a succession of assured shorthold tenancies, each running for a term of 12 months, in 2008 the Respondents were contacted by Freehold Managers for confirmation as to occupation of the property and the status of any required consents to sub-let. Further correspondence followed but no further action was taken by Freehold Managers until 2011, when a letter was sent by agents acting on their behalf.
The letter stated that, according to their records, the Respondents appeared to be sub-letting without the Freeholders’ consent and without notice/registration of letting being served, constituting a breach of the terms of the Lease.
Further exchanges of correspondence took place between Freehold Managers and the Respondents where the Respondents were provided with a document entitled “sublet guidelines” which, as well as reminding that the freeholder’s consent was required for sub-letting, stated that there were fees of £260.00, £400.00 or £95.00 payable for the provision of the consent. 
Completing the application form and providing the current tenancy agreement the Respondents forwarded these to the agents with their cheque for £3.15, this sum was the registration sum referred to in Clause 2 (18) of the Lease.  Upon receipt Freehold Managers refused to grant consent and the Respondents made their application to the LVT under Schedule 11 of the Commonhold and Leasehold Reform Act 2002.
The LVT concluded that consent to sub-let must be provided without payment of fees, unless such consent was withheld, reasonably, for alternative reasons (i.e. non-payment of a fee).
The appeal looked at Holding and Management (Solitaire) Ltd v Norton, and following this the decision was taken that the LVT was wrong in deciding the Landlord was “required to grant a consent to a sub-letting without payment”.  With the LVT’s decision found to be wrong Freehold Managers are entitled to charge a reasonable amount for any costs incurred by them in providing consent to the sub-letting of the Property.
Further submissions were later made by the parties with the Respondents arguing that as the tenancy agreements were all granted to the same Tenants the agreement is a renewal tenancy and therefore would not attract the fees listed by the Freehold Managers’ agents.
The case, however, had particular circumstances that required further investigation, including a complaint relating to a dog.  In the circumstances it was held that Freehold Managers had been “put to a substantial amount of work for the purpose of considering the application to sub-let” and it was this that saw the Judge conclude that the £165.00 plus VAT fee was a reasonable charge and was payable by the Respondents.

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