Avon Freeholds Limited v Alexander Garnier [2016] UKUT 477 (LC)

Administration Charges

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Summary

No duress had been applied by a landlord on his tenant when the former sought retrospective consent for works undertaken to his property and payment was then demanded for the same. An explicit statement from the tenant that a payment was “fine” constituted an acceptance of the administration charge such that the First Tier Tribunal (Property Chamber) had had no jurisdiction to determine it.

Facts

The Respondent tenant had carried out works to his flat without seeking the Appellant landlord’s consent, as was required under the terms of his lease. He later sought retrospective consent to these to secure the sale of his flat.

The Appellant initially requested payment of a £600 consultation fee, which the Respondent said by email was “fine, thank you.” Following an inspection of the flat, the Respondent notified the Appellant that he had received an ultimatum from the purchasers threatening to pull out of the sale if consent was not obtained that day.

The Appellant made an offer to agree to retrospective consent for a total payment of £1000 legal fees (plus VAT), plus £5000 for the consent itself. The Respondent replied stating that he had been advised to reject such fee for being unreasonable, and making a counter-offer of £1500 plus VAT. In response to this the Appellant stated that it would need to take its own legal advice which would delay the matter. Shortly thereafter the Respondent replied:

“This really does need to be done today (I will lose the sale if we wait until new year), so I will make the £6200 payment now, that’s fine[…]”

Issues

The main issue in the case was whether the FTT had been incorrect in concluding that the Respondent had been under duress and had not ‘agreed’ to pay an administration charge. If so, they had exceeded their jurisdiction in determining the amount of administration charge payable pursuant to paragraph 5(4) of Schedule 11 Commonhold and Leasehold Reform Act 2002 (‘the Act’).

The Appellant relied on a second alternative ground of appeal being that, if there had been duress, then the Respondent had elected to avoid the contract in applying to the FTT for a determination. It was submitted that because the agreement had been avoided, no ‘consent’ had been given for the alterations and the fee was therefore not an administration charge that the FTT could rule on.

The Respondent cross-appealed, submitting that the Appellant had not been entitled to either the £620 consultation fee or the further sum which had been assessed by the FTT. This was on the basis that Appellant had failed to evidence that these charges had been incurred as ‘reasonable and proper legal and surveyors’ fees’ as required under the lease.

First instance

The FTT in considering the evidence had discounted the fact that the Respondent had actually paid the administration charge demanded, as required by paragraph 5(5) of Schedule 11 of Act.

It had concluded that because the Respondent had been under huge pressure to complete the sale of a property, which was subject to the appellant’s consent, he had not reached ‘genuine agreement’ as to the payment of the charge with the appellant. The Tribunal found that the Respondent’s seeking legal advice over the payment showed his dissatisfaction with the same and further found that the payment had been made under duress given the time pressure the Respondent was under to conclude the sale.

As such, the Tribunal concluded that it had the jurisdiction to determine the application. The Tribunal reduced amount payable to the Appellant from £6820 to a total of £1500 (including the £620 already paid), being the sum proposed by the Respondent in his initial counter-offer.

Decision

His Honour Judge Hodge QC accepted the Appellant’s argument that, as a matter of law, there had been no duress in the instant case, as the pressure on the Respondent to accept the charge had been effectively self-imposed. The Respondent could have applied for consent before undertaking the works, or even applied for retrospective consent in good time thereafter, but instead had waited until he was under pressure from an imminent exchange deadline.

The judge therefore concluded that the FTT had wrongly applied the relevant law in making a finding of duress, as there was no illegitimate threat or other pressure applied to the Respondent. The FTT had therefore had no jurisdiction to determine the application.

Although not required, for completeness HHJ Hodge QC also considered the second ground of appeal, and cross appeal.

The former was rejected on the basis that on a true construction of the lease, the payment would still have been ‘for or in connection with the grant of approvals under [the lease], or applications for such approvals’, under paragraph 1(1)(a) of Schedule 11 of the Act.

The cross appeal was rejected on the basis that the Respondent had, again, agreed to the initial fee by saying it was “fine”, and agreed to the further payment as ordered by the FTT in his counter-offer, where he had said he was “happy to compromise by paying [that sum].”

Comment

The judge’s comments in the decision give guidance as to how a client in the Respondent’s position might better protect their position.

HHJ Hodge QC found that 3 options had been open to the Respondent:

  1. Simply making the payment
  2. Making the payment specifically under protest and/or expressly reserving the right to invoke Article the FTT’s jurisdiction under Schedule 11 of the Act
  3. Agreeing to make the payment.

The Respondent in saying the payment was ‘fine’ had chosen option 3. The judgment suggests that with choice 1 or 2, the Respondent would in fact have been entitled to invoke Schedule 11 to the Act to challenge the amount of payment at the FTT.