Acceptance of administration charges: just fine

When a tenant stated that a charge made by his landlord for entering into a deed granting retrospective consent to the tenant’s alterations to his flat was “fine”, the Upper Tribunal found that the word “fine” constituted an acceptance of that administration charge and that the First Tier Tribunal (Property Chamber) had had no jurisdiction to determine it.

In the case of Avon Freeholds Ltd v Garnier [2016] UKUT 477 (LC) (31 October 2016), the question to be determined was whether the administration charge had been agreed or admitted by the tenant under the Commonhold and Leasehold Reform Act 2002 Schedule 11 paragraph 5.

The case was heard before His Honour Judge Hodge QC and was an appeal by Avon Freeholds, the freehold owner of 43 Gore House, Drummond Way, London N1 1NR, from a decision of the First-tier Tribunal (FTT) (Property Chamber) reducing the sum payable by the former leaseholder, Alexander Garnier, by way of an administration charge by £5,000 to £1,800 (inclusive of £300 VAT).

The appellant, Avon Freeholds, sought to review the FTT’s decision on the grounds that it wrongly interpreted or applied the relevant law. The respondent was also given permission to cross-appeal the FTT’s decision that the sum of £1,500 (plus VAT) was payable by way of an administration charge. The respondent contended that the appellant had provided no justification for any part of that charge.

In this case, the respondent (the tenant) installed a shower room and new plumbing in his flat. He thought the appellant landlord’s consent was not required under the terms of his lease but he then sought the appellant’s retrospective consent to the alterations in order to sell the flat. The appellant’s view was that the works involved a breach of the absolute covenant against cutting, maiming, or injuring, or making any breach in any part of the structure of the flat, alternatively a breach of the qualified covenant against making any alterations to the flat without the landlord’s consent.

The Head of Developments for the appellant’s group of companies imposed on the tenant a non-refundable consultation fee of £500 plus VAT, which would include a representative of the appellant visiting the property, reporting to the appellant, and responding to the respondent with the appellant’s decision and/or requirements for instruction of a surveyor and/or solicitor. The respondent was warned that that fee was solely for inspection and initial work to assess the scope of the work, and whether the landlord’s surveyor and solicitor would be required to take the matter further. It was made clear that payment of the fee did not guarantee consent. The respondent replied by email confirming that: “That is fine, thank you.”

The sum of £600 was paid and the inspection took place. The granting of consent was vital to the conveyance of the flat and the delay caused the respondent to urge haste. The Head of Developments for the appellant eventually responded that the appellant was willing to deal with the retrospective consent if the respondent agreed to pay (1) the appellant’s legal department’s fee in drawing up the consent order of £1,000 plus VAT and (2) the appellant £5,000 for retrospective consent. The respondent replied by email saying “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”.

At First-tier Tribunal, the court was asked whether an administration charge could be payable and, if so, how much this should be. The FTT concluded that the charge was payable but that the respondent had agreed to make the payments under duress. It was decided that paying them did not mean agreeing to them.

The FTT also decided that it had jurisdiction to address the issue of reasonableness and held that a reasonable amount payable was £1,500 plus VAT, rather than the £6,500 plus VAT charged by the appellant. The appellant appealed to the Upper Tribunal.

The Upper Tribunal agreed that paying the charges did not mean agreeing to them but said that the FTT had applied the law incorrectly and that there had been no duress: the appellant had not threatened the respondent. The tenant could have requested and obtained consent to the works before undertaking them rather than waiting until he was under the time pressure associated with selling the flat. The urgency in obtaining the consent was therefore self-inflicted.

The respondent had not made the payment expressly under protest, or reserving the right to invoke the jurisdiction of the FTT. Rather, by saying in writing that the payment was “fine” he had agreed to the charges and so he could not therefore argue against them on the grounds of reasonableness at a later date. The FTT did not have therefore jurisdiction to determine the reasonableness of the sum as being £1,500 plus VAT. The appellant’s appeal was therefore allowed.

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