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UPPER TRIBUNAL
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UT Neutral citation number: [2013] UKUT 479 (LC)
UTLC
Case Number: LRX/148/2012
TRIBUNALS,
COURTS AND ENFORCEMENT ACT 2007
LANDLORD
AND TENANT – breach of covenant – whether a breach had occurred – LVT finding only
no breach at date of inspection – held on admitted facts breach had occurred
–Commonhold and Leasehold Reform Act 2002 s168 – appeal allowed
IN
THE MATTER OF AN APPEAL AGAINST A DECISION
OF
A LEASEHOLD VALUATION TRIBUNAL FOR THE
SOUTHERN
RENT ASSESSMENT PANEL
BETWEEN Forest House Estates Ltd Appellant
and
Dakhil Allah R Al-Harthi Respondent
Re:
Flat 43
Forest House
1 Russell Cotes Road
Bournemouth
Dorset
BH1 3UB
Before:
Peter McCrea FRICS
Decision
on Written Representations
The following
case is referred to in this decision:
DECISION
Introduction
1. This
appeal is against a decision of the Leasehold Valuation Tribunal for the
Southern Rent Assessment Panel (the LVT) given on 17 September 2012. Forest
House Estates Ltd (the appellant) is the freehold owner of Forest House, 1
Russell Cotes Road, Bournemouth, (Forest House), which includes Flat 43 (the Flat).
The Flat is let on a long lease to Mr Dakhil Allah R Al-Harthi (the respondent).
The appellant had applied to the LVT under section 168(4) of the Commonhold and
Leasehold Reform Act 2002 (the 2002 Act) for a determination that a breach of
covenant had occurred in respect of the flooring within the flat, in that the
respondent had laid wooden flooring, whereas he was obliged to lay and maintain
carpet and underlay.
2. The LVT
inspected the Flat on 17 September 2012, by which time carpeting had
been laid, and decided that there was no breach of covenant, or if there had
been a breach it had been remedied by the time of the LVT’s inspection.
3. The appeal
is brought as an appeal by way of review with a view to rehearing with the
permission of the Tribunal (Sir Keith Lindblom, President) granted on 13
February 2013 on the grounds that it was arguable that the LVT did not address
the correct question under s168(4) of the Commonhold and Leasehold Reform Act
2002, which was not whether any breach of covenant had been remedied, but
whether a breach had in fact occurred. With the agreement of the parties this
appeal is determined on the basis of written representations.
The relevant statutory provision
4.
So far as material, section 168 of the 2002 Act provides as follows:
“168 No forfeiture notice before determination of
breach
(1)
A landlord under a long lease of a dwelling may not serve a notice under
section 146(1) of the Law of Property Act 1925 (restriction on
forfeiture) in respect of a breach by a tenant of a covenant or condition in
the lease unless subsection (2) is satisfied.
(2)This subsection is satisfied if–
(a) it has been finally determined on an application
under subsection (4) that the breach has occurred,
(b) the tenant has admitted the breach, or
(c) a court in any proceedings, or an arbitral
tribunal in proceedings pursuant to a post-dispute arbitration agreement, has
finally determined that the breach has occurred.
(3) But a notice may not be served by virtue of
subsection (2)(a) or (c) until after the end of the period of 14 days beginning
with the day after that on which the final determination is made.
(4)
A landlord under a long lease of a dwelling may make an application to a leasehold valuation
tribunal for a determination that a breach of a covenant or condition in the
lease has occurred.”
The relevant facts
5. From the
statement of agreed facts and issues I take the following facts as the basis of
my decision.
6. Forest House
comprises a purpose built block of 74 flats. Each of the flats is let on a long
lease and most of the tenants, including the respondent, are shareholders in the
appellant company. The lease of the Flat is dated 2 February 2003 and is
between the appellant (the landlord), the respondent (the tenant) and Forest House
(Bournemouth) Management Company Limited (the company) for the purpose of the
covenant to maintain and insure. The term of the lease is from 2 February 2003
to 25 December 3000.
7. The alleged
breach is of the respondent’s covenant in respect of carpeting. Under Clause
3(15) of the lease the tenant covenants to observe and perform the restrictions
and stipulations in the second schedule to the lease. Clause 17 of the second
schedule obliges the tenant “forthwith to provide and thereafter at all times
to maintain throughout THE FLAT (with the exception of the kitchen and
bathroom) good quality carpeting and underlay”
8. On 2 April
2012 the company’s managing agents Napier Management Services Ltd (Napier)
wrote to the respondent stating that they understood the respondent was in the
process of having wooden flooring laid, that the work needed to cease immediately
as it was against the terms of the lease, and that this had been notified to
the respondent’s local representative Mr Yeltsin who had advised that the work
would continue. Napier requested written confirmation of the respondent’s
intentions by return.
9. On 23
April 2012 Napier wrote to the respondent expressing disappointment at not
having received a response or acknowledgement to their letter of 2 April and
again reiterating the request for written confirmation of his intentions by
return.
10.
By a letter of 3 May 2012 the respondent replied to Napier stating that
wooden flooring had been laid over the original installation, plus additional
insulation, and that it would subsequently be 95% covered by good quality rugs.
11.
Apprehending that the respondent’s letter of 3 May 2012 was an admission
of a breach of covenant on 22 May 2012 the appellant served notice on the
respondent under section 146 of the Law of Property Act 1925 notifying the
respondent that there had been a breach of covenant and requiring the respondent
to remedy it within a reasonable time.
12.
The appellant then had second thoughts. It considered that the
respondent’s letter of 3 May 2012, whilst admitting wooden flooring had been
laid, was not an admission of a breach of covenant as the lease does not
contain a covenant not to lay wooden flooring. The covenant is to provide and
thereafter at all times maintain throughout the Flat (with the exception of the
kitchen and bathroom) good quality carpeting and underlay and that there is a
regulation that floors must be covered with fitted carpets and underlay and
sound board insulator with the exception of kitchens and bathrooms. Concluding
that there was no admission by the respondent of a breach of this covenant the
appellant applied to the LVT on 27 June 2012 for a determination under section
168(4) of the 2002 Act that a breach of covenant had occurred in this respect.
13.
By letter dated 12 July 2012 the respondent wrote to the LVT stating it had
been necessary to totally change the flooring of his apartment. This had been achieved
by removing the original carpeting but leaving in place the original underlay,
laying additional underlay then laying wooden flooring on top, on which he
positioned rugs covering some 95% of the floor. This letter contained a denial
that he was in breach of covenant, on the grounds that the floor covering was
much more effective than just underlay and carpets.
14.
The flat was not carpeted on the 3 August 2012 but fitted carpets were
laid to the hall, two bedrooms, lounge and dining room of the Flat some time
after 3 August 2012 and before the LVT inspected the Flat on 17 September 2012.
15.
I infer from the Respondent’s letter of 3 May 2012 that the wooden
flooring had been laid by that date. There was thus a period of 3 months or more
during which the only carpeting was in the form of rugs which left some part of
the wooden surface uncovered.
The LVT’s Decision
16.
Following an inspection of the Flat on 17 September, the LVT found in
its Decision of that date, that:
“ a. The Respondent/Leaseholder’s
letters dated 3 May 2012 and 12 July 2012 appear to acknowledge that wooden
flooring had been laid in the premises
b.
However, at the time of the [LVT’s] inspection, fitted carpets had been
laid in the hall, two bedrooms, lounge and dining room
c.
The [LVT] is unable to make any findings in relation to any floor
coverings in the room which was locked, and which the [LVT] was therefore
unable to inspect
d.
The carpets appeared to be of good quality
e.
Although the [LVT] was unable to see whether there was any underlay
underneath the fitted carpets, the presence of offcuts of carpets and underlay
in one of the bedrooms was an indication that underlay had been laid
f.
Although the floors of the bathroom and kitchen were tiled, the lease
specifically excepts those rooms from the requirement for carpeting and
underlay
g. At the time of
the [LVT’s] inspection there was accordingly no evidence of a breach of
paragraph 17 of the second schedule to the lease”
The Issues
17.
The parties ask the Tribunal to consider two issues;
a)
Whether the LVT addressed the correct question under section 168(4) of
the 2002 Act in determining that a breach of covenant did not exist at the date
of its inspection or whether it should have determined whether or not a breach
had occurred.
b) If the LVT
did not address the correct question under s168(4), whether or not a breach of
covenant had occurred.
18.
I consider it more logical to deal with these in reverse order. If a
breach of covenant had not occurred, the issue of whether the LVT should have
found that one had falls away.
Whether or not a breach of covenant had occurred
19.
The proceedings before the LVT included the issue of whether the laying
of wooden flooring covered with rugs, as opposed to fitted carpets, would be a
breach of Clause 17 of the second schedule of the lease. The proceedings included
discussion as to what constituted carpeting, but the only sensible
interpretation of the clause, given that the tenant had to provide and maintain
carpeting “throughout” (with the exception of the kitchen and bathroom) is that
fitted wall to wall carpeting and underlay was to be provided and maintained,
principally to reduce noise.
20.
From the agreed facts it is apparent that the Flat did not have
carpeting “throughout” from about April 2012 until after 3 August 2012.
21.
The respondent accepted in his letters of 3 May and 12 July 2012 that
wooden flooring had been laid. It is clear from those letters that the
respondent did not, at that point, intend laying fitted carpets on top but instead
intended to, and later had, laid rugs on 95% of the wooden flooring. I find
that this was in breach of the covenant to provide and thereafter at all times maintain
throughout (with the exception of the kitchen and bathroom) good quality carpets
and underlay.
22.
The respondent did not indicate that fitted carpets would be installed.
That they were installed by the time of the LVT’s inspection may have been in
response to the section 146 notice served on 22 May, or may simply suggest that
the respondent anticipated that the LVT would consider the wooden flooring and
rug arrangement to be a breach of covenant.
Whether the LVT addressed the correct question
23.
The issue is whether the LVT should have considered whether there had
been a breach, or whether there was a breach at the time of their
inspection.
24.
In its refusal of permission to appeal to this Tribunal, the LVT gave
further explanation, saying that “the relevant date at which the [LVT] has to
decide whether a breach “has” occurred is the date of the [LVT’s]
determination, and not, as seems to be suggested in the application for
permission to appeal, the date of the application, because only if a breach of
covenant were occurring at the date of the [LVT’s] determination would there be
a breach in respect of which a landlord would be able to serve a notice under
section 146(1) of the Law of Property Act 1925”. This statement is not part of
the LVT’s decision under appeal, but it provides some insight into its
thinking.
25.
The appellant contends that the LVT neither determined that a breach had
occurred nor that it had not occurred at the date of application. Its duty was to
determine whether a breach of covenant had occurred at all, not to determine
whether a breach had occurred at the date of its inspection.
26.
The LVT appears to have accepted that that there had been a breach of
the lease by the laying of wooden flooring, but “however” at the time of their
inspection that breach had been remedied. They seem to stop short of stating
explicitly that there had been a breach.
27.
The appellant refers to the decision of the Tribunal in GHM
(Trustees) Limited v Glass (LRX/153/2007) where the President (Mr George
Bartlett QC) said;
“in my judgement the LVT was in
error in refusing to make a determination that a breach had occurred on the
ground that the breach had been remedied by the acquisition of the landlords of
knowledge on the tenants’ identity. The jurisdiction to determine whether a
breach of covenant has occurred is that of the LVT. The question whether the
breach has been remedied, so that the landlord has been occasioned no loss, is
a question for the Court in an action for breach of covenant”
28.
Whilst that case was in respect of a tenant’s covenant to inform the
landlord of an assignment or underletting, as opposed to the subject covenant
in respect of carpeting, the principle remains applicable. That a breach had
not occurred because at the date of the LVT’s inspection any breach had been remedied
was a decision not open to the LVT.
Conclusion
29.
By fitting wooden flooring with the intention of covering this with
rugs, the respondent was in breach of the covenant in clause 17 of the second
schedule of the lease which required him to provide and thereafter at all times
to maintain throughout the Flat (with the exception of the kitchen and
bathroom) good quality carpeting and underlay. The problem is not the nature of
the flooring or the quality of the rugs, but the failure to cover the floor
throughout the Flat (with the exception of the kitchen and bathroom). The
respondent’s letter of 12 July admits facts which amount to a breach of that
obligation. The breach may have been temporary, and perhaps even trivial, but
it was clearly a breach.
30.
The appellant is correct in arguing that the LVT’s decision is
inconsistent with the reasoning of the Tribunal in GHM (Trustees) Limited v
Glass. The question of whether a breach had been remedied by the time of
the LVT’s inspection was not an issue for determination by the LVT. Questions
relating to remedy, damages for breach and forfeiture are matters for the
Court. The LVT was entitled to record the fact that the breach had been
remedied by the time of its inspection, but that finding was peripheral to its
main task under section 168(4) of the 2002 Act. The LVT should have made an
explicit determination that there had been a breach of covenant,
notwithstanding that the breach had subsequently been remedied at the time of
the LVT’s inspection.
Disposal
31.
The appeal is allowed.
32.
I determine that there was a breach of Clause 3(15) and clause 17 of the
Second Schedule of the lease dated 2 February 2003 by the respondent’s failure
to provide and at all times to maintain throughout the Flat (with the exception
of kitchen and bathroom) good quality carpet and underlay between April 2012
and 3 August 2012.
Dated:
26 September 2013
Peter
McCrea FRICS
