Introduction

The case of Freehold Managers (Nominees) Ltd v. Piatti ([2012] UKUT 241 (LC)) addresses the issue of whether a landlord is entitled to charge tenants a fee for granting consent to sublet under the terms of a lease. The dispute arose between the landlord, Freehold Managers (Nominees) Ltd (the "Appellant"), and the tenants, Martina and Polo Piatti (the "Respondents"), concerning administration charges for consenting to a subletting agreement of the property located at 40 Wetherden Street, London E17 8EJ.

The central issues in this case revolve around the interpretation of lease covenants concerning subletting, the application of the Landlord and Tenant Act 1927, and the reasonableness of administration charges under the Commonhold and Leasehold Reform Act 2002. The Upper Tribunal (Lands Chamber) was tasked with determining whether the landlord could impose a fee for consent to sublet and, if so, whether such a fee was reasonable.

Summary of the Judgment

The Leasehold Valuation Tribunal (LVT) initially ruled that the landlord could not charge a fee for granting consent to sublet, as the lease did not explicitly provide for such charges, and Section 19(1)(a) of the Landlord and Tenant Act 1927 did not confer this right. However, upon appeal, the Upper Tribunal overturned this decision. The High Court Judge, Nicholas Huskinson, held that under Schedule 11 of the Commonhold and Leasehold Reform Act 2002, the landlord is entitled to impose reasonable administration charges for consenting to subletting, provided such charges are reasonable. The Tribunal remitted the case back to the LVT to determine the specific amount, ultimately deciding that a charge of £165 inclusive of VAT was reasonable under the circumstances.

Analysis

Precedents Cited

The Judgment references two pivotal cases: Holding and Management (Solitaire) Ltd v Norton [2012] UKUT 1 (LC) and Bradmoss Limited v Stubbs [2012] UKUT 3 (LC). In both instances, the Tribunal under the presidency of George Bartlett, QC, interpreted Section 19(1)(a) of the Landlord and Tenant Act 1927 as allowing landlords to charge reasonable fees for consenting to subletting, provided such fees cover the landlord's legal or administrative expenses. These precedents were instrumental in shaping the Tribunal's understanding that the Act permits reasonable administration charges, thereby influencing the judgment in favor of the landlord's right to impose such charges.

Legal Reasoning

The core legal reasoning centers on the interpretation of Section 19(1)(a) of the Landlord and Tenant Act 1927 in conjunction with Schedule 11 of the Commonhold and Leasehold Reform Act 2002. The Tribunal identified that an "administration charge" under Schedule 11 includes fees related to granting subletting approvals. Importantly, the term "variable administration charge" applies to fees not specified in the lease or calculated via a lease-specified formula, necessitating that such charges be reasonable.

Judge Huskinson concluded that the initial LVT decision was incorrect in not recognizing the landlord's entitlement to reasonable administration charges. The judge emphasized that unless the lease explicitly prohibits such charges, Section 19(1)(a) allows landlords to impose fees covering legitimate administrative costs associated with granting consent to sublet.

Furthermore, the Tribunal determined that the specific circumstances of the case, including previous failures to obtain consent and the need to investigate complaints, justified a higher administration charge of £165. This amount was deemed reasonable given the additional administrative efforts required.

Impact

This Judgment establishes a significant precedent affirming landlords' rights to impose reasonable administration charges for granting consent to sublet. It clarifies the application of Section 19(1)(a) and Schedule 11 of the Commonhold and Leasehold Reform Act 2002, providing a framework for determining the reasonableness of such charges. Future cases involving subletting consent fees will reference this Judgment to assess whether landlords can lawfully impose fees and what constitutes a reasonable amount.

Complex Concepts Simplified

Conclusion

The judgment in Freehold Managers (Nominees) Ltd v. Piatti serves as a crucial affirmation of landlords' rights to levy reasonable administration charges for consenting to subletting under lease agreements. By interpreting relevant statutory provisions and adhering to established precedents, the Upper Tribunal clarified the boundaries within which landlords can impose such fees. This decision not only impacts current landlord-tenant dynamics but also provides a clear legal pathway for resolving similar disputes in the future, ensuring that administration charges are both lawful and justifiably reasonable.