Who is the man in the middle?

Often these leases exist because of the way that buildings were developed or sold off and allow the landlord to pass on the management obligations to a ‘middle man’ who will also normally collect the ground rent from the building and may have a ‘reversion’ (a longer lease than those held by the flats).

When a flat owner claims an extended lease, the ‘man in the middle’ gets a slice of the premium.

The recent case of Howard De Walden v Stella Kateb and Accordway [2014] considers how far the ‘man in the middle’ can go in arguing his corner. In this case, the freeholder and the tenant agreed terms - but the intermediate landlord did not agree.

A First Tier Tribunal (FTT) hearing was scheduled, but the freeholder and the tenant wrote to the tribunal confirming terms were agreed.

In the meantime, the intermediate landlord, sought to argue that the tribunal still had jurisdiction to hear the case and the tribunal held a jurisdictional hearing, determining that it did have the power to hear the case, even though only the intermediate landlord wanted a hearing. The freeholder appealed to the Upper Tribunal which determined that the intermediate landlord could not call for a hearing in her own right.

The 1993 Act gives the competent landlord the power to bind the intermediate landlord. Provided that the competent landlord acts in ‘good faith’ and with ‘reasonable care and diligence’ he is not liable to the intermediate landlord by the exercise of this authority.

Effectively, the only remedy that the intermediate landlord seems to have (if he does not like what the competent landlord is doing) is to apply to court for directions as to how the competent landlord should act under different provisions in the 1993 Act.

What the Kateb case appears to show is that serving notice of independent representation does not give the intermediate landlord sufficient standing to call for an FTT hearing in his own right to determine the premium payable if the competent landlord and the tenant have agreed.

So, as the law currently stands, provided that the competent landlord does not breach his duty to act in good faith and with reasonable care and diligence, he can ‘override’ the intermediate landlord in any tribunal process by agreeing terms unless the intermediate landlord applies to court.

The ‘man in the middle’ in this story (actually a Ms Kateb) has now appealed the case to the Court of Appeal. It will be interesting to see whether the position changes when the case is heard in November.