Case Law

Daejan Investments Ltd v Benson Podcast - PublicIn this podcast Justin Bates and Nicolas Shulman discuss the case of Daejan Investments Ltd v Benson which is a
case about section 20 consultation requirements. Listen using our podcast player:

The Appellant was the freehold owner of the St Clairs Estate in Croydon. The estate comprised both houses, flats and maisonettes. This case concerned a house held under a 999 year lease by the Respondent. The lease was not a happily drafted document. When the Respondent attempted to sell the property in 2007 it became clear that there was doubt as to whether the lease provided for repairs to the foundation of the house and, more generally, whether there was any adequate general repairing covenant.As the property was a house, it was not open to the Respondent to apply to the LVT for a variation of the lease under s.35, Landlord and Tenant Act 1987. Accordingly, the Respondent sought to vary the lease by agreement to deal with these perceived defects. The Appellant demanded – and the Respondent paid - £850 plus VAT, inclusive of legal fees, for the relevant deed of variation. After the execution of the deed, the Respondent applied to the LVT for a determination of the reasonableness of that charge.The LVT held that the charge was an administration charge within the meaning of Sch. 11 Commonhold and Leasehold Reform Act 2002 and reduced the charge to £350. The Appellant appealed to the Lands Tribunal, contending that the charge did not fall within the scope of Sch. 11 or, if it did, that it was reasonable in its amountThe Lands Tribunal allowed the appeal. Administration charges were defined in Sch. 11 as “...an amount payable by a tenant of a dwelling as part of or in addition to the rent which is payable, directly or indirectly(a)     for or in connection with the grant of approvals under his lease, or applications for such approvals,(b)     for or in connection with the provision of information or documents by or on behalf of the landlord or a person who is party to his lease otherwise than as landlord or tenant,(c)     in respect of a failure by the tenant to make a payment by the due date to the landlord or a person who is party to his lease otherwise than as landlord or tenant, or(d)     in connection with a breach (or alleged breach) of a covenant or condition in his lease.”The charge self-evidently could not come within (a), (c) or (d). Nor could it come within (b). That did not cover the provision of documents which amended the parties’ responsibility under the lease but was limited to documents (whether existing or to be created) relating to the lease. Thus, the LVT did not have jurisdiction to consider the charge at all. In any event, the charge had been perfectly reasonable in its amount.

The Commonhold and Leasehold Reform Act 2002 confers on qualifying leaseholders of flats a right to establish and join a “Right to Manage company” (RTM company) which can then exercise the management functions of the freeholder. Since the Companies Act 2006, an RTM company is required to have a governing document, known simply “the articles.” The Right to Manage Companies (Model Articles) (England) Regulations 2009  prescribe the form of articles for RTM companies in England. All new RTM companies are bound by the new articles and all existing companies have until September 30, 2010 to adopt them. The DCLG has also issued guidance on the application of the new regulations.