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Cash for Consents
Real Insights - Property Update

Real Insights - Property UpdateIssue 16 | February 2017

Date
28 February 2017

James Liffen Legal Director

The recent cases of Avon Freeholds Ltd v Garnier 2016 and No.1 West India Quay (Residential) Ltd v. East Tower Apartments Ltd [2016] EWHC 2438 (Ch) have looked at the impact that Landlord's fees can have upon an application for consent.


Cash for Consents

The recent cases of Avon Freeholds Ltd v Garnier 2016 and No.1 West India Quay (Residential) Ltd v. East Tower Apartments Ltd [2016] EWHC 2438 (Ch) have looked at the impact that Landlord's fees can have upon an application for consent.

Avon Freeholds Ltd v Garnier 2016

The Tenant paid the Landlord a fee of £6,800 for a retrospective consent for alterations. Initially the Landlord quoted £600 to deal with it but the Tenant was selling their flat and asked the Landlord to expedite. The Landlord offered a further £6,200 and, to conclude the sale, the Tenant agreed the charge. Subsequently the Tenant appealed to the First Tier Tribunal (FFT) to recover the payment. 

Normally payment for a licence to alter is an administration charge and the Commonhold and Leasehold Reform Act 2002 provides these are payable only to the extent they are reasonable. The FFT found that £1,500 plus VAT would have been reasonable but the FFT had no jurisdiction to intervene as the fee had been expressly agreed between the parties. Had the tenant stayed silent or reserved their right to query the charge, the FTT would have been able to rule and would have found in the Tenant's favour. It is also worth noting that at the first hearing the FTT ruled that the duress caused by the delay in the sale was enough to void the agreement, on appeal it was ruled that the Tenant had created the situation by failing to apply for consent in the first instance and so the question of duress was irrelevant.

No.1 West India Quay (Residential) Ltd v. East Tower Apartments Ltd [2016] EWHC 2438 (Ch)

The Tenant had requested a licence to assign and, as the lease stipulated that consent could not be unreasonably withheld, the provisions of the Landlord and Tenant Act 1988 applied. The Act provides that where consent for assignment is required a Landlord must grant the application (unless it is reasonable not to) within a reasonable time and subject to reasonable conditions. The Landlord had declined the application as the tenant had failed to:

  • provide a bank reference for the assignee;
  • allow the Landlord to inspect the premises at the Tenant's cost (£350); and
  • provide an undertaking to cover the Landlord's fees (£1250).

The first two grounds were reasonable, however, surprisingly, the third ground was deemed unreasonable because of the amount sought. That one unreasonable ground was sufficient to invalidate the two reasonable grounds. 

Conclusion

Consent applications should not be treated as an opportunity to raise additional revenue. The courts have shown a clear willingness to determine what constitutes a reasonable fee depending on the circumstances surrounding it. Landlords should also check the terms of any agreement carefully.