Lease Variation to address Fire Safety Concerns

This post discusses a recent FTT case, Britannia Village (Nine) Residents Management Company Ltd v Various leaseholders in which an order was made to vary all leases in a block of 119 flats to enable remediation of balconies. The block was originally developed by Taylor Wimpey and the report comments that they are willing to pay for the remediation work, although it was not yet clear whether this would include the cost of work to the balconies as there is uncertainty as to the extent of their statutory liability. No further explanation is given as to this liability; perhaps it is under the Defective Premises Act 1972, although it is worth noting that Taylor Wimpey also entered into a self-remediation contract in March 2023.

In an article published in 2019 I reported (with Philip Morrison)  on a detailed survey looking at how the First Tier Tribunal (FTT) exercises the jurisdiction to vary a residential lease under sections 35 and 37 of the Landlord and Tenant Act 1987. We suggested there that it may be possible to use s 35 to vary leases to help with some of the fire safety problems emerging after the Grenfell Tower tragedy, even though there is a notable reluctance to interfere with contractual bargains. The Britannia Village case illustrates the jurisdiction being used in this way.

The Britannia Village decision has not (at the time of writing) been reported on the government site (a common problem) but the decision and the order are available on the Tanfield Chambers website, together with a note by Robert Bowker and Greg Barnbrook (counsel and solicitor instructed by the applicant). In addition to the application for variation of the leases, the case also involved applications for a determination of the payability of service charges and for dispensation from the consultation provisions. However, these applications were subsequently withdrawn (with the possibility of future reinstatement) and this post therefore only focusses on the aspects that relate to the leasehold variation.

There are two routes to variation using the LTA 1987. Section 35 addresses the problem of ‘defective’ leases – that is, leases which ‘fail to make satisfactory provision’ with respect to one of six specific grounds, including repair or maintenance of the building/flat. Our 2019 study revealed that tribunals approach the issue of what is ‘defective’ narrowly. More recently, Judge Cooke has focussed on the clarity and workability of the lease, stating in The Mayor and Burgesses of the London Borough of Camden v Ms E Morath and Others that ‘the Tribunal will consider whether the wording of the lease as it stands is clear, and whether the term sought to be varied is workable. If it is clear and workable then it is not unsatisfactory’ [16]. Section 37 LTA 1987 is not tied to specific grounds. Rather, the only requirement is that ‘the object to be achieved by the variation cannot be satisfactorily achieved unless all the leases are varied to the same effect’. However, because of this broader jurisdiction, a majority of the parties to the relevant leases must approve. Bowker and Barnbrook explain that in Britannia Village a ‘group of leaseholders opposed significant aspects of the applications’ and the applicant therefore chose the s 35 route rather than risk not getting the majority needed for s 37.

In Britannia Village the problem facing the applicant, a Residents Management Company (RMC), was that it was unclear whether the management company or individual leaseholders were responsible for the work required on balconies, and, if the former, whether the RMC had rights to enter flats to do the work.  It is sadly commonplace to have unclear leases. In Evenlode Tower the Tribunal noted that it was unclear in those leases whether the balconies formed part of the demises; in addition to the lease wording, the Tribunal looked at the practicalities of layout and access in concluding that the parties had intended the balconies to be included subject to the landlord maintaining them [18-21]. A 2017 report by Carr and others highlighted gaps in the law relating to fire doors and fire safety. With respect to fire doors, they indicate that ‘it is often not clear whether or not the door forms part of the demise to the lessee’, and that ‘it is not clear who is responsible for ensuring that the door is made compliant’ with fire safety regulations. The ambiguity over responsibility for compliance of fire doors (but not ownership) has since been addressed by the Fire Safety (England) Regulations 2022 which require responsible persons (as defined there) to undertake annual checks on flat entrance doors (although it is the lease that will – or should- allocate responsibility for any necessary remediation).

In Britannia Village the FTT held that the wording of the leases was unsatisfactory: ‘the leases failed to make a clear distinction, having regard to the way in which the building and the balconies were constructed, between which parts of the balcony are the responsibility of the landlord and which parts are the responsibility of the leaseholders’ [24]. In addition, the management and repairing obligations for the balconies were split between the management company and individual leaseholders: this was, according to the FTT, ‘impractical and unsatisfactory’. Accordingly, the FTT granted an order varying the leases to make it clear that although the balconies are owned by the leaseholders, it is for the RMC to maintain and repair them as this will ‘lead to consistency in management, maintenance and safety’ [24]. This goes beyond simply correcting unclear wording in the original leases: the Tribunal takes account of the fact that ‘a failure to remediate or maintain one balcony could have an impact on other flats or the structure or common parts of the building’ [24] and thus ensures a scheme that is workable is in place.

The variation order in Britannia Village also made clear that the RMC were allowed, if ‘proportionate to do so, to enter upon the Property [the flat and balcony] to carry out any works to repair maintain remediate renew or comply with any statutory duty’. The lack of clarity over whether landlords and managers have rights to enter flats has created difficulties post-Grenfell. The report by Carr and others noted that even the DCLG guidance on the Housing Health and Safety Rating System under the Housing Act 2004 assumed that there is no right of entry for most RTB leases. The report further observed (at p24) that ‘we have seen documents and media which raise concern about landlord and regulator access to properties, particularly where a building is multi-tenured with property owned on a long leasehold’. During the refurbishment of council tower blocks in Oxford, the reluctance of a leaseholder to permit the landlord entry to do planned works led to a High Court decision, Piechnik v Oxford City Council, discussed here. This case accepts that in addition to any express rights to enter, there may be limited implied rights to enter; implied whenever the landlord has a duty to perform a covenant for which access would be necessary, and quite possibly also implied if the lease contains a covenant giving the landlord the power to carry out works. The issue of access will, eventually, be more clearly addressed in relation to building safety issues when s 30C of the Landlord and Tenant Act 1985 is implemented. There is to be an implied covenant, introduced by the Building Safety Act 2022 s 112(2), by which the leaseholder must allow the landlord or relevant person to enter for a ‘relevant building safety purpose’ (inspecting and carrying out works in connection with building safety duties). At the time of writing s 112(2) has not been brought into force.

One of the leaseholders in Britannia Village had argued for qualifications to the variation order, including a limitation that would restrict the recovery of costs by the RMC from the leaseholders to those not recoverable from any other third party. The Tribunal refused to make this qualification, noting that the term ‘third party’ is uncertain as well as expressing doubt as to whether this is permitted by s 35. It was also observed that ‘there is a possibility that a similar provision may be introduced by legislation’. This is, presumably, a reference to the proposed insertion of s 20(D) into the Landlord and Tenant Act 1985 by s 133(4) of the Building Safety Act 2022 that will create a duty for landlords to take reasonable steps to ensure that all alternative avenues of cost recovery have been explored before passing remediation costs on to leaseholders. The government consulted on this in February 2023 but again it has not been implemented.

Given how poorly many leases are drafted, and how limited the landlord’s right to enter usually is, applications for lease variation may be frequent. This requires not only leaseholders and landlords to be involved but also all mortgagees (the Tribunal’s order in Britannia Village notes that all mortgagees had been given notice, and none objected). In addition, changes have to be made to the Land Registry titles for each flat. Recent media stories report the Land Registry having severe delays, sometimes as much as 2 years for an application.

In their note on Britannia Village, Bowker and Barnbrook note that the opposition to the applications meant that there had been several hearings over a two-year period. Sadly, getting buildings fixed is turning into a field day for lawyers and a nightmare for others.