This appeal from the First Tier Property Tribunal ("FTPT") to the Upper Tribunal concerned the scope and operation of the leaseholder protections provided by Schedule 8 of the Building Safety Act 2022 (the "2022 Act").
The statutory provisions are designed to protect leaseholders under "qualifying leases" from liability to pay some or all of the service charges which would otherwise be due from them as their contribution towards costs connected with "relevant defects" relating to post-Grenfell cladding remediation costs.
The most comprehensive of these protections protects all leaseholders from liability to contribute towards the cost of "relevant measures" if their landlord was "responsible for" the relevant defect. Where the relevant condition is satisfied, leaseholder protection is absolute; however, where the condition is not met, the contribution from leaseholders remains limited to a "permitted maximum".
The protections relate not only to remediation costs but other professional and legal costs.
In an appendix to the Judgment, Martin Rodger KC, as Deputy Chamber President provides detailed guidance on how a FTPT should approach the provision in future cases and so is required reading for practitioners in this evolving area.
Lehner v Lant Street Management Ltd [2024] UKUT 0135 (LC)
What are the practical implications of this case?
The relevant statutory provisions are contained principally in Section 122 and Schedule 8 of the 2022 Act; however, Part 5 begins at section 116 which introduces sections 117 to 125 by explaining that, together with Schedule 8, they "make provision in connection with the remediation of relevant defects in relevant buildings".
Part 5 is supplemented by The Building Safety (Leaseholder Protections) (England) Regulations 2022 (as amended) (the "Leaseholder Protection Regulations").
The Judge also drew specific attention to the deeming provisions of Part 5 in these terms:
"... we draw attention to the fact that in a number of places in Part 5 and in the regulations made under it, Parliament has made use of "deeming" provisions, or presumptions, by which particular facts are assumed to be true unless some condition is satisfied. Usually the relevant condition requires the landlord to take the initiative in providing relevant information, or in requesting that leaseholders provide relevant information known to them. The presumptions operate where the landlord has failed to take the required step, and generally have the effect that information which has not been supplied or requested is assumed to be favourable to leaseholders. Another way of looking at these presumptions is to see them as tools for displacing the usual burden of proof in relation to specific matters; ordinarily the person who wishes to rely on a particular fact is required to prove it, but where one of the presumptions applies certain facts will be assumed in favour of the leaseholder unless the landlord has taken the steps required to oust the presumption. We draw specific attention to this device because these provisions are a trap for unwary parties and decision makers, as this case will illustrate." (emphasis added)
In a strange twist in the case, it was established (on new evidence led by the alleged landlord) that the appellant's true landlord was actually the holder of an intermediate leasehold interest. Technically, that discharged the appeal as no service charge was due to the original respondent (who was not entitled to demand service charge).
However, the Judge (sensibly) proceeded to deal with the issues on the appeal for the eventual benefit of the true parties to the lease.
The identity of the landlord became important in a discussion of whether a certificate was required under Regulation 6 of the Leaseholder Protection Regulations.
The Judge reserved for another occasion the question of whether a certificate was required when the service demand pre-dated the coming into force of the Leaseholder Protection Regulations. The service of a compliant certificate (or the failure to comply) would have provided a rebuttable factual presumption as to the landlord's responsibility for the defects (and as such the availability of the leaseholder protections).
On the evidence available to the FTPT and given the limited scope of the appeal, it was not possible to determine that the landlord was responsible for the defects in a manner that would provide Mr Lehner with the full protections from service charge under the 2022 Act. It remained for Mr Lehner to address that issue on proper evidence in respect of his actual landlord in the future.
The next question was whether Mr Lehner's lease was a qualifying lease for the purposes of the remaining leaseholder protections. The FTPT treated this as Mr Lehner's burden which he had not evidentially discharged. On appeal, it was conceded this was the wrong approach and that Mr Lehner's lease clearly satisfied, as the Judge noted, "the conditions in section 119(2)((a), (b) and (c) ... (i.e. the lease was a long lease of a single dwelling which included a service charge and had been granted before 14 February 2022)."
Further, the Judge noted that the FTPT had failed to consider whether the landlord had taken the steps to establish Mr Lehner's qualification and the provision that provided that a failure to do so would result in the lease being treated as qualifying.
The Judge went onto consider whether the landlord could establish the contribution condition to fix Mr Lehner with liability and while noting that the FTPT approach to the issue was plainly wrong (putting the onus on Mr Lehner), again that issue was left open for future consideration on proper evidence.
The Judge also considered the scope of "cladding system" – an undefined term in the statutory provisions – to reject an argument by the landlord that the replacement of the insulation system between the outer cladding and the building structure was independent of the cladding and thus did not fall within the protections at all.
What was the background?
The FTPT had found that Mr Lehner and a number of other leaseholders were liable for service charges demanded, where the sums, Mr Lehner alleged, included charges for cladding remediation works (and related professional fees) covered by the protections afforded leaseholders by Section 122 and Schedule 8 of the 2022 Act.
The appeal was to decide whether the protections applied and if so to what extent and effect.
What did the court decide?
The Upper Tribunal found as follows:
"121. Our conclusion is that the service charge of £1,244.85 demanded on 8 February 2021, was not payable by Mr Lehner, and will not be payable even if a proper demand is made for it in future. That is for two reasons. First, because the 2021 demand failed to state the name and address of the landlord (referring to Dangate rather than to LCMS) so that section 47 of the Landlord and Tenant Act 1987 meant that the amount demanded was not due. And second, because the work in respect of which the demand was made was "cladding remediation" and, as the owner of a qualifying lease, Mr Lehner has the benefit of the paragraph 8 protection and is not liable to pay such a charge.
122. For these reasons we allow the appeal, set aside the FTT's decision of 12 April 2023, and substitute a determination that no service charge is payable by Mr Lehner in respect of the works."
The Upper Tribunal set out detailed guidance in an appendix to the judgement as to the future consideration and application of the statutory protective provisions which the Judge accurately described as "complex".
Case details
- Court: Upper Tribunal (Lands Chamber)
- Judge: Martin Rodger KC, Deputy Chamber President and Peter D McCrea
- Date of judgment: 17/5/2024
first published by LexisNexis
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