A landlords right to recover costs for dealing with assignments & underlettings

The Upper Tribunal, in four recent decisions, considered the question of costs recovery by landlords when there is no express lease provision for the recovery of costs of dealing with tenants’ applications. It reviewed the effect of section 19(1) of the Landlord and Tenant Act 1927 and Administration Charges provisions in the 2002 Commonhold, etc Act, and it concluded, amongst other things, that reasonable costs may be recoverable by landlords.

Each of the four Upper Tribunal (UT) decisions* involved a lease or leases where landlord’s consent to assignments and underlettings was required, which consent was not to be unreasonably withheld, but where there was no express power for the landlord to charge for considering applications. Disputes arose regarding the landlords’ proposed charges for looking at the applications, as to whether charges could be imposed at all and, if they could, whether the proposed charges were reasonable.

It is somewhat surprising that none of these decisions make reference to the Court of Appeal case of Dong Bang Minerva v Davina (1996). In that case the parties agreed, and the Court accepted, that, despite the absence of any express provision for the landlord to charge for considering a subletting application, the landlord was entitled to ask for an undertaking for reasonable costs before deciding whether or not to give its consent.

If there is an express provision to charge (as there is in most modern commercial leases), then there is no issue, save for the reasonableness of the amount sought.

The UT made it clear that s.19 of the 1927 Act does not preclude the right to charge, but neither does it confer such a right; the right to charge (if not express) arises from the terms of the alienation clause. As for the 2002 Act, the UT said that charges for considering assignment, etc, requests in respect of long residential leases were variable administration charges, the reasonableness of which charges the LVT had jurisdiction to consider.

It should be noted that solicitors’ charges levied under leases not covered by the 2002 Act can be referred to Court for assessment under s.71 of the Solicitors Act 1974 [* Holding and Management (Solitaire) v Norton (2012); Bradmoss v Stubbs (2012); Freehold Managers(Nominees) v Piatti (2012); and Crosspite v Sachdev (2012)]