Challenging Administration Charges under a lease – A warning!

The recent case of Avons Freehold Ltd v Garnier [2016] UKUT 477 (LC) considered whether an amount paid by a leaseholder for granting retrospective consent to alterations had been agreed by the leaseholder or whether it remained open to the First Tier Tribunal (“FTT”) to determine the reasonableness of the charge.

Mr Garnier subsequently applied to the FTT to determine whether an administration charge was payable and if so, how much. The FTT held that the payment of £6,200 was made under duress and that there had been no agreement by Mr Garnier.

Mr Garnier owned the long lease of a flat at 43 Fore House and carried out alterations to the flat without the prior consent of the freeholder, Avons Freehold Ltd.Mr Garnier subsequently applied to the freeholder for retrospective consent (as he wished to sell the flat). The freeholder agreed to grant consent although it demanded a charge of £5,000 together with payment of its legal costs of £1,000 plus VAT.Mr Garnier initially objected to the amount demanded by the freeholder. However due to the pressure he was under to complete the sale of the flat he sent an email to the freeholder saying "that's fine" and made the payment of £6,200.

Mr Garnier subsequently applied to the FTT to determine whether an administration charge was payable and if so, how much. The FTT held that the payment of £6,200 was made under duress and that there had been no agreement by Mr Garnier. Accordingly the FTT had the jurisdiction to determine the reasonableness of the administration charge and reduced the amount payable to £1,500 plus VAT.

The freeholder appealed the decision to the Upper Tribunal ("UT") which held that the FTT had wrongly applied the relevant law, that there was no duress and that Mr Garnier had agreed to pay the amount of £6,200. The UT commented that simply making payment would not have amounted to an agreement or an admission as to the reasonableness of the charge. Alternatively by making payment under protest would also have preserved the jurisdiction of the FTT to determine the reasonableness of the charge.

The case highlights that (a) where a lease requires prior written consent to alterations there is no obligation on the landlord to grant retrospective consent, (b) any charge for consent would be an 'administration charge' within paragraph 1(1) of schedule 11 to the Commonhold and Leasehold Reform Act 2002 and must therefore be reasonable; and (c) a leaseholder must be careful not to inadvertently reach an agreement with the landlord if he/she wants to preserve the jurisdiction of the FTT to determine the reasonableness of the charge.

For more information please contact Adam King at [email protected]rtner.co.uk.