Earlier this year, the Upper Tribunal ("the UT") gave judgment in 56 Westbourne Terrace RTM Company Ltd -v- Polturak & others [2025] UKUT 88 (LC), and allowed a somewhat novel application by a right to manage company ("RTM company") to vary leases to enable it to recover enforcement costs where the leases otherwise failed to do so.

Now, just over 6 months after that decision, the UT has given judgment in another case allowing variations to leases on terms favourable to a RTM company, in the recent case of Eastern Pyramid Group and others -v- Spire House RTM Co Ltd [2025] UKUT 292 (LC). In that case, the UT dismissed an appeal and upheld the decision of the First-tier Tribunal (“the FTT”) allowing the variation of leases to enable the RTM company to raise on-account service charge demands in order to effectively discharge its repairing obligations.

Background

Spire House in Lancaster Gate is a striking property made up of 23 flats, an enclosed garden and most notably, a Victorian church tower and spire. The freeholder, Eastern Pyramid Group Corporation SA, held the freehold of the flats, a 999-year lease of the tower and a 125-year of the garden.

Following an initial notice in 2019 and subsequent opposition from the freeholder and others, Spire House RTM Co Ltd (“the RTM”) acquired the right to manage in February 2022.

Shortly afterwards, it became clear that the tower was in urgent need of works to prevent falling masonry. Costs were estimated at around £450,000 for emergency repairs and up to £2.3 million for full remedial works. With service charge arrears exceeding £200,000 and only £110,000 held in the reserve fund, the RTM was far short of the amount needed to carry out the works.

The FTT Application

Although the leases did permit certain on-account service charge demands to be made, such costs were capped at a level which meant that the landlord, and therefore the RTM, had to forward fund the majority of repair costs and then recover from the leaseholders at the end of the financial year.

Faced with the substantial cost of the required works, the RTM applied to the FTT under Section 35 of the Landlord and Tenant Act 1987 (“the 1987 Act”) to vary the leases so that it could demand the full anticipated costs of the works in advance.

The freeholder and two leaseholders opposed the application, arguing that the RTM should be required to forward fund repairs just as the freeholder had previously done.

The FTT disagreed and found that the relevant provisions meant that the leases failed to make “satisfactory provision” for the recovery of the expenditure of the RTM in the circumstances, and made an order varying the leases.

The UT Appeal

The freeholder and the two leaseholders appealed to the UT arguing that a lease could only fail to make “satisfactory provision” if its terms created a serious defect, for example one affecting health and safety. They sought to rely upon the Nugee Committee Report of 1985 which had originally recommended the creation of the 1987 Act.

They also argued that the earlier case of 56 Westbourne Terrace RTM Company Ltd -v- Polturak & others [2025] UKUT 88 (LC), which had adopted a more flexible approach to lease variations, was wrongly decided. In that case, reported in our Legal Update here, the UT made orders varying the relevant leases under Section 35 of the 1987 Act to enable enforcement costs to be recovered by the RTM and set out the questions the FTT should consider when faced with an application under Section 35.

The UT dismissed the appeal.

Whilst the UT accepted that the Nugee Committee Report 1985 had recommended a variation power to deal with leases with serious defects, it noted that Parliament ultimately had not used that language when enacting the 1987 Act. So the UT held that the approach in 56 Westbourne Terrace should be followed. Accordingly, the FTT was correct to conclude that the failure to allow for sufficient sums to be paid on-account as service charges was something which made the leases unsatisfactory and to allow the variation.

Practical Consideration  

It is notable that the Tribunals appear to be taking a practical approach when considering an application under Section 35 of the 1987 Act, seemingly asking: does the lease enable the landlord/RMC/RTM to discharge its obligations effectively?

If you are an RTM company (or indeed a landlord or RMC), it would be wise to review the provisions of your leases (with the assistance of a specialist lawyer) and consider making application under Section 35 where the leases fall short of making “satisfactory provision” to enable you to discharge your obligations effectively, or fail to make adequate provision for the recovery of costs.  

Disclaimer

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