Drafting errors are, unfortunately, commonplace in residential long leases. These could arise as a result of poor forward planning on the part of the lawyer drafting the lease, or simply by reason of human error. A change in circumstances could also mean that the provisions made under the lease are no longer suitable or fit for purpose. Equally, a lease may be perfectly suitable but perceived as unsuitable or ‘unfair’ by a leaseholder who, for example, lives on the ground floor but is required to contribute towards the upkeep of the lift when they have no need to use it.

For any one of these reasons a landlord, management company or leaseholder may look to vary the terms of their lease.

The lease is a binding contract between the parties and as such under common law the Courts and Tribunals are generally unable to interfere and look behind the terms of the lease to vary or imply terms simply because one of the parties has signed up to a ‘bad deal’. However, due to the difficulties amending defective or badly drafted leases, legislation has intervened to give the Tribunal power in some circumstances to grant a variation of the lease terms.

In this Legal Update we look at three ways that a residential long lease can be varied.

1. Variation by agreement

It is always possible for the parties to the lease to agree to vary the terms of the lease by agreement. The agreement must be in writing, signed by all parties, and is generally recorded by way of a Deed of Variation. Some variations will take effect as a surrender of the existing lease and grant of a new lease, for example any variations to the term of the lease. However minor variations, for example to the service charge mechanisms, will not generally lead to the surrender of the existing lease.

A variation agreed orally is not strictly binding, however it could lead to arguments that the specific terms of the original lease varied have been waived or that a party is estopped (e.g. prevented) from relying upon them.

For the most part, a landlord will be unwilling to agree to anything other than very minor variations to the lease. Changes to the service charge mechanism, for example, will often have wider implications and require variations of all leases in the block or development. Variations by agreement are, therefore, often not a viable option.

2. Section 35 - where the lease fails to make satisfactory provision

Under Section 35 of the Landlord and Tenant Act 1987 (“the Act”), an application can be made by any party to the lease to the First-Tier Tribunal for a lease to be varied where the lease fails to make satisfactory provision with respect to one or more of the matters specified within that Section of the Act. This incudes, for example, the repair or maintenance of the flat or building, the insurance or the computation of the service charge. The matters specified in Section 35 are exhaustive, therefore an application can only be made in respect of one or more of those matters.

This section is commonly relied upon where the service charge apportionments in the lease do not add up to 100%.

Any respondent to a Section 35 application can make a counter-application under Section 36 to vary the leases of other flats having the same landlord, on the grounds that those other leases also fail to make satisfactory provision for the matters referred to in the original application.

3. Section 37 - majority agreement

Under Section 37 of the Act, an application can be made by the landlord or the lessee to the Tribunal to vary more than one lease where the object to be achieved by the variation cannot be satisfactorily achieved unless all the leases are varied to the same effect.

The restrictions of Section 35 do not apply so there is no need to establish that the existing leases do not make satisfactory provision and the variations sought can extend beyond the matters specified in Section 35. 

An application under Section 37 can only be made if :-

• In a case where the application is in respect of eight or fewer leases, all, or all but one, of the parties concerned consents to it; or

• In a case where the application is in respect of more than eight leases, it is not opposed for any reason by more than 10% of the total number of the parties concerned and at least 75% of that number consents to it.

The ‘parties concerned’ includes the leaseholders of each flat and the landlord. So where you have 100 flats held on long leases, there are 101 ‘parties concerned’ (100 leaseholders plus 1 landlord), of which 76 must consent to the application and no more than 10 can object.

Discretion of the Tribunal

Under both Sections 35 and 37 of the Act, the Tribunal has the discretion whether to grant the variations sought. Evidence should always be produced therefore to justify why the particular variations are sought and why the Tribunal should grant the variations.

The Tribunal also has the discretion, if it thinks fit, to make an order providing for any party to the lease to pay compensation in respect of any loss or disadvantage that the Tribunal considers any other party to the lease (or any other person) may suffer as a result of the variation made under Sections 35 or 37.

For more information, please contact Faye Didcote, Senior Solicitor, on 01435 897297 or faye.didcote@kdlaw.com.

Disclaimer

This legal update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole. 

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