[2024] UKUT 56 (LC)

The FTT was wrong to hold that the appellant could not apply to the FTT for a dispensation prior to registration of its title

The FTT said:

“16.

By s27(1) Land Registration Act 2002 title to registered land does not pass until registration which means that at the time when the Applicants carried out the work at the property, they were not the legal owners of the property. They owned only an equitable interest which would not entitle them to enter and do works on the property without the legal owner’s permission nor to serve a s20 notice or commence legal proceedings in their own name. There is no evidence that they had either sought or obtained the legal owner’s permission before carrying out the works.

17.

The Tribunal is not impressed by the Applicant’s arguments that as equitable owners of the property the Applicants were entitled to do the works without consent of the registered proprietor.

18.

It appears therefore that the Applicants had no locus standi either to do the works or to make a s20ZA application prior to their registration of title on 07 January 2022 by which time the works had been completed It is noted that the Applicant’s application is dated 31 January 2023. They are therefore making an application retrospectively to dispense with consultation for works which they

carried out to a property when they did not own it. The Tribunal cannot condone this action.”

At its paragraph 25 the FTT added that it could not “consider giving a retrospective dispensation in relation to a property which the applicants did not own at the time when the works were carried out.”

These paragraphs demonstrate a misunderstanding of the law by the FTT.

There is almost invariably a gap – known as the registration gap – between the completion of a purchase of land by the execution and delivery of a transfer, and its registration at HM Land Registry. The length of the gap will vary with HM Land Registry’s workload, and with other factors such as the need to answer requisitions. But there will always be a gap, and until the purchaser’s title is registered, as the FTT said, the legal estate does not pass to the purchaser.

During the gap the vendor holds the legal title on a bare trust for the purchaser. As a bare trustee the vendor has no power to make decisions about the property and must act at the direction of the purchaser.

Section 24 of the Land Registration Act 2002 says:

“A person is entitled to exercise owner’s powers in relation to a registered estate or charge if he is-

(a)

the registered proprietor, or

(b)

entitled to be registered as the proprietor.”

The practical effect of that is well known to anyone who has bought a house and to conveyancers: on completion day the transfer is signed and dated, the keys are handed over, and the purchaser moves. The property belongs in equity to the purchaser, and to say that at that stage it is not the owner of the property both flies in the face of everyday reality and betrays a failure to understand equitable ownership. True, there are just a few things the equitable owner cannot do in the registration gap, such as giving notice to quit; but entering the property is not one of them.

As I said above the upper floors of the property were subject to long leases, and the appellant had vacant possession of the commercial units on the ground floor. It was entitled to enter the ground floor at will; so far as the long leasehold property was concerned it was able to exercise whatever rights to enter were reserved to it, as landlord, by the leases. Equally it took on, at completion, all the landlord’s obligations to maintain the property, and took the benefit of the tenant’s covenants to pay the service charge (section 3 of the Landlord and Tenant (Covenants) Act 1995, codifying the common law of privity of estate).

So the appellant’s right to take possession of the property and carry out the work cannot be in doubt.

Turning to ground 2, equally there can be no doubt about its standing to apply for a dispensation under section 27A of the 1985 Act. Mr Auld pointed out that section 30 of that Act states that for the purposes of the service charge provisions a landlord “includes any person who has the right to enforce payment of a service charge”, and that that provision although intended for the protection of management companies is also apt to cover an equitable owner. I would put it more strongly than that; the owner of the property, albeit in equity and not yet at law, is the landlord. Section 18 of the 1985 Act defines service charges by reference to a landlord’s costs, and an unregistered purchaser, for whom the legal owner holds on a bare trust, is the landlord in all senses relevant to the recovery of service charges imposed for the recovery of the landlord’s costs.

Grounds 1 and 2 succeed.

Can a lack of urgency be a reason to justify the denial of an application?

Was the FTT wrong to refuse to grant dispensation where it found there wa no prejudice?

In the course of the hearing the judge said to Ms Meigh:

“We need to see that these works were so urgent and immediate that they had to be done before you could, possibly, even send one letter to the respondents.”

On the basis of that idea the FTT then subjected Ms Meigh to a cross-examination lasting some hours. I have quoted above (my paragraph 23) what the FTT said about urgency in paragraph 19 of its decision. Its thinking is further elaborated in paragraph 13 of its refusal of permission to appeal:

“[In its grounds of appeal] the Appellant asserts that the lack of prejudice to the Respondents effectively precludes the Tribunal from denying the grant of the order to the Appellant. Lack of prejudice is an important factor which the Tribunal takes into account on exercising its discretion. It cannot however dominate in a situation where the basic right to an order has not been established. The Tribunal re-emphasises that grant of a dispensation order is not merely a rubber stamp available on payment of a small fee.”

The idea that if the works were not urgent the appellant had not established the “basic right” to a dispensation is a misconception. There is no requirement of urgency in section 20ZA. Nor, for that matter, is there a “basic right” to a dispensation; it is a matter of discretion; but to impose a precondition that is not in the statue is to exceed the bounds of that discretion.

The Supreme Court in Daejan has made it clear that whether there was prejudice to the tenant is “the main, indeed normally, the sole question” for the FTT. The only mention of urgency in Daejan is in paragraph 56 where urgency is given as an example of a reason why a landlord might want to apply for dispensation before doing the work. That urgency is not a pre-condition for dispensation is abundantly clear from Daejan, and should be equally clear from decisions of this Tribunal (such as Marshall v Northumberland & Durham PropertyTrust [2022] UKUT 92 (LC) andLambeth LBC v Kelly [2022] UKUT 290 (LC))

Whether or not the FTT was right to find that the works were not urgent is not directly in issue in this appeal, although I comment on it further under ground 5. It was clearly wrong to hold that lack of urgency can be a reason to justify the denial of a dispensation.

The absence of a requirement of urgency does not make dispensation “merely a rubber stamp available on payment of a small fee”. The FTT was perhaps concerned that if dispensation is too easy a landlord might make a deliberate decision to go ahead without consulting and then seek dispensation, but that is an unrealistic concern. An application to the FTT for a dispensation is not cheap; it costs not only the FTT’s fee but also the time and (usually) legal fees incurred in making the application, together with the expense of complying with the FTT’s directions and attending the hearing. A conscious decision to go ahead without consultation and then seek dispensation would be a high-risk strategy; if the failure to consult is found to have prejudiced the tenants the consequences could be seriously expensive. The penalty for not consulting, in terms of the restriction of the right to recover service charges, is severe and there is no need for the FTT to create further hurdles for the landlord to surmount.

As to the fourth ground, as I said above (paragraph 30) the FTT found as a fact that there was no prejudice to the tenant arising from the failure to follow the consultation process in full or at the proper time. The respondents did not suggest in the FTT that there was any prejudice. In their statement of case in the appeal the respondents said that they were prejudiced by “criminal theft and damage” carried out by the appellant. No evidence of such was produced in the FTT, and there was no finding to that effect by the FTT. The respondents made various allegations to the FTT about the necessity for the work and the quality of work done, but again produced no evidence.

Therefore in view of the lack of prejudice to the tenant arising from the failure to consult properly it is impossible to see any reason why dispensation was not given.

Grounds three and four therefore succeed; the FTT was wrong to regard urgency as a precondition to dispensation, and in light of the lack of prejudice to the respondents it should have granted one.

Those four grounds together mean that the appeal succeeds and the FTT’s decision is set aside.

That makes it unnecessary for me to deal with the sixth ground of appeal, which arose only if the Tribunal had found that the FTT was correct to find that the appellant was not entitled to work on the property without the vendor’s consent after completion of its purchase and before registration.

Findings of fact

Although the points raised under this ground make no difference to the outcome of the appeal, they are points that cause the appellant concern and it is entitled to a decision on them. There are three findings of fact that the appellant seeks to challenge. The Upper Tribunal will not normally interfere with findings of fact, because the FTT saw and heard the witness and was in the best position to decide; but it will do so if the appellant can show an error of law or an irrationality, such as a finding made against the weight of the evidence. That is what the appellant says happened here.