[2025] UKUT 88 (LC)

The FTT refused the first of the proposed variations. It considered that it did not have power to vary a lease to introduce a new administration charge because such a variation would not be to the benefit of the respondent to the application.

As an alternative basis of decision the FTT said that, if it did have jurisdiction to vary the lease to introduce a new administration charge, it would not exercise that power in favour of the proposed clause 3(13A). Its reason was connected to the form of the leaseholders’ covenants at clause 3(13) by which they agreed only to pay expenses incurred by the Lessor “of and incidental to” the preparation and service of a section 146 notice. The variation sought by the RTM Company would have allowed it to recover from a defaulting leaseholder expenses incurred “in connection with or in contemplation of the enforcement of any of the Lessee’s covenants.” The FTT refused to vary the lease to allow the RTM Company to recover expenses which the landlord could not have recovered under the original terms.

The FTT also rejected the second variation proposed by the RTM Company, which would have enabled it to recover the cost of proceedings as a service charge expense payable by all of the leaseholders collectively. It decided that it did not have jurisdiction to introduce the proposed alteration under section 35(2)(e), but that it did under section 35(3A). It nevertheless refused to exercise its discretion to make the proposed alteration. It applied what it considered to be the approach of this Tribunal (HHJ Gerald and Mr AJ Trott FRICS) in Shellpoint Trustees Ltd v Barnett [2012] UKUT 375 (LC), at [107], which it described as “the most detailed and authoritative decision under section 35”. I will come back to that decision when I consider the appeal against this part of the FTT’s decision.