[2025] UKUT 292 (LC)

In my judgment the Nugee Report did indeed envisage a strict test for the variation of a lease in the absence of unanimity or majority support; the committee felt that such a step should be taken only if the lease was “seriously defective”, and that is quite a strong term. But that is not the test Parliament enacted. The statutory test is whether the lease “fails to make satisfactory provision” for the matters set out in section 35(2)(a) to (f). The Nugee Report cannot be used to read down the statute.

Nor can the Consultation Paper that preceded the 2002 Act be of any assistance in construing a statute enacted 25 years earlier. The reference to “defective” leases in section 4.2 has no significance.

As to the meaning of “fails to make satisfactory provision” I respectfully agree with the Deputy President’s analysis in 56 Westbourne Terrace, and in particular with paragraphs 112 and 113 of that decision, set out at paragraph 20 above.

In the end neither party laid great weight on Camden v Morath; as the Deputy President said in 56 Westbourne Terrace, the Tribunal’s observation in that case should not be regarded as an exhaustive test, nor as a shorthand or a substitute for what the statute says. Camden v Morath was one of a series of cases (including Cleary v Lakeside Developments Ltd [2011] UKUT 264 (LC) and Triplerose Ltd v Stride [2019] UKUT 99 (LC)) where the lease provided for the tenant to make contributions that were in some way unequal to those made by others; there was no evidence that that arrangement was causing any practical problems and therefore it could not be said that it failed to make satisfactory provision. As the Deputy President said in 56 Westbourne Terrace at his paragraph 72, “Unequal contributions are not enough, but other factors, including an absence of alternative sources of funds to enable A to meet its responsibilities, may combine to undermine the workability of a provision and to render unsatisfactory that which was previously satisfactory.”

The provision under consideration in the present appeal, while clear, is certainly not workable for the respondent because it is an RTM company. It is not that it is, as the appellant puts it, inconvenient; it is unworkable because it cannot (the FTT found as a fact) fund the emergency work.

Ground 2 fails. The words of the statute are not the words of the Nugee Report; Parliament chose a different test. And there can be no doubt that there was jurisdiction to amend this lease in accordance with the statutory provision. The reasons for that can be seen when we look at ground 3.

As to ground 3, I agree entirely with the respondent’s arguments. It is a consistent theme of the Tribunal’s decisions that the identity and nature of the person responsible for the maintenance of the property – in particular if it is an RTM company – is a relevant and significant factor in assessing whether a lease fails to make satisfactory provision as required in section 35. And it is indeed the case that a lease that made satisfactory provision for the recovery of expenditure for many years may be found not to do so because of a change of circumstances. The fact that that change was chosen by the persons concerned – for example, an RTM company legitimately acquiring the right to manage – does not make the provision satisfactory.

So in Cleary v Lakeside Developments Ltd [2011] UKUT 264 (LC) the FTT had varied four leases in a block of six to provide for them to contribute towards the cost of employing a managing agent, where two other leases in that block made that provision. The Tribunal (the President, George Bartlett) allowed the appeal from that decision, and said at paragraph 72:

“… there may be circumstances where the financial position of the lessor may make the absence of a lessee's covenant to pay for the cost of management unsatisfactory. This could be the case, for instance, where there was an RTM company with no other source of income. But evidence would be needed to show that there was a particular need in the circumstances of the case."

That was the basis of the Deputy President’s decision in 56 Westbourne Terrace, where the RTM company needed a provision that the landlord had not needed in order to manage the property.

The intention of section 35 is to resolve practical problems and to ensure that maintenance gets done and is paid for; it would be perverse if the fact that the respondent is an RTM company meant that its practical difficulties were irrelevant so that it could not make use of the legislation.

Nothing in the 2000 consultation paper casts doubt on that. And as to the fact that the proposal at paragraph 14 of that section was not enacted, I agree that in all probability it was not enacted because by the time the amendments to the 1987 Act came to be drafted it was appreciated that it was not needed.

In summary, the FTT’s finding cannot be criticised; the restriction of the interim maintenance charge to half the previous year’s expenditure meant that the lease failed to make satisfactory provision for the recovery by the respondent of expenditure to be incurred by it in carrying out the emergency work on the tower for the benefit of the lessees, because it meant that the respondent could not afford to do the work.