UK: Power Of Competent Landlord To Bind Intermediate Landlord

Last Updated: 5 December 2014
Article by Laura Hughes

In the recent case of Howard de Walden Estates v Accordway 1, in which Charles Russell Speechlys acted for the freeholder, the Upper Tribunal confirmed that a competent landlord can bind an intermediate landlord notwithstanding his Notice of Separate Representation, in the context of a claim for an extended lease under the Leasehold Reform, Housing and Urban Development Act 1993.  Conflicting decisions of the First-tier Tribunal had led to uncertainty as to the exercise of that power.

The Act provides that, in relation to such claims, the competent landlord (that is the owner of the freehold or a superior interest sufficiently long to grant a 90-year lease extension)  conducts on behalf of all other landlords all proceedings arising out of the tenant's claim.  The Act also provides that any agreement between the competent landlord and the tenant shall be binding on the other landlords.  The competent landlord has a defence to liability to the other landlords for any loss or damage provided that he acts in good faith and with reasonable care and diligence.

The Act, however, gives intermediate landlords two express rights in this context.  Firstly, the intermediate landlord may apply to a County Court for directions as to the manner in which the competent landlord should act in any dispute.  Secondly, a landlord has a right to be separately represented in any proceedings deriving from the claim, on giving Notice to this effect to the competent landlord and the tenant. 

In this case the sub-tenant claimed an extended lease of a flat in Harley Street.  The claim was admitted but the terms of the new lease were not agreed, so the freeholder applied to the First-tier Tribunal for these to be determined.  The head lessee served a Notice of its intention to be separately represented in those proceedings.  Before the Tribunal hearing the competent landlord and the tenant did finally agree the terms of acquisition and jointly requested that the Tribunal hearing be vacated.  The intermediate landlord declined to give its consent on the grounds that it had not been a party to the agreement as to the terms of acquisition.

On this procedural point the First-tier Tribunal decided that the Notice of Separate Representation "trumped" the right of the competent landlord to agree terms with the Claimant tenant.  On appeal, the Upper Tribunal reversed that decision.  In its view the purpose of the Act was to confer on a tenant the right to extend his lease as swiftly and efficiently as possible.  The Act made it clear that "the points of contact for agreement and dispute resolution are the competent landlord and the tenant.  It is they who are vested with the authority to make decisions and reach agreement ... what is not intended is that the tenant be embroiled in multi-party negotiations".  In these circumstances the rights of the intermediate landlord are deliberately very limited.  If there is a Tribunal hearing, the intermediate landlord has a right to have his say.  If the intermediate landlord is unhappy at the way the competent landlord is responding to the tenant's claim he can seek directions from the Court.  But once an agreement has been reached between the competent landlord and the tenant, the proceedings are over and the intermediate landlord has no further say.

Accordingly, in this case the intermediate landlord was bound by the agreement reached between the freeholder and the sub-tenant, and the First-tier Tribunal proceedings were effectively concluded.

This decision of the Upper Tribunal certainly clarifies the relative powers of the competent landlord and other landlords.  Competent landlords cannot afford to ignore the interests of other landlords.  However, other landlords have no right to delay or disrupt proper negotiations conducted between the competent landlord and the claimant tenant. 

Footnotes

1 [2014] UKUT 0486 (LC)

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