Victory for Hamlins’ Client in the Upper Tribunal provides some much needed guidance for Residential Landlords

Summary

  • In an appeal decision the Upper Tribunal found in favour of Hamlins’ client, Triplark Limited, a landlord of a large residential block in Highgate, in respect of two previously undecided legal issues. (Reiner and Wismayer –v- Triplark Limited [2016] UKUT0524 (LC))
  • The Tribunal found that where a tenant of a flat lease had agreed in her lease not to part with possession of the flat, selling the flat, and moving out amounted to a breach of her obligation. She had allowed her buyer into physical occupation of the flat and had not and did not intend to occupy the flat once she had sold it.
  • A tenant cannot claim that a Right to Manage Company has unreasonably withheld consent to an assignment of the tenant’s lease and proceed with a sale where the company has failed to: a) pass on the application for consent to the landlord; and b) waited 30 days for a response.

Parting with Possession

This case involved an unusual set of facts. The flat had been sold in July 2015 but the Buyer had not been registered as the new tenant at the Land Registry. Due to the way the Land Registration rules work, this means that the Seller is still the registered owner of the flat. In law, an assignment of the lease had not taken place. Under the Land Registration legislation the Seller will continue to hold the flat on trust for the Buyer until the assignment is registered.

The Tribunal found that the Seller had parted with possession. The hallmark of the right to possession is the right to exclude all others from the property in question. Once the Seller had sold the flat she allowed the Buyer into physical occupation of the flat with intention of relinquishing her own exclusive possession of the flat to him. As the Tribunal noted, the Buyer had removed all her possessions and had not been back to the flat since it was sold. The Tribunal found these facts were relevant.

This is an important decision given that the position in relation to a sale of registered land was not previously clear but it arose out of fairly unusual circumstances and will only be relevant where there is a significant registration gap.

RTM Company

In this case the Buyer was also the sole director of the RTM Company. He had deliberately not passed on details of the proposed sale or any application for consent to assign to the landlord as the RTM Company was obliged to do (Section 98 (4) of the Commonhold and Leasehold Reform Act 2002). No licence to assign was completed and the Buyer and Seller proceeded with the sale.

The Buyer and the Seller argued that the RTM Company had unreasonably delayed or withheld its consent and, accordingly, the Seller was entitled to proceed with the transaction under the common law (a well-known remedy for tenants where landlords are unreasonably withholding consent).

However, the Tribunal preferred the landlord’s argument. Until the RTM Company had complied with its statutory obligation to pass on applications to the landlord the RTM Company was not capable of unreasonably withholding consent. As a result the Seller was not entitled to proceed with the transaction.

Key Points

This is an important decision for landlords as the Tribunal has endorsed some fundamental protections which are in place to protect landlords where a right to manage company is managing the building.

Although arising out of unusual circumstances, it is important for both landlords of buildings where the right to manage has been put in place and those advising and setting up right to manage companies to note the following:

  • The statutory duty to pass on applications for consent to assign (as well as underletting, charging, parting with possession, the making of structural alterations or improvements or alterations or use) and wait the required 30 days for the landlord to respond must be complied with.
  • Unless step 1 is followed the RTM Company cannot give its consent or unreasonably withhold consent to the application. This means that the seller will be in breach if they proceed with the sale.
  • Sellers or buyers of flats who are required to obtain landlord’s consent before selling their flat should be aware of the extra time this is likely to involve and should ensure that, when dealing with an application to a RTM Company, they have evidence that the application has been passed to the landlord for consideration and for the required 30 days to have elapsed before they can take any action in relation to the sale.

For further information, please contact the Real Estate Disputes Team at Hamlins.