Most residential leases usually contain an obligation to pay an administration charge to the landlord. If you dispute the amount of an administration charge it is possible to the make an application to the First-tier Tribunal (Property Chamber) (FTT) who will then decide whether the charge is reasonable or not and, importantly, whether you should pay it. In some cases you can still dispute an administration charge after it has been paid.
The recent case of Avon Freeholds Ltd v Garnier provides a useful reminder as to what you should do if you want to reserve your right to dispute an administration charge after you have paid it.
What the law says
The Commonhold and Leasehold Reform Act 2002 defines administration charges as charges that are payable by a tenant, in addition to rent, in relation to:
- the grant of approvals under the lease and applications for such approvals
- the provision of certain information or documents
- costs arising from the non-payment of monies due to the landlord
- costs arising from a breach of a the lease
The act provides that any administration charge must be reasonable and must also be accompanied by a summary of the leaseholder’s rights. The charge is not payable until the summary is provided and, if you don’t think the charge is reasonable you can challenge it via the FTT. It is important to bear in mind that you cannot make an application to the FTT if you have either agreed or admitted the administration charge. The act provides that payment of the charge does not of itself signify any agreement or admission in respect of the payment.
The tenant, Mr Garnier, sought retrospective consent from his landlord regarding some alterations that he had carried out to his flat relating to a new shower room. He wanted to sell his flat and the outstanding consent needed to be dealt with before he could exchange contracts with his buyer. The landlord charged Mr Garnier a total of £6,800 (including VAT) for granting consent. Mr Garnier initially protested against the amount but eventually emailed the landlord to say “that’s fine”, and made the payment. Mr Garnier then applied to the FTT disputing the amount of the charge and claiming that he had never accepted it.
The FTT held that the administration charge was not agreed because Mr Garnier had made the payment under duress. Accordingly, it reduced the charge to £1,800 including VAT. The landlord then appealed to the Upper Tribunal (Land Chamber) (UT).
Unfortunately for Mr Garnier, the UT disagreed with the FTT and held that there was no duress and that Mr Garnier had practical alternatives to agreeing the administration charge. The UT found that Mr Garnier had agreed the administration charge by paying it and saying “that’s fine”. Accordingly, the FTT no longer had jurisdiction to decide whether the administration charge was reasonable or not. As regards Mr Garnier’s alternatives, the UT noted that Mr Garnier could simply have reserved his right to make an application to the FTT by doing any of the following:
- Simply paying. This would not have constituted any agreement or admission
- Making the payment expressly under protest and/or expressly reserving the right to invoke the FTT’s jurisdiction
The UT commented that if Mr Garnier had done either of the above the landlord could then have taken a view on whether to grant consent in the knowledge that the tenant could challenge the amount. This might have resulted in negotiations and possibly a reduced charge. Instead, the landlord granted consent under the false understanding that the payment was acceptable.
This case highlights the importance of not doing anything which could constitute acceptance of an administration charge. If you inadvertently agree the charge you will have lost your right to challenge it via the FTT.
It is reassuring to know that simply paying the charge will not constitute agreement but the safer approach would be to make it expressly clear that any payment is under protest and that you reserve your right to challenge it via the FTT. There is certainly no harm in taking this approach and, you never know, the landlord may think twice about charging you the full amount.
Jeremy Crook works in our disputes legal team. If you have any questions about the issues raised in this article or any others get in touch by telephone 0345 450 5558 or email email@example.com