Karen Bright is a Partner and Head of Litigation & Disputes at Bishop & Sewell explains what you need to consider in terms of the lease when replacing a communal boiler or heating system.
It is now not as common for new leasehold properties to have a communal boiler, hot water or heating system. The current preference tends to be for individual flats to have their own independent systems, with the landlord being obliged to provide a cold water supply to each flat.
Previously, it was not uncommon for large blocks of flats to have a shared facility, the maintenance and upkeep of which was paid for out of the general service charge. But what happens when such a system becomes unreliable or is nearing the end of its expected life span? A landlord will want to minimise the risk of a breakdown, as not only will this cause great inconvenience to the lessees, but the landlord may also face claims for breaches of covenant under the leases. The landlord could (assuming the leases permit it) simply carry out repairs and charge these through the service charge. However, it may be that repair is not an option or the cost of repairing such a substantial item will outweigh the costs of replacing the existing system with a new similar system or even a completely new type of system. With the current trend being for individual flats to have their own independent systems, a landlord may wish to consider individual systems being installed to serve each flat rather than continuing with a communal system.
The starting point is to consider the terms of the leases because if they do not permit the replacement of a communal boiler or heating system or if the landlord’s obligations will change, the leases may need to be varied. A lease is a contract between the landlord and leaseholder, which means that it is not normally possible for one party to vary the terms of the lease without the agreement of the other. Furthermore, the landlord will wish to ensure that its obligations under each of the leases for all of the flats are the same. For example, a landlord would not want to be in the position of being obliged under one lease to provide a communal heating system and under the remaining leases it is only required to provide a cold water supply to the flats. This could expose a landlord to the risk of not recovering all of the costs of the communal system through the service charge. The landlord may therefore wish to vary the terms of the leases at the same time and ensure they are all on the same terms moving forward.
One of the main ways of varying a lease is to apply to the First Tier Property Tribunal under Section 37 of the Landlord and Tenant Act 1987. The requirements are that at least 75% of the total number of registered owners of long leases at the property have consented to the variation. Furthermore, it must not be opposed by more than 10%. Assuming the landlord satisfies those requirements, then it may wish to make an application to the Tribunal. It will need to provide evidence of the agreement of the leaseholders and details of the proposed lease term variations to the Tribunal. If the Tribunal is minded to vary the leases, then the landlord will need to register the variation against all leasehold titles and also its own freehold title. This will then have the effect of being binding on any purchasers of the leasehold and/or freehold titles and also act as a variation to the existing leases.
Before being able to apply to the Tribunal to vary the leases there are a number of important practical steps to consider. A landlord will need to engage with specialist contractors to enable them to draw up a specification of proposed works. It is likely the contractors will need to view the interior of each of the flats to ensure that the works being proposed are viable in all the flats. Once the landlord has the specification and it is certain what is being proposed will work, it is likely it will need to put the works out to tender. Where the likely costs of the works will exceed £250 per flat, the landlord will also have to comply with the statutory consultation procedure under s.20 of the Landlord & Tenant Act 1985. Should it fail to do this it could be restricted to recovering a maximum of £250 per flat towards the proposed works.
A good and experienced managing agent will be invaluable in this type of process. There will be a considerable amount of administrative work in having a detailed works specification drawn up, tendering the works and liaising with the leaseholders. A landlord should also seek early specialist legal advice.
Bishop & Sewell has experience in this area and acted on behalf of the applicant landlord in varying leases to allow for the removal of a communal boiler system and its replacement by way of individual boilers in each flat in relation to [LON/ooBJ/LVT/2018/001 Kenilworth Court, Lower Richmond Road, London SW15 1EN].
