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UPPER TRIBUNAL (LANDS CHAMBER)   UT Neutral citation number: [2012] UKUT 375 (LC)UTLC Case Number: LRX/44/2011  TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007 LANDLORD AND TENANT – variation of leases – application by landlords and majority of leaseholders for variation of all leases to allow replacement of communal heating system with individual boilers and recovery of management and legal costs through the service charge – appeal against LVT’s refusal to order recovery of management and legal costs variation – whether single or multiple objects of variation – sufficiency of reasons – appeal dismissed – Landlord and Tenant Act 1987 sections 37 and 38 IN THE MATTER OF AN APPEAL AGAINST A DECISIONOF THE LEASEHOLD VALUATION TRIBUNALFOR THE LONDON RENT ASSESSMENT PANEL BETWEEN (1)  SHELLPOINT TRUSTEES LIMITED  (2)  ANSTON INVESTMENTS LIMITED               Appellants -and- (1) JAMES JOHN HENRY BARNETT(2) JEREMY CLYNE(3) KATHERNINE ZOGRAPHOS(4) CONSTANTINE JOHN ZOGRAPHOS        Respondents Re:   Eton HallEton PlaceEton RiseEton College RoadLondon NW3 Before: His Honour Judge Gerald and A J Trott FRICS  Sitting at 43-45 Bedford Square, London, WC1B 3ASon 19 and 20 September 2012 Howard Lederman, instructed by Teacher Stern LLP, for the AppellantsThe Respondents appearing in person © CROWN COPYRIGHT 2012 The following cases are referred to in this decision:Lucie M v Worcestershire County Council and Evans [2002] EWHC 1292Flannery v Halifax Estate Agencies Limited [2000] 1 WLR 377 English v Emery Reimbold & Strick Limited [2002] 1 WLR 2409South Buckinghamshire DC v Porter (No 2) [2004] 1 WLR 1953Thirlway v Troy [2012] UKUT 302 (LC); LRA/57/2012Schilling v Canary Riverside Development PTE Limited LRX/26/2005 (Lands Tribunal)The following cases were referred to in argument:Pepper and others v Appleby Consultancy Limited BIR/00CN/LVL/2007/0001 (LVT)Curtis v London Rent Assessment Committee (1999) QB 92 Baystone Investments Limited v Perkins [2010] UKUT 70 (LC)LB Havering v MacDonald [2012] UKUT 154 (LC)Dixon and others v Wellington Close Management Limited [2012] UKUT 95 (LC)Arrowdell Limited v Coniston Court (North) Hove Limited (2006) LRA/72/2005 (Lands Tribunal) Pittalis v Grant [1989] 1 QB 605   DECISIONIntroduction 1. The appellant landlords, Shellpoint Trustees Limited and Anston Investments Limited, appeal against the decision of the Leasehold Valuation Tribunal (the “LVT”) dated 13 January 2011 (the “Decision”) refusing to order variation of the subject leases to allow recovery of the landlords’ management and legal costs of enforcing divers covenants contained in the leases through the service charge under section 37 and 38 of the Landlord and Tenant Act 1987 (“the 1987 Act”).   2. There is no extant appeal against the principal part of the Decision ordering variations to the leases to permit replacement of the communal boiler system with individual flat boilers and a change to the insurance covenant: the appellants do not pursue their appeal against the insurance variation as they now accept that the LVT ordered what they had asked for.    3. The appellants are together the landlords of the 365 flats comprised within the three blocks known as Eton Hall, Eton Place and Eton Rise all situate at Eton College Road, London NW3 (respectively, “Eton Hall”, “Eton Place” and “Eton Rise”, collectively “the Etons”).   Shellpoint is the freehold reversioner of the majority of the flats (“the Shellpoint flats”); Anston holds a headlease of the remainder (“the Anston flats”).   4. The material covenants of the leases of the Shellpoint flats are in common form, as are those of the Anston flats albeit that their clause numbering and layout is slightly different and they do not have clause 6(8)(b).  For the purposes of these appeals we adopt the approach of the LVT of addressing itself to the sample lease granted on 16 April 1984 by Shellpoint’s predecessor in title, Linthaven Limited, to Jackinstant Limited (“the Shellpoint Leases”) and, where necessary, the sample lease granted on 9 June 1975 by Anston’s predecessor in title, Peachey Property Corporation Limited, to Anthony Rudolf Sascha Suchy (“the Anston Leases”).  “Leases” refer to both Shellpoint and Anston Leases.   5. Two applications, both dated 25 January 2010, were issued to reflect the different reversionary ownerships and leases of the flats by the appellants and, to demonstrate the requisite level of section 37(5)(b) support for the variations, by a total of 299 of the 365 tenants, 96 from Eton Hall, 103 from Eton Place and 100 from Eton Rise.   The rest either opposed the proposed variations, or did not respond to the ballot of all 365 flats conducted shortly before issuance, the results of which were as follows, “S” referring to Shellpoint flats and “A” to Anston flats: ETON HALL ETON PLACE ETON RISE TOTALS S A S A S A In favour 80 16 88 15 84 16 299Against 9 0 4 1 2 1 17Unreturned 8 2 13 4 18 3 48Abstained 1 0 0 0 0 0 1Totals: 98 18 105 20 104 20 365 6. There were pre-trial reviews in both applications on 4 February 2010 at which the LVT consolidated the applications and ordered that any person wishing to oppose the variations must serve a statement in reply setting out their reasons.   7. Despite the number of those who balloted their opposition, only three tenants actively opposed the applications before the LVT: Jeremy Clyne (“Mr Clyne”) lessee of flat 57 Eton Hall and Katherine Zographos (“Miss Zographos”) and her brother Constantine joint lessees of 75 and 76 Eton Hall (all Shellpoint flats) and James Barnett (“Mr Barnett”) lessee of flat 6 Eton Place (an Anston flat) each of whom served statements in reply setting out why they opposed the variations.8. In broad terms, the applications sought variations to the Leases to enable the communal heating and hot water systems to be replaced with individual boilers in each flat with consequential provisions for recovery of those costs through the service charge and what have been described as “non-consequential” variations to the Leases to enable the landlords to recover its costs of enforcing covenants contained in the Leases through the service charge.   9. The only evidence served in support of the applications were two witness statements dealing with the heating and hot water issues and two witness statements explaining the background to the proposals.  One was from Nicholas Goldreich (“Mr Goldreich”) a solicitor and partner in Comptons who had been instructed by New Etons Residents Association (“NERA”), a formally constituted and recognised residents association, and the other from Dr Seth Rankin (“Dr Rankin”), the tenant of flat 73 Eton Rise and a former chairman and committee member of NERA.   10. The hearing before the LVT took place on 19 April 2010 but was adjourned and resumed on 15 and 16 November 2010 by which time the applicants had adduced a further witness statement from Mr Goldreich.  Refinements to the proposed variations appended to the applications were also provided, which were further refined after the conclusion of the hearing by email dated 22 November 2010.  It is this last version of the variations to which we will refer in this decision.   11. The LVT issued its decision on 13 January 2011 and the appellants applied to the LVT for permission to appeal.  The LVT refused the application on 23 March 2011 (the “Refusal Decision”), dealing separately with each of the twenty grounds of appeal raised and to some extent adding to the reasons it had already given in the Decision.   12. On 15 August 2011, the President of the Upper Tribunal (Lands Chamber) granted the appellants permission to appeal because there was a “real prospect of success” and specifying that the appeal would be by way of review.  It should be recorded that permission to apply for permission to appeal out of time was also granted.   Representation13. Before the LVT, the applicants, that is, the landlords and the 299 tenants were represented by Mr Stan Gallagher of counsel who was jointly instructed by the landlords’ solicitors Teacher Stern LLP and the 299 tenants’ solicitor Messrs Comptons (“Comptons”).  The three active respondents represented themselves.  Oral evidence was given by some of the witnesses.14. Before this Tribunal, the appellant-landlords were represented by Mr Howard Lederman of counsel, instructed by Teacher Stern LLP.  The 299 applicant-tenants did not appeal the Decision, were not represented and have expressed no views about the merits of the appeal.  The three active respondents before the LVT are the sole active respondents to the appeal and, as below, represent themselves; Miss Zographos representing herself and her brother.15. Each of the respondents was clearly well-acquainted and fully familiar with the issues relating to the non-consequential variations and well able to advance their arguments in opposition to the appeal.  Indeed, as will become clear, they appeared at times to have a grasp of the issues superior to that of the appellants and at least some of their advisers who did not appear to understand the extent and scope of the new clauses they had asked the LVT for and were asking this Tribunal for.    16. Whilst each of the respondents advanced different arguments, we shall treat their submissions in a composite manner, without distinguishing between them save where necessary.  We do so because the broad thrust of their positions was the same albeit that there were some differences of emphasis, and without intending any disrespect to them.   The legislation 17. Sections 37 and 38 of the 1987 Act permit applications to vary leases where the majority of parties concerned consent.  This is in contrast to the separate and distinct section 35 jurisdiction which permits applications by any party to a long lease of a flat to vary a lease with unsatisfactory repairing, maintenance, insurance, service charge or similar provisions.   18. As Mr Lederman reminded us, the applications were made under section 37 and not under section 35.  It is nonetheless necessary to set out the material parts of both provisions as reference has been made to them.  Section 35 states so far as relevant: “35. Application by party to lease for variation of lease.(1) Any party to a long lease of a flat may make an application to a leasehold valuation tribunal for an order varying the lease in such manner as is specified in the application.   (2) The grounds on which any such application may be made are that the lease fails to make satisfactory provision with respect to one or more of the following matters, namely— (a) the repair or maintenance of— (i) the flat in question, or (ii) the building containing the flat, or (iii) any land or building which is let to the tenant under the lease or in respect of which rights are conferred on him under it; (b) the insurance of the building containing the flat or of any such land or building as is mentioned in paragraph (a)(iii);(c) the repair or maintenance of any installations (whether they are in the same building as the flat or not) which are reasonably necessary to ensure that occupiers of the flat enjoy a reasonable standard of accommodation; (d) the provision or maintenance of any services which are reasonably necessary to ensure that occupiers of the flat enjoy a reasonable standard of accommodation (whether they are services connected with any such installations or not, and whether they are services provided for the benefit of those occupiers or services provided for the benefit of the occupiers of a number of flats including that flat); (e) the recovery by one party to the lease from another party to it of expenditure incurred or to be incurred by him, or on his behalf, for the benefit of that other party or of a number of persons who include that other party; (f) the computation of a service charge payable under the lease…”Sections 37 and 38 of the 1987 Act state:“37.   Application by majority of parties for variation of leases.(1) Subject to the following provisions of this section, an application may be made to a leasehold valuation tribunal in respect of two or more leases for an order varying each of those leases in such manner as is specified in the application.   (2) Those leases must be long leases of flats under which the landlord is the same person, but they need not be leases of flats which are in the same building, nor leases which are drafted in identical terms.   (3) The grounds on which an application may be made under this section are that the object to be achieved by the variation can not be satisfactorily achieved unless all the leases are varied to the same effect.   (4) An application under this section in respect of any leases may be made by the landlord or any of the tenants under the leases.   (5) Any such application shall only be made if— (a) in a case where the application is in respect of less than nine leases, all, or all but one, of the parties concerned consent to it; or (b) in a case where the application is in respect of more than eight leases, it is not opposed for any reason by more than 10 per cent of the total number of the parties concerned and at least 75 per cent of that number consent to it.   (6) For the purposes of subsection (5)— (a) in the case of each lease in respect of which the application is made, the tenant under the lease shall constitute one of the parties concerned (so that in determining the total number of the parties concerned a person who is the tenant under a number of such leases shall be regarded as constituting a corresponding number of the parties concerned); and (b) the landlord shall also constitute one of the parties concerned.38. Orders … varying leases.(1) If, on an application under section 35, the grounds on which the application was made are established to the satisfaction of the tribunal, the tribunal may (subject to subsections (6) and (7)) make an order varying the lease specified in the application in such manner as is specified in the order.   (2) If— (a) an application under section 36 was made in connection with that application, and (b) the grounds set out in subsection (3) of that section are established to the satisfaction of the tribunal with respect to the leases specified in the application under section 36, the tribunal may (subject to subsections (6) and (7)) also make an order varying each of those leases in such manner as is specified in the order.   (3) If, on an application under section 37, the grounds set out in subsection (3) of that section are established to the satisfaction of the tribunal with respect to the leases specified in the application, the court may (subject to subsections (6) and (7)) make an order varying each of those leases in such manner as is specified in the order.   (4) The variation specified in an order under subsection (1) or (2) may be either the variation specified in the relevant application under section 35 or 36 or such other variation as the tribunal thinks fit.   (5) If the grounds referred to in subsection (2) or (3) (as the case may be) are established to the satisfaction of the court with respect to some but not all of the leases specified in the application, the power to make an order under that subsection shall extend to those leases only.   (6) A tribunal shall not make an order under this section effecting any variation of a lease if it appears to the court— (a) that the variation would be likely substantially to prejudice— (i) any respondent to the application, or (ii) any person who is not a party to the application, and that an award under subsection (10) would not afford him adequate compensation, or (b) that for any other reason it would not be reasonable in the circumstances for the variation to be effected.   (7) A tribunal shall not, on an application relating to the provision to be made by a lease with respect to insurance, make an order under this section effecting any variation of the lease— (a) which terminates any existing right of the landlord under its terms to nominate an insurer for insurance purposes; or (b) which requires the landlord to nominate a number of insurers from which the tenant would be entitled to select an insurer for those purposes; or (c) which, in a case where the lease requires the tenant to effect insurance with a specified insurer, requires the tenant to effect insurance otherwise than with another specified insurer.   (8) A tribunal may, instead of making an order varying a lease in such manner as is specified in the order, make an order directing the parties to the lease to vary it in such manner as is so specified; and accordingly any reference in this Part (however expressed) to an order which effects any variation of a lease or to any variation effected by an order shall include a reference to an order which directs the parties to a lease to effect a variation of it or (as the case may be) a reference to any variation effected in pursuance of such an order.   (9) A tribunal may by order direct that a memorandum of any variation of a lease effected by an order under this section shall be endorsed on such documents as are specified in the order.   (10) Where a tribunal makes an order under this section varying a lease the tribunal may, if it thinks fit, make an order providing for any party to the lease to pay, to any other party to the lease or to any other person, compensation in respect of any loss or disadvantage that the tribunal considers he is likely to suffer as a result of the variation.” The case before the LVTIntroduction 19. The applicants were wholly successful in securing all of the variations they asked for to enable the communal boiler system to be replaced with a system providing for individual boilers in each flat and attendant changes to the service charge provisions and also to the insurance covenant, albeit that the LVT amended some of the wording in respect of which no complaint is made.   20. The applicants were wholly unsuccessful in securing the “non-consequential” variations they asked for (other than in respect of insurance) i.e.