Tribunal Guidance on the Variation of Long Residential Leases
A recent decision on how funds would be raised to repair a church spire forming part of a block of flats has provided guidance on how Tribunals are likely to apply the statutory test for varying long leases under Section 35 of the Landlord and Tenant Act 1987 (“the LTA 1987”). The headline point is simple but significant: the only test that matters is the one in the legislation itself.
In Eastern Pyramid Group Corporation SA and Others v. Spire House RTM Company Limited [2025] UKUT 292 (LC), the Upper Tribunal upheld a First-tier Tribunal decision that Section 35 could be used to vary a clause in a long lease rendered impractical by a change in circumstances.
The lease in question capped reserve fund contributions at 30% of the previous year’s expenditure. For years, that caused no particular issues. However, in 2019 an RTM company acquired the right to manage the block of flats together with managing the service charge fund. As the issue related to the repair and maintenance of part of the structure of the block of flats, this would usually fall within the service charges for which a landlord would seek recovery from the leaseholders. On the wording of the lease, tackling a one-off major works project like repair of the spire would require budgeting service charges and/or reserve funds over multiple years. This would delay vital repairs. The RTM company applied to vary the lease under Section 35 of the LTA 1987.
The Upper Tribunal emphasised the practical purpose behind Section 35: to allow the variation of long leases where they have become unworkable in practice. Crucially, the provision is not confined to defects present from day one. It also applies to problems that emerge during the lease term.
Arguments were raised suggesting the test was whether a provision is “clear and workable”. If so, it was unlikely to be unsatisfactory. Further submissions were made that the grounds of Section 35 were intended to be substantial, as evidenced by the 1985 Nugee Report prior to the enactment of the legislation. However, the Upper Tribunal offered a broader reminder about statutory interpretation in this context. Arguments based on extraneous commentary carried no weight where they strayed beyond the statutory language or considered a different test to that enacted by Parliament. What matters, the Upper Tribunal noted, is the wording of Section 35 itself which states that the statutory test is whether the lease “fails to make satisfactory provision” for the matters set out in Section 35(2)(a) to (f). Accordingly, it allowed the variation of the lease.
This Judgment is valuable because it provides an insight into how the Tribunal will apply Section 35, particularly in circumstances where final decisions on Section 35 are fairly rare. The key here was that the test was laid down in Section 35 itself and that must be followed.
For more information on varying long residential leases, please see our Property Patter Podcast: Service Charge miniseries: Variation of Residential Lease (Episode 3).
“In my judgment the Nugee Report did indeed envisage a strict test for the variation of a lease in the absence of unanimity or majority support; the committee felt that such a step should be taken only if the lease was “seriously defective”, and that is quite a strong term. But that is not the test Parliament enacted. The statutory test is whether the lease “fails to make satisfactory provision” for the matters set out in section 35(2)(a) to (f). The Nugee Report cannot be used to read down the statute.”
