RTM: The Power to Vary Leases

The RTM company acquires management functions, and what it can do is both enabled and limited by the leases. If the leases have problems, it is difficulty for the RTM Company to exercise its management functions. For instance, the terms of the leases may not adequately provide for the recovery of costs of certain maintenance work or the calculation of service charge may be incorrect.

Section 35 of the Landlord and Tenant Act 1987 (the 1987 Act) enables a party to a lease or the RTM company to apply to the Tribunal to vary the lease on the grounds that the lease fails to make satisfactory provision in relation to various specified matters. These include the maintenance and repair of the premises, the insurance of the building or the calculation of the service charge.

The RTM company may, therefore, be able to apply to vary a lease if the service charge provisions in all the leases in a building do not add up to 100%.

However, the lease variation mechanism in the 1987 Act may not apply in all cases. For example, the Tribunal will not vary a term of a lease which is of itself clear and workable, but which no longer works because the RTM has acquired management, (Camden LBC v Morath).

Recommendation

A lease can be varied by agreement. This must always be the starting point.

The RTM company can call an extraordinary general meeting to approve a motion for a deed of variation or can approve a motion at the annual general meeting.

In the absence of 100 per cent support from leaseholders and the landlord, the RTM company should then consider applying to the Tribunal to vary the leases.