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Section 38 (Court Order to Vary Leases)

Summary

1. This section states that if a Court or Tribunal is satisfied that an Application has been correctly made under Sections 35, 36 or 37 of the Landlord and Tenant Act 1987 then it may make an Order varying the Leases referred to in the Application in the manner stated in the Application.

2. The Court or Tribunal is also given the right to make an Order for a different variation to the one stated in the Application, and it may also choose to apply the variation to some (rather than all) of the Leases mentioned in the Application as it sees fit.

3. Rather make an Order varying the Leases or Leases, Section 38 also states that a Court or Tribunal may make an Order directing the parties to enter into a Deed of Variation varying the Lease or Leases in the manner stated in that Order.

Power to Compensate Leaseholders or Landlords after an Order is made

1. In the event that an Order to vary a Lease is made, the Court or Tribunal may then make a further Order for one party to pay the other compensation for any disadvantage they suffer as a consequence of the variation to the lease.

2. This is an important point for a Leaseholder whose Lease is being varied following an application under Section 35 of the Landlord and Tenant Act 1987. If they wish to receive compensation, they will need to be prepared to make a good case, and provide supporting evidence, in order to convince Court or Tribunal to order a Landlord to pay them compensation in the event that terms of their Lease is varied.

Situations where an Order may not be Order under Section 38

1. Section 38 also lists 5 circumstances in which an Order cannot be made.

2. These circumstances are taken to occur when the variation sought would:

i. Be of substantial ‘prejudice’ to any party (whether or not a party to Application) to the extent that this prejudice could not be adequately compensated by an Order of the Court or Tribunal.

ii. If it would be unreasonable to make the variation in the circumstances for any other reason.

iii. Take away an existing right on the part of a Landlord to nominate an insurer.

iv. Require a landlord to nominate a list of insurers from which a Leaseholder was able to choose.

v. Would require a Leaseholder to choose an insurer other than the one which is specified in the Lease.

Can the Order affect Service Charges bills which have been previously issued?

1. Case Law has established that an order made by a Court or Tribunal can have an effect from a date before an Application under Sections 35, 36 and 37 of the Landlord and Tenant Act 1987 was made.

2. Currently the leading legal authority on this point the Upper Tribunal case called Brickfield Properties Ltd v Botten [2013] UKUT 133 (LC).

Relevant Case Law

See the section of our case law library on Applying to Vary the Terms of a Lease

Click on the link to read more about The Landlord and Tenant Act 1987