John Stephenson, senior partner and head of residential property team at law firm Bircham Dyson Bell LLP is warning landlords that failure to comply to the letter with the The Landlord and Tenant Act 1985 could leave them 'hard up' when it comes to the upkeep and repair of buildings leased to tenants.
The warning comes off the back of the ruling on Daejan Investments Ltd Vs Benson where the statutory consultation requirements were not observed in their entirety by the landlord (Daejan Investments) and the liability of the five residential tenants was restricted to £250 each - much less than the £50,000 each that may have been due had the consultation been carried out.
The Court of Appeal concluded that while the financial consequences for the landlord of being unable to recover the service charge fully were significant, this wasn't a relevant factor when deciding whether or not to waive the consultation requirements of the Act.
"The Landlord and Tenant Act 1985 sets out detailed requirements and preconditions which must followed to the letter where landlords seek to recover the cost of works to a property from residential tenants via a service charge," explains John Stephenson.
"In this case, some, but critically not all, of the consultation steps had been followed by the landlord, leaving it with a substantial liability of some £270,000 for the cost of repairs to the building."
"Landlords must take notice of this important ruling and be able to explicitly show that they have taken the correct steps under the 1985 Act - otherwise a court will not forgive them their mistake. Alternatively, a somewhat more straightforward approach is to put money aside each year from service charges into a sinking fund for periodic major repairs and decorations, and thus not let the building get into such a state of disrepair in the first place."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
