Tribunals may impose conditions upon a landlord when granting dispensation from consultation requirements under section 20ZA Landlord and Tenant Act 1985 (Aster Communities v Chapman & Ors [2021] EWCA Civ 660)
Background to the case
Where a landlord is planning "qualifying works", which will result in a spend of more than £250 per leaseholder, it must enter into a legal consultation process as required under Section 20 of the Landlord and Tenant Act 1985.
This case dates back to March 2016 when Aster Communities (Aster), the freeholder of Kingsway Gardens (a development comprising of 5 blocks of flats with 114 flats in total), sent its long leaseholders a notice of its intention to carry out works on the development and subsequent estimates of the works.
The notice detailed numerous proposed works including works to concrete, windows and doors. However, balcony works were not mentioned in the notice or referenced in the original cost estimates sent to leaseholders - although there was provision for this work included in the price specifications which were available for inspection at the time.
(The balcony asphalt replacement works were completed as a result of two flats suffering water ingress caused by the asphalt on their balconies. Aster therefore decided to complete asphalt replacement works on all balconies of the flats.)
In January 2017, Aster made an application to the First Tier Tribunal (FTT) under section 27A Landlord and Tenant Act 1985 for a determination, in relation to on account service charges required from the leaseholders. The FTT found the balcony asphalt works were unnecessary and, in any event, were not part of the section 20 consultation.
As a result of the FTT's decision, Aster made an application for dispensation from the section 20 consultation requirements in February 2019. Several leaseholders objected to the application, stating that the lack of consultation prevented them from being able to obtain expert advice in relation to the necessity of the works, and they had therefore been prejudiced.
What are the key points from the case?
The FTT applied the principles from earlier case law - Daejan Investments Ltd v Benson [2013] - which tested whether the lessees would suffer any relevant prejudice as a result of the landlord's failure to comply with the consultation requirements.
The FTT held that the asphalt works had already been found to be unnecessary and therefore there was a relevant prejudice. As a result, the FTT granted dispensation, but this was conditional on the landlord paying the costs of the lessees in obtaining a report to advise on the necessity of replacing all of the balcony asphalt. The FTT also ordered Aster to pay the respondents' reasonable costs of the application and that the costs of Aster's application should not be recoverable through the service charge.
Aster appealed the conditions imposed upon them to the Upper Tribunal, and then the Court of Appeal. Their appeal was dismissed with the Court of Appeal applying the principles in the Daejan case and the reasoning of the FTT.
What does this recent case highlight for landlords?
This case highlights the importance of completing section 20 consultations correctly from the start, and that landlords need to consider whether their leaseholders are likely to suffer prejudice as a result of the dispensation from consultation requirements prior to any application to the FTT being made.
Dispensation may be an appropriate solution in some circumstances, for example where works need to be completed as a matter of urgency, so there may be no time to consult. However, landlords should be aware of the potential conditions the tribunal may impose when granting dispensation from the consultation requirements. This may be relevant where there is a dispute with leaseholders in relation to the works required.
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