[2024] UKUT 56 (LC)

Two areas of law are obviously relevant to this appeal; first, the consultation requirements in section 20 of the Landlord and Tenant Act 1985; second, the provisions for dispensation from those requirements in section 20ZA. Less obviously, we shall have to look at the law relating to the “registration gap”: the period between purchase of the property and the registration of the purchaser as proprietor at H Land Registry. I defer consideration of the latter point until the relevant part of the decision, and set out here just the law relating to consultation and dispensation.

Section 20 of the Landlord and Tenant Act 1985, together with the Service Charges (Consultation Requirements) (England) Regulations 2003, created a statutory procedure for tenants to be consulted before major works are undertaken which they will have to pay for in the service charge.

The consultation procedure must be followed before “qualifying works” are carried out; “qualifying works” are defined by regulations made under section 20 as work that is going to cost each leaseholder more than £250. If the consultation requirements are not complied with, the contribution of each tenant to the cost of doing that work is limited to £250 unless the landlord obtains a dispensation from the consultation requirements under section 20ZA of the 1985 Act.

As to the procedure itself, in brief, the landlord must send out a notice of intention to do the works and give the tenants at least 30 days to make observations; it must obtain estimates, including from anyone nominated by the tenants; it must give notice to the tenants about the estimates and give them 30 days to make representations; and within 21 days of engaging a contractor it must (unless the contractor gave the lowest estimate or was nominated a tenant) give the tenants a statement of its reasons for doing so.

Section 20ZA says this:

“(1)

Where an application is made to [the FTT] for a determination to dispense with all or any of the consultation requirements in relation to any qualifying works or qualifying long term agreement, the tribunal may make the determination if satisfied that it is reasonable to dispense with the requirements.

That provision gives the FTT a discretion to dispense with the requirements. The Supreme Court in Daejan Investments Limited v Benson [2013] UKSC 14 explained how that discretion is to be exercised. At paragraph 44 Lord Neuberger said :

“44.

Given that the purpose of the [consultation requirements] is to ensure that the tenants are protected from (i) paying for inappropriate works or (ii) paying more than would be appropriate, it seems to me that the issue on which the LVT should focus when entertaining an application by a landlord under section 20ZA(1) must be the extent, if any, to which the tenants were prejudiced in either respect by the failure of the landlord to comply with the Requirements.

46.

I do not accept the view that a dispensation should be refused in such a case solely because the landlord seriously breached, or departed from, the Requirements. That view could only be justified on the grounds that adherence to the Requirements was an end in itself, or that the dispensing jurisdiction was a punitive or exemplary exercise. …

50.

In their respective judgments, the LVT, the Upper Tribunal and the Court of Appeal also emphasised the importance of real prejudice to the tenants flowing from the landlord's breach of the [consultation requirements], and in that they were right. That is the main, indeed normally, the sole question for the LVT when considering how to exercise its jurisdiction in accordance with section 20ZA(1).

As Lord Neuberger pointed out at paragraph 65, that is the relevant prejudice and no other:

“The tenants can always contend that they will suffer a disadvantage if a dispensation is accorded; however, as explained above, the only disadvantage of which they could legitimately complain is one which they would not have suffered if the [consultation requirements] had been fully complied with, but which they will suffer if an unconditional dispensation were granted.”

So the consultation requirements are not an end in themselves, and failure to consult is not something to be punished. On many occasions the urgency of the work will have been such that the landlord obviously did the right thing, and acted in the tenants’ best interests, in going ahead without waiting to go through the consultation process; see for example Holding and Management (Solitaire) Limited v Leaseholders of Sovereign View [2023] UKUT 174 (LC), where the landlord acted swiftly to get a fire alarm system installed so as to put a stop to the financial haemorrhage caused by the maintenance of a waking watch. Whether or not the work was urgent, if the tenants have not been prejudiced as a result of the failure to consult then dispensation should normally be granted, and it can be granted subject to conditions.

The sort of prejudice that will have a bearing on dispensation is where the tenants can show that they would have been able to suggest a better or cheaper way of doing the work: see for example Marshall v Northumberland & Durham Property Trust Limited [2022] UKUT 92 (LC) where the tenant had expertise such that if he had been consulted he would have made suggestions which would have resulted in the work being done more cheaply. As a result, dispensation was granted on condition that the cost to leaseholders was limited to the sum the landlord would have had to spend had the tenant been consulted.