Landlord and tenant – Service charges – Failure to consult – Appellant landlord seeking to recover through service charges cost of repair and maintenance works – First-tier Tribunal (FTT) granting appellant dispensation from consultation obligations subject to conditions – Appellant appealing – Whether FTT correctly imposing conditions – Appeal dismissed
The appellant owned a development of 160 flats in five blocks at Kingsway Gardens, Andover, 114 of which were let on long leases. In January 2017, the appellant applied to the First-tier Tribunal (FTT) under section 27A of the Landlord and Tenant Act 1985 to determine the service charge payable by the lessees. The principal issue was whether on-account demands of service charge made by the appellant mainly in relation to the replacement of asphalt on the balconies of the main blocks were unreasonable. The respondent lessees contended that the proposed works included elements which had either not reasonably been incurred or were not of a reasonable standard, thereby contravening section 19 of the 1985 Act.
The FTT found that the consultation in relation to four of the main blocks had been carried out in good faith, but found in favour of the lessees on the issue of the balcony asphalting and refused to sanction the costs being recovered through the on-account service charge. It also held that the asphalt replacement had not been part of the pre-works consultation by the landlord under section 20.
Having completed the works, in February 2019, the appellant made an application under section 20ZA(1) of the 1985 Act for dispensation of the consultation requirements, limited to the works on the residents’ balconies in the four main blocks. The application was opposed by the respondents who argued that the lack of consultation had deprived them of the opportunity to compare the proposed asphalt replacement with other options and assess whether there was a more economic approach.
The FTT concluded that, in the light of Daejan Investments Ltd v Benson [2013] UKSC 14; [2013] 2 EGLR 45; [2013] EGILR, while it was satisfied that it was reasonable to grant dispensation to the appellant, it had to be on terms that would remove possible prejudice to the lessees. Accordingly, the dispensation was granted conditional upon the appellant paying the respondents’ reasonable costs of: (i) the dispensation application, (ii) obtaining an expert report and (iii) not recovering those costs through the service charge.
The appellant appealed contending that the FTT had misdirected itself in law and misapplied Daejan to the facts.
Held: The appeal was dismissed.
(1) Section 20ZA of the 1985 Act conferred a discretion on the FTT to dispense with the statutory requirements of consultation where the landlord had failed to comply with them. The majority of the Supreme Court in Daejan adopted a purposive approach in the interests of consistency and predictability of decision making; and thereby enabling clear and reliable advice to be given to the parties to an application to dispense with consultation requirements. Unconditional dispensation would be granted in favour of the landlord unless the tenants were able to establish real or actual prejudice as a result of the landlord’s failure to abide by the consultation requirements. The legal burden of satisfying the tribunal that it was reasonable to dispense with the consultation requirements was on the landlord. However, the factual burden of identifying some relevant prejudice that they would or might have suffered was on the tenants.
(2) An application to dispense with consultation requirements did not take place in a vacuum. If the FTT took a view of the application without regard to what had happened previously as between the landlord and the tenants, and what was likely to happen in the foreseeable future, it was difficult to see how it could properly consider what if any prejudice had been suffered. If tenants were obliged in every case to show that the works proposed were inappropriate, or too expensive, as a prerequisite to the FTT refusing the landlord’s application for unconditional dispensation, it would entirely frustrate the process of dispensation. Once there was a credible case of prejudice it would be for the landlord to rebut it. Each case had to be decided on its particular facts. It was often the tenants’ central complaint that they had lost the opportunity to make representations at the time they were entitled to be consulted. But the mere loss of that opportunity did not on its own establish prejudice and it might be incumbent on the tenants to indicate what they would have said if they had been properly consulted by the landlord: Daejan Investments Ltd v Benson [2013] UKSC 14 applied.
(3) In the present case, the FTT had good reason, in dispensing with the consultation requirements, for deciding to impose the three conditions that it had. The appellant had contended that condition (i) was insufficiently certain as it was too vague and imprecise to comprise a lawful condition of dispensation. There was no time limit within which the expert was to be nominated and no mechanism where the particular expert was to be agreed by the various tenants, nor was there any means for determining whether the costs claimed by the expert were reasonable. However, those were not issues of any real substance. It was clear that the Supreme Court in Daejan was contemplating a wide power vested in the FTT to set conditions as appropriate. It expressly contemplated conditions requiring a landlord to recompense lessees for incurring surveyors’ fees and it did not qualify the circumstances in which such conditions could be imposed. Adopting a pragmatic approach, condition (i) was perfectly workable and was appropriate in its nature and effect. Having upheld condition (i), the objection to condition (ii) fell away as the respondents had established that their opposition to the appellant’s application to dispense was justifiable. Condition (iii) had been conceded by the appellant throughout.
James Fieldsend (instructed by Capsticks Solicitors LLP) appeared for the appellant; Joshua Dubin (instructed by Talbot Walker LLP) appeared for the respondents.
Eileen O’Grady, barrister
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