Landlord and tenant – Service charges – Consultation – Appellant local authority owning property requiring repair works – Appellant failing in statutory duty to consult with respondent leaseholders – Appellant applying to First-tier Tribunal (FTT) for dispensation from consultation requirements under section 20ZA of Landlord and Tenant Act 1985 – FTT dismissing application – Appellant appealing – Whether FTT having jurisdiction to make determination – Whether discretion to grant dispensation to be exercised – Appeal allowed
The appellant local authority was the owner and landlord of a property at 333 Clapham Road, Stockwell, London SW9. The property was a Victorian house which had been converted into five flats: three flats were held on long leases by the three respondents and the other two were let by the appellant on secure tenancies.
In July 2016, a possible roof leak at the property was reported to the appellant by the first respondent. As a result, a job order was raised by the appellant to address the problem. Work was subsequently carried out to the property and the lessees were eventually invoiced for the costs as part of their annual service charge.
The cost of the work was such that the consultation requirements under section 20 of the Landlord and Tenant Act 1985 were triggered. The third respondent was clear that she had not received the requisite consultation notice. In 2021, she applied to the First-tier Tribunal (FTT) under section 27A of the 1985 Act for a determination that her contribution to the costs of the work should be limited to the statutory cap of £250.
The FTT decided that there had been a failure to comply with section 20 and that accordingly, the sum payable by the third respondent was limited to £250.
The appellant applied to the FTT under section 20ZA of the 1985 Act, for dispensation from the consultation requirements. The FTT decided that the tribunal had no jurisdiction to make a determination under section 20ZA once a determination under section 27A had been made. The appellant appealed.
Held: The appeal was allowed.
(1) The power to dispense with the consultation requirements was conferred on the tribunal by section 20ZA(1). The scope and extent of the dispensation power was prescribed by the Supreme Court in Daejan Investments Ltd v Benson [2013] UKSC 14; [2013] 2 EGLR 45; [2013] EGILR 4. The main, and normally the sole, question for consideration was whether the landlord’s breach had resulted in real prejudice to the tenants.
(2) There was nothing in the statutory scheme of the 1985 Act to support the conclusion that a section 20ZA application could not be made after a section 27A determination had been issued.
The appellant had clearly expressed its decision not to make an application under section 20ZA during the course of the section 27A proceedings. Instead, it indicated that it would consider whether or not to make an application after the section 27A determination had been issued. The FTT did not reply to the appellant to say that failure to make a section 20ZA application at the same time as the section 27A proceedings would bar a future application. Furthermore, it did not decide that the section 27A proceedings were final in respect of all issues that might fall to be determined under sections 18-30 of the 1985 Act.
(3) Section 20 imposed a cap on the relevant contributions of tenants. That cap might be lifted or modified by the FTT on an application under section 20ZA. Although the consideration of such an application concerned the same background facts as those dealt with in the section 27A proceedings, the issues for determination were not the same and might well require additional evidence and submissions in particular on the question of prejudice.
If dispensation was given, then it might be conditional and it was a matter for a landlord to decide whether to accept the conditions imposed or whether instead to accept the cap. That was a very different matter from the consideration of payability under section 27A.
It was common practice in the FTT for applications under section 20ZA to be made after section 27A proceedings. As happened in this case, the appellant as landlord was responding to a section 27A application made by a single leaseholder. In order to make a section 20ZA application the appellant was informed that it should pay a fee and notify other leaseholders. That would inevitably have caused a delay and might have been unnecessary but that would not be known until the first determination had been given.
(4) The exercise of the FTT’s power to dispense or to refuse to dispense under section 20ZA was governed simply by its determination of whether “it is reasonable” to dispense with the requirements. However, Daejan gave a direction for the exercise of that discretion and a clear steer that where an FTT was unable to identify relevant prejudice, dispensation should be granted.
The circumstances in which a section 20ZA application was made could be almost infinitely various and the sufficiency of information would vary from case to case. In the present case, however, it was indisputable that there was a failure to provide the leaseholders with adequate information in advance of the costs being incurred, as the section 20 notice was not served on them before the works were begun.
(5) Standing back and taking an overview of this case, there was a wholesale failure to comply with the section 20 process. The requisite notices were either not served at all or not served until after the works had been completed. The lessees were not informed that the costs had been incurred until about 18 months after they had been demanded by the contractor. Despite making inquiries of the council, the third respondent was not provided with a copy of a section 20 notice until 2019, nearly two years after the works were carried out.
The FTT found that she had suffered prejudice because she was unable to budget for the costs and had lost the opportunity of establishing prejudice because of the inadequacy of the information provided by the appellant and the delay in its provision. However, there was no evidence of actual prejudice. Even accepting that the third respondent was hampered in demonstrating prejudice by delay, it was still incumbent upon her to show some type of loss.
The appellant’s failure to communicate with the leaseholders and its rather careless attitude to leasehold management had distracted from the main issue. On balance, however, the appeal would be allowed and unconditional dispensation from the requirements of section 20 of the 1985 Act was granted.
The parties appeared by their representatives.
Eileen O’Grady, barrister
Click here to read a transcript of Lambeth London Borough Council v Kelly and others