The Landlord and Tenant Act 1985 requires landlords to consult tenants before undertaking work above a certain value if the cost of the work is to be included in residential service charges. In addition, the Service Charges (Consultation Requirements) (England) Regulations 2003 restrict the amount that tenants can be required to pay for work about which they have not been properly consulted to £250, unless the landlord can satisfy the tribunal that it is reasonable to dispense with these requirements.
There are two separate stages to the consultation procedure. The landlord must first consult the tenants, and any recognised tenants’ association, about its intention to carry out work. The landlord must take the consultees’ observations into account and seek estimates from at least one of any nominated contractors. During the second stage of the process, the landlord must summarise the observations received, respond to them, and provide at least two estimates to the tenants. It must also make all estimates available for inspection and allow the consultees to comment. It must take their observations into account and, unless its chosen contractor submitted the lowest estimate or was nominated by the consultees, must state the reasons for its choice.
In Reedbase Ltd v Fattal [2018] EWCA Civ 840; [20189] PLSCS 72, the Court of Appeal had to consider the position following the discovery that the specification for work needed to be varied. The tenants’ apartments had tiled terraces around them. The asphalt roof underneath needed to be repaired and sealed with a plastic substance. After the consultation process was completed, it emerged that the guarantee for the plastic seal would be invalidated if tiles were placed directly onto it. So the landlord inserted shims between the tiles and the roof, which increased the cost of the work. The tenants accepted that the cost was reasonable. But should the landlord have repeated the second stage of the consultation process and re-tendered when it realised that the work needed to be varied?
In the absence of any statutory guidance on the point, the Court of Appeal compared the old and new proposals to see whether the tenants had been given sufficient information in the first set of estimates. The court also asked itself whether, taking all the circumstances into account, the protection provided by the consultation process (against unnecessary, defective or unreasonably expensive services) would have been materially assisted by obtaining fresh estimates.
The proposals had remained substantially the same. The landlord had not tried to ambush the tenants by undertaking work that differed from the work originally proposed. Furthermore, the tenants knew about and had approved the change without suggesting that the work should be retendered. The 6% uplift in cost was a relatively small proportion of the cost of the work (and some of that increase could be ascribed to the tenants’ choice of a different tile). A retendering process would have delayed matters and it was unrealistic to think that contractors who had tendered for all the work would tender only for the additional work required. There was no evidence that there would have been any cost saving and the tenants still enjoyed the benefit of section 19 of the Landlord and Tenant Act 1985, which protects tenants against unreasonable service charge costs.
Allyson Colby is a property law consultant
