Consultation requirements: prejudice & conditions

It is not the role of the First-tier Tribunal when considering an application for dispensation from the consultation requirements to penalise an appellant for other aspects of its conduct. In Holding & Management (Solitaire) Ltd v Leaseholders of Sovereign View [2023] UKUT 174 (LC); [2023] PLSCS 133 the Upper Tribunal (Lands Chamber) was asked to determine whether the FTT’s decision to impose conditions in an application for dispensation from the consultation requirements in respect of the installation of a fire alarm system was wrong. The appellant was the freeholder of Sovereign View, an estate comprising of 174 flats. The respondents were long leaseholders of the flats. Following risk assessments carried out in 2020 and 2021, fire stopping concerns were raised. The freeholder was advised in the short-term to implement an immediate waking watch or install battery linked smoke detectors in each flat. As a permanent solution, it was advised that a fire alarm system be installed across the estate. The freeholder implemented a waking watch costing £10,000 per week, which was paid from the service charges reserve fund. It subsequently obtained quotes for the installation of a fire alarm system, the cheapest being £168,000. Due to the costs of the works the consultation requirements under section 20 of the Landlord and Tenant Act 1985 were engaged. The freeholder commenced consultation, but abandoned the exercise. Subsequently, it applied to the FTT for dispensation due to the urgency in bringing the costs of the waking watch to an end. Dispensation was granted by the FTT but it imposed two conditions. First, the cost of the waking watch was to be paid by the freeholder. This was on the basis that it constituted a considerable financial prejudice to the leaseholders when cheaper alternatives were available. Second, the costs of the proceedings were not recoverable through the service charge. The freeholder appealed. Relying on Daejan Investments Ltd v Benson [2013] UKSC 14; [2013] 2 EGLR 45; [2013] EGILR 4, the UT found that the FTT had erred in not focussing on whether the leaseholders had suffered prejudice as a result of the failure to consult in relation to the fire alarm system. Whether the waking watch constituted a significant financial prejudice to the leaseholders was an irrelevant consideration. It was not a relevant prejudice caused by the failure to consult in respect of the fire alarm system. The FTT erroneously regarded the waking watch as “part and parcel” of the works to deal with the fire risk. Yet, there was no legal obligation on the freeholder to consult in relation to the waking watch because it was a service and not “works”. It was not the role of the FTT in a dispensation application to penalise the appellant for other aspects of its conduct. Conditions can be imposed upon dispensation being granted, but those conditions must be relevant and appropriate in addressing the relevant prejudice suffered. The UT granted dispensation without conditions. Elizabeth Dwomoh is a barrister at Lamb Chambers