Landlord and Tenant Act 1985 – Service charge – Major works – Consultation – Freeholder carrying out major works to premises containing flats – Freeholder carrying out statutory consultation with headlessee of relevant part of premises but not with leaseholders of individual flats – Whether consultation satisfying requirements of section 20 of 1985 Act – Issue tried as to appropriate party to carry out consultation and which parties required to be consulted – Preliminary issues determined accordingly
The applicants were long leaseholders of flats in the Brunswick Centre, a Grade-II listed complex of shops, flats, offices, car parks and other premises in London WC1. Their immediate landlord was the first respondent council, which held a long headlease of parts of the centre. The applicants’ leases provided for the payment of a service charge to the first respondents in respect of certain costs incurred by them in discharging their responsibilities as landlord. The first respondents were themselves liable under the headlease to pay a service charge to their own landlord, which was the freeholder of the centre.
In 2005, the second respondent, as the then freeholder, carried out major works to the centre. Before doing so, it carried out a process of statutory consultation with the first respondents pursuant to section 20 of the Landlord and Tenant Act 1985 and the Service Charges (Consultation Requirements) (England) Regulations 2003. It served no consultation notices on the leaseholders of the individual flats, although the first respondents forwarded copies to the leaseholders and passed on their responses to the second respondent.
The works were not a success and required further remedial works. Some of those remedial works were carried out by third and fourth respondents, to whom the second respondent sold the freehold in 2007, and/or by the fifth respondent, who purchased the freehold from the third and fourth respondents in 2012 before selling it on in 2014.
The applicants sought a determination, under section 27A of the Landlord and Tenant Act 1985, of the extent to which they were liable to contribute through the service charge to the cost of the 2005 major works and certain other works. An issue arose as to whether the leaseholders’ service charge liability might be limited by reason of a lack of statutory consultation over the works. That in turn raised an important issue as to whether the statutory obligation to consult before carrying out major works or entering into “qualifying long term agreements” fell on the freeholder or on the first respondents as intermediate landlord. That and other questions were referred to the Upper Tribunal, pursuant to r 25 of the Property Chamber Rules 2013, for determination as preliminary issues.
Another preliminary issue was whether a 2009 contract, under which the third and fourth respondents had engaged a company to provide security services, was a “qualifying long term agreement” within the meaning of the 1985 Act so as to attract the consultation requirements. That depended on whether it was an agreement entered into “for a term of more than 12 months” within the meaning of section 20ZA(2) of the 1985 Act, which in turn depended on whether the term was defined by clause 3 of the agreement, which stipulated that the agreement was to terminate on the third anniversary of the commencement date, or by a standard form site schedule, entered into pursuant to that agreement, which set out the details agreed for the particular site; in that schedule, a space to fill in the “Start Date” was left blank but the space for the “End Date” was filled in a date in late October 2010.
There was also an issue as to whether a claim by the leaseholders that the works had not been carried out to a reasonable standard should be struck out as an abuse of process.
Held: The issues were determined accordingly.
(1) Whether section 20 applied to certain works was determined solely by whether the relevant costs incurred in carrying out the qualifying works exceeded the appropriate amount specified in the regulations. It did not depend on the identity of the person carrying out the works. The limitation therefore applied equally to costs incurred by an immediate landlord and by a superior landlord. Since the costs incurred by the freeholder in the instant case exceeded the appropriate amount, it followed that the consultation requirements applied to those costs, and that the relevant contributions of each tenant would be limited to the statutory cap of £250 if the requirements had not been either satisfied or dispensed with pursuant to section 20ZA.
(2) The person who was obliged to undertake the consultation was the landlord who intended to carry out the work. That interpretation flowed from a consideration of regulation 1 of the 2003 Regulations, so far as it provided that the consultation requirements applied where a landlord intended to carry out works and made provision for that landlord to invite, receive and consider observations.
A landlord that was under a primary obligation to its tenants to carry out works, but satisfied that obligation by paying for works carried out by a superior landlord, could not be described as a landlord that “intends to carry out qualifying works” so as to make it a landlord within the scope of the 2003 Regulations. To conclude otherwise would not be a natural reading of regulation 1 and would be pointless in the absence of any requirement for such an intermediate landlord to pass on the observations of its tenant to the superior landlord that actually intended to carry out the qualifying works.
In the instant case, therefore, the only landlord on whom a consultation requirement was imposed was the second respondent, because it was the only landlord that had the relevant intention to carry out qualifying works.
(3) The second respondent was obliged under the 2003 Regulations to give a consultation notice to each tenant of a dwelling and to any recognised tenants’ association. Where a dwelling was sublet, the expression “tenant” included a subtenant. A person was not precluded from being a “tenant” for the purposes of the regulations merely because there was no direct relationship of landlord and tenant between that person and the person who intended to carry out the works. To hold otherwise would be inconsistent with other provisions of the 1985 Act and 2003 Regulations and would frustrate the purpose of the statutory regime by depriving those who were ultimately obliged to pay for qualifying works of the opportunity to be consulted on the extent of the works and the identity of the contractor who would carry them out. The proper construction of the consultation requirements was therefore that a superior landlord intending to carry out works, or enter into a qualifying long term agreement, had to give notice both to each of its direct tenants of a dwelling and also to each subtenant of a dwelling who was liable to contribute to the cost of the works.
(4) It was possible, for the purposes of the 1985 Act, to be the tenant of a dwelling despite the fact that the property comprised in the relevant tenancy comprised more than one dwelling, or comprised a dwelling and commercial premises. Accordingly, the first respondents were the tenant of each dwelling in the premises that they held under the headlease and the service charges payable to the freeholder under that headlease were service charges within the meaning of section 18 of the 1985 Act: Oakfern Properties Ltd v Ruddy [2006] EWCA Civ 1389; [2006] 3 EGLR 30 applied. It followed that the second respondent was obliged to consult both with the first respondents, as its direct tenants, and also with each individual leaseholder, as subtenants.
Any practical difficulties for a superior landlord in knowing whom to consult could be overcome by addressing a consultation notice addressed to “the leaseholder” to each flat in the building, or by asking the intermediate landlord to provide the relevant information, or by applying for dispensation from the consultation requirements on suitable terms.
(5) The uncertainty over the duration of the agreement for the provision of security services arose because of an apparent tension between para 3 of the agreement and the standard form site schedule. However, while the agreement was not flawless, it was reasonably clear how it would be understood by commercial parties. The agreement was intended to be a framework agreement, under the umbrella of which the specific terms for each site were to be negotiated individually. The agreement had to be read and understood as a whole, having regard to the contents of the relevant site schedule. Rdead in that way, the commencement date specified in clause 3 of the agreement was obviously the start date, but any reasonable party would understand that the end date was that set out in the site agreement. Clause 3 was dealing with the duration of the framework agreement, while the site schedule determined the period for which services were to be provided to a specific site. It was therefore apparent that the relevant agreement was intended to end in late October 2010, which was less than 12 months after the commencement of the agreement, with the result that it was not a qualifying long term agreement for the purpose of the 2003 Regulations.
(3) The tribunal rejected contentions that the leaseholders’ claim regarding the quality of the works was an abuse of process by reason of being insufficiently particularised, or by reason of the delay in bringing the challenge to the service charge, or because it was pointless and could result in no benefit to the leaseholders.
Justin Bates and Riccardo Calzavara (instructed by Brethertons LLP) appeared for the applicants; Jonathan Upton (instructed by Judge & Priestley LLP) appeared for the first respondents; Nicola Muir (instructed by Forsters LLP) appeared for the second respondent; Camilla Lamont (instructed by Nabarro LLP) appeared for the third, fourth and fifth respondents.
Sally Dobson, barrister
