Local authority landlord – Qualifying long-term agreements – Consultation requirements – Para 2(1)(d) of Schedule 2 to Service Charge (Consultation Requirements)(England) Regulations 2003 – Appellants failing to serve notice of intention to enter into qualifying long-term agreements on tenants until after public notice of proposed contracts published – Breach of para 2(1)(d) – Whether appropriate to dispense with requirements – Whether prejudice suffered by respondent tenants – Appeal allowed
In 2006, the appellants, a local authority landlord, published a notice in the Official Journal of the European Union (OJ) advertising three contracts for building works to 71 tall buildings in their borough. Those contracts were qualifying long-term agreements (QLTAs) on which the appellants were required to consult with tenants, including the 20 respondents, in accordance with section 20 of the Landlord and Tenant Act 1985 and Schedule 2 to the Schedule 2 to the Service Charge (Consultation Requirements) (England) Regulations 2003. In September 2006 the appellants served on all relevant tenants a notice of intention to enter into QLTAs, giving them a 30-day period within which to make observations on “the relevant works”. The service of the notice of intention at that time was a breach of the regulations, since, by para 1(2)(d), it should have been served before notice of the contract was published in the OJ. Only two tenants submitted observations, one querying the meaning of the notice and another enquiring about the specific works and costs to that tenant’s property.
The appellants proceeded with the short-listing of contractors and the issue of invitation to tender documentation and, in September 2007, served on tenants a notification of their proposal to enter into the QLTAs, identifying the three contractors to whom they intended to let the contracts. That notice again gave tenants a 30-day period to make observations but none were submitted. The appellants then proceeded to enter into the contracts.
In July 2010, the appellants made an application under section 20ZA of the 1985 Act, to which the respondents submitted objections, seeking dispensation from the consultation requirements so far as they had breached para 1(2)(d). The leasehold valuation tribunal (LVT) refused to grant the dispensation and the appellants appealed. They contended that the LVT had erred in failing to consider the question of prejudice to the tenants, arguing that the breach was a minor one that had caused no prejudice.
Held: The appeal was allowed.
When exercising the dispensatory discretion under section 20ZA(1) of the 1985 Act, an important consideration was the degree of prejudice caused by the breach, namely what opportunity the tenant had lost and whether its loss had caused significant prejudice to the tenant: Daejan Investments Ltd v Benson [2011] EWCA Civ 38; [2011] WLR 2330; [2011] PLSCS 31 and Re 30-40 Grafton Way [2008] PLSCS 198 applied. The leasehold valuation tribunal (LVT) had erred in principle in failing to consider the issue of prejudice and its decision should therefore be set aside and the matter considered afresh.
Schedule 2 to the 2003 Regulations imposed a slightly different consultation regime for public bodies, as opposed to private landlords, which took into account the fact that a separate regulatory procurement framework was engaged. The main differences were that the authority was not required to invite tenants to nominate contractors and only one proposal needed to be presented to the tenants. At the first stage, of the consultation process, namely the giving of written notice of intention to enter into the QLTA, para 1(2)(d) of Schedule 2 required the authority to state, as the reason why they were not inviting recipients of the notice to nominate contractors, that public notice of the relevant matters was “to be given”; namely, a notice published in the OJ pursuant to the relevant public procurement regulations. The purpose of that requirement was not merely to convey the factual reason why tenants were not being invited to nominate contractors but also to inform them where they could view the public notice. That enabled the tenants to look at the advert, to satisfy themselves that it was consistent with the ambit of the relevant works summarised in the notice of intention and also, if they wished, to encourage a suitable contractor to respond to the advert. That opportunity was consistent with the intent of Schedule 2 of preserving the consultation process and the tenants’ involvement so far as permitted by the public procurement regulations. However, it was very different from the usual tenant’s right to nominate a contractor and, further the public procurement regulations were there to promote transparency and competition so providing tenants with a form of protection that was not usually available to them.
The respondents had lost nothing by reason of the appellants’ breach of para 1(2)(d). None of the tenants had raised any question relating to the OJ advertisement. None had made any observation on the selection of the contractors or expressed any desire in being involved in that process. There was no suggestion that they would have done anything differently had the advert been published after the notice of intention. Although the law was there to be observed, and the breach was not a mere technicality, the court’s discretion to dispense with a breach depended on what, if any, adverse consequences flowed from that breach to the particular tenants. The opportunity that para 1(2)(d) afforded to the tenants was very narrow in scope and non-compliance had not, as a matter of fact, caused any prejudice to any of the respondents.
Sally Dobson, barrister
