The Landlord and Tenant Act 1985 requires landlords to consult tenants before undertaking work above a certain value or entering into long-term agreements for the provision of goods or services to be included in residential service charges. 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. The cap in respect of qualifying long–term agreements is £100.
The Leasehold Valuation Tribunal has the power to dispense with the consultation requirements if it is satisfied that it is reasonable to do so. The Supreme Court’s decision in Daejan Investments Ltd v Benson [2013] UKSC 14 has had a revolutionary effect on the approach to applications for dispensation. The court explained that the purpose of the consultation requirements is to ensure that tenants are protected from paying for inappropriate work or from paying more for the work than would be appropriate. Consequently, the tribunal must focus on the extent to which tenants have been prejudiced by a landlord’s failure to comply with the requirements and should not infer prejudice simply because the breach is not a trivial one. It can also grant dispensation on such terms as it thinks fit.
In Re OM Property Management’s appeal [2014] UKUT 9 (LC); [2014] PLSCS 34 the landlord failed to comply with the requirements in two respects, before accepting the lowest tender. It failed to make the highest two of four estimates available for inspection by its tenants during the second state of the consultation process and did not disclose that one of the consultees had asked the landlord to allow a panel of tenants to participate in the assessment of the tenders and awarding of the contracts.
The Upper Tribunal noted that the regulations require that only two estimates be obtained. It thought that it would be ironic if, because the landlord had obtained more than the required minimum number of tenders, but failed to make them all available to leaseholders, it should be penalised by being unable to recover a six-figure sum. The landlord had provided access to the lowest tenders, as well as summarising the third-highest tender for the tenants. The final tender had not been in the running because it was significantly higher than the others, and there was no evidence that the extent, quality or cost of the works had been affected by the landlord’s omission.
There was nothing to suggest that the landlord’s failure to share the request for participation with other tenants had had any impact on the scope or cost of the works either. Therefore, the tribunal could see no reason to refuse the dispensation sought, on condition that the landlord reimbursed the tenants their reasonable expenses in connection with their application and did not try to recover its own costs through the service charge.
Interestingly, the tribunal refused to make the dispensation conditional on the reimbursement of sums paid by the tenants on account of expenditure that the Leasehold Valuation Tribunal had found not to be recoverable through the service charge. It accepted that the payments were collected in good faith and ruled that the tenants must abide by the provisions in their leases dealing with the treatment of any surplus contributions accruing during the course of a service charge year.
Allyson Colby is a property law consultant