Section 20 of the Landlord and Tenant Act 1985 places a statutory obligation on landlords to consult with leaseholders before embarking on major works that require each leaseholder to contribute more than £250 to the costs of the same. A landlord who fails to comply with the statutory consultation requirements will be limited to recovering only £250 from each leaseholder unless dispensation is obtained under section 20ZA. The statutory requirements are set out in the Service Charges (Consultation Requirements) (England) Regulations 2003.
Daejan Investments Ltd v Benson and others [2013] UKSC 14; [2013] 2 EGLR 45 is the leading authority in respect of dispensation with the consultation requirements. A landlord’s ability to obtain dispensation was contingent on the leaseholders demonstrating that they had suffered real or actual prejudice as a result of the landlord’s failure to comply with the requirements. If the tribunal was minded to grant dispensation, where relevant prejudice had been established, conditions could be attached to compensate the leaseholders.
One of the issues on appeal in Aster Communities v Chapman and others [2021] EWCA Civ 660; [2021] PLSCS 86 concerned whether each individual leaseholder was required to establish that they had suffered a relevant prejudice in order to receive the benefit of a condition imposed on the landlord who had obtained dispensation.
Aster was the landlord of a development comprising five blocks of residential flats in Andover, Hampshire. It had failed to consult with its leaseholders in respect of works to replace the asphalt on the balconies of four of the blocks. In particular, when Aster served its “notice of intention to do the works” on its leaseholders under the 2003 Regulations, it was silent as to this aspect of the works. Aster applied to the First-tier Tribunal for dispensation.
The FTT granted dispensation, but on condition that Aster (i) pay the reasonable costs of a surveyor to advise the leaseholders; (ii) pay the leaseholders’ legal costs in opposing the application for dispensation; and (iii) be debarred from recovering its costs of the application through the service charge.
In respect of the prejudice the leaseholders had suffered, the FTT placed weight on the evidence given by one of the lessees who asserted that if the landlord had served a compliant notice of intention to do the works she would have instructed an expert surveyor to report on the necessity of such works. The Upper Tribunal (Lands Chamber) upheld the FTT’s decision.
Aster argued on appeal that it was incumbent on each leaseholder to demonstrate that they had suffered a relevant prejudice. In effect, that each would have acted differently if the landlord had complied with the requirements. The Court of Appeal firmly rejected this proposition. It observed that the consultation requirements under the 2003 Regulations was a group process. Aster was required to serve notice of its intention to carry out the works on all leaseholders. Further, if dispensation was sought, it was against all leaseholders generally. Although the position of each individual tenant was a relevant consideration, if all tenants suffered prejudice because of a defect in the consultation process, they would all be entitled to the benefit of the same condition if dispensation was granted.
Elizabeth Dwomoh is a barrister at Lamb Chambers
