Major works and consultation under section 20 Landlord & Tenant Act 1985
In the private sector in England and Wales, landlords (defined as any person who has a right to enforce payment of a service charge) are obliged to consult with their lessees/tenants before incurring certain kinds of expense to be paid from service charges. The definition of landlord includes superior landlords, so planned expenditure by the overall freeholder of a mixed residential and commercial development to which residential leaseholders are obliged to contribute directly or indirectly will be subject to consultation if the qualifying criteria are met.
The regulations apply to major works or “qualifying works”, which means works the cost of which is recoverable from the leaseholders under the terms of the lease through the service charge. If the cost of the major works will exceed the sum of £250 for any one leaseholder, the landlord is required to consult under section 20 of the 1985 Act. If the landlord fails to carry out consultation in accordance with the regulations it will be limited to recovering £250 per leaseholder in respect of the works.
The landlord does have the right to seek dispensation from compliance with the regulations from the First Tier Tribunal and this can be done either prior to work being carried out or retrospectively. This could be either because the work is urgent and cannot await the time taken to consult or because the consultation carried out is flawed in some way.
There have been a couple of recent cases which have touched on elements of consultation.
In Leaseholders of Foundling Court and O’Donnell Court v Camden LBC (2016) UKUT 366 (LC) it was held that a superior landlord must consult not only with its own tenants and any tenants’ association but also any sub-tenants even though they have no direct relationship with the landlord. This can be difficult as the superior landlord may not know the identity of all relevant sub-tenants. The court suggested that to get around this consultation notices should be served addressed “to the leaseholder” to each flat. Details of sub-tenants can be requested from the intermediate landlord and there is always the option of seeking dispensation.
In 23 Dollis Avenue (1998) Limited v Vejdani (2016) UKUT 365 (LC) the Upper Tribunal held that there is no need to consult in order to collect sums in excess of £250 for future works where an estimated service charge is being demanded in advance. The statutory limit only applies to costs incurred not to costs to be incurred at some point in the future – consultation is not therefore necessary in order to demand an on account sum in advance of works being carried out. Consultation will still be required before the carrying out of any works and the amount drawn down will be open to challenge if consultation is not carried out correctly.
In this situation the only statutory limit is in section 19(2) of the 1985 Act in respect of which the failure to consult is merely one factor to be taken into consideration in determining whether the amount demanded on account is reasonable or not.
The same case also held that estimates obtained in the consultation process must be estimates for the works that are proposed to be carried out as set out in the notice of intention served at the start of the consultation process. In the case in question the estimates obtained went beyond the scope of the works initially proposed and the landlord was held not to have complied with the regulations in that respect.