28 April 2023 by Ransford Addo-Quaye

Applications for Section 20 Dispensation

Landlords must consult their lessees whenever the landlord intends to carry out ‘qualifying works’ to the building, as defined by section 20 of the Landlord and Tenant Act 1985. Failure to comply with this will mean the landlord cannot recover anything above £250 per leaseholder, potentially leaving the landlord with a hefty bill for any shortfall.

The consultation procedure is designed to ensure leaseholders can have their say in terms of understanding the nature of works proposed. The procedure ensures that leaseholders are protected from having to make contributions, through service charge, for inappropriate or excessively expensive works.

Dispensation from this consultation is granted only where the First-tier Tribunal (FTT) considers it reasonable – for example, where works are so time critical as to make it unreasonable for the landlord to allow the consultation to run its course.

In the recently published Grey GR Ltd Partnership v The Leaseholders [2022] decision, a landlord applied to the FTT for special dispensation from the consulting procedure which should have been followed regarding qualifying works to replace combustible cladding.

Grey GR Ltd Partnership owned a residential tower block comprising 73 apartments. In the wake of the Grenfell Tower tragedy, the landlord sought dispensation from the FTT for failing to consult the leaseholders prior to installing a communal fire alarm system and tendering for works to replace the building’s combustible cladding, at an estimated cost of more than £10m.

The FTT in Grey accepted that it would be in the parties’ best interests for the landlord to install the communal fire alarm quickly and press ahead with the main works tender and application to the Building Safety Fund, rather than comply with the consultation procedure. However, the FTT used their discretion to impose addition conditions on the landlord, such as a contribution to the leaseholders’ legal costs of the dispensation application, as well as having to provide an indemnity fund of £20,000 plus VAT for the leaseholders to take expert advice and observations on the proposed works.

The decision in Grey is an example of the difficulty for leaseholders to successfully oppose a dispensation application. It often appears as though there is no risk to landlords for failing to consult ahead of major works. However, landlords must be cautious that their leaseholders retain a right to apply to the FTT by return, challenging the reasonableness of the service charges following the major works, i.e. where the landlord seeks to recover costs.

There is no guarantee that a dispensation application will protect a landlord from failure to consult and each case will turn on its own facts. Nevertheless, Grey may well be the beginning of a pattern of FTT cases highlighting the boundaries of dispensation awards in the aftermath of the Grenfell Tower tragedy, the resulting Building Safety regulations, and urgent action being taken by landlords.

We would be more than happy to assist you by providing advice on major works consultations and the possibility of dispensation. If you require assistance in this regard or would like to make an enquiry with one of our expert solicitors, then please do not hesitate to contact our Real Estate Disputes team.

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