26 May 2023 by

Major works and dispensation – a cautionary tale

The notable case of Lambeth LBC v Kelly provides a cautionary tale as to when and how a landlord might be excused of its duty to consult with tenants before commencing major works.

Lambeth Council, the landlord of a Victorian property consisting of five flats, carried out maintenance work in 2016, costing over £7,000, to address a roof leak. The tenants were eventually invoiced in 2018 for the repairs as part of their annual service charge. The expense incurred from the works triggered the requirements under section 20 of the Landlord and Tenant Act 1985 (the “Act”).

In brief, section 20 of the Act sets out the procedure for landlords who wish to undertake any major works (works that oblige any tenant to pay an excess in service charge). The landlord must serve notice of intention to the tenants prior to undertaking the works, as well as inviting observations from the tenants. In this case, the Council failed to comply with the consultation requirements outlined in section 20 of the Act.

However, section 20ZA of the Act also provides that the First Tier Tribunal (FTT) may make a determination to dispense with the consultation requirements, if it is satisfied that this is reasonable.

When the Council served the notice to one of the tenants, Mrs Danvers-Russell, it served the notice to her flat despite knowing she did not reside at the flat. Mrs Danvers-Russell contended that she had not been served the requisite consultation notice and subsequently applied to the FTT under section 27A of the Act to limit her service charge contribution to the statutory threshold of £250, as a result of the Council’s failure to comply with the consultation requirements.

However, the Council did not indicate an immediate intention to apply for dispensation (particularly as this would have meant involving the other leaseholders), stating instead that it would consider doing so promptly after the matter was resolved.

In July 2021, the FTT made a ruling in favour of Mrs Danvers-Russell.

After the FTT rendered its verdict, the Council applied for dispensation in August 2021 pursuant to section 20ZA of the Act. However, the FTT denied the Council’s application, citing two reasons. Firstly, the FTT deemed that the application was untimely as it should have been filed in response to Mrs Danvers-Russell’s section 27A application. Secondly, the FTT concluded it would be unreasonable to grant dispensation as Mrs Danvers-Russell had suffered prejudice due to the absence of a section 20 notice before the commencement of the works.

The Council appealed to the Upper Tribunal (UT).

The UT allowed the appeal and ruled that the FTT was mistaken in its belief that it lacked jurisdiction to decide on a dispensation application after a section 27A determination has been made.

The UT pointed out that, under section 20ZA of the Act, the FTT has the power to modify or lift the cap on leaseholders’ contributions imposed by section 20 of the Act in response to a dispensation application.

Further, it is customary in the FTT for dispensation applications under section 20ZA to follow section 27A proceedings. In this case, making a dispensation application involving other leaseholders would have caused unnecessary delays and additional expenses, which would not have been apparent until after the section 27A application had been determined.

The UT granted unconditional dispensation to the Council even after the determination of service charges.

Nonetheless, Mrs Danvers-Russell was unable to evidence any actual loss or prejudice from the lack of consultation. This highlights the need for tenants to demonstrate relevant prejudice to successfully oppose a dispensation application.

Ultimately, landlords are advised to take all necessary measures to comply with consultation requirements and to promptly seek dispensation if there is any doubt of compliance.

If you have any queries regarding major works or potential disputes over service charge, please contact our specialist Real Estate Disputes team.

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