23 Dollis Avenue (1998) v Vejdani [2016]:

Statutory requirements and limitations on residential service charges.

The background

The appellant was the management company of a building within which were four flats, of which the respondents were tenants. The appellant made a demand for £10,200 in respect of major works the management company proposed to carry out at the property.

The management company served notice on the tenants, setting out the reasons for the proposed works. Details of three estimates were delivered to tenants, with no observations or comments made on these. Later, the management company served notice on the tenants to advise that one of the contractors had been appointed, together with the £10,200 demand.

At First-tier Tribunal, the Court held that the statutory consultation process set out in the Landlord and Tenant Act 1985 had not been sufficiently completed due to a lack of detail in estimates. The tenants’ contributions to the works were therefore held to be limited to £250 per tenant.

The management company appealed.

The law

Under s.20 of the Landlord and Tenant Act 1985, a landlord (or, as in this case, a management company) must conduct a consultation procedure with tenants:

• when it proposes to carry out major building works where each tenant’s contribution is calculated to exceed £250, or
• where it proposes to enter into a long-term agreement to provide services where each tenant’s contribution is calculated to exceed £100.

The procedure requires a landlord to serve notice on the tenants, containing details of the proposed works and why the landlord deems them to be necessary. The notice must specify how tenants can submit their views and state an address and timescale; tenants can also require the landlord to obtain estimates from particular contractors.

The parties in 23 Dollis Avenue accepted that the management company had complied with its obligations to give notice and the tenants had not specified any particular contractors from whom the management company should obtain estimates. The management company had not provided a statement of estimated costs of the works, however; its statement also included additional works.

The tenants contended whether the management company was therefore limited to a recovery of £250 contribution per tenant.

The decision

The Upper Tribunal held that, firstly, the tenant’s contribution as indicated under the statutory provisions refers only to the works proposed to be carried out in the immediate term, not in respect of future additional works.

The statutory terms do not limit tenant contributions, save that s.19 of the Landlord and Tenant Act 1985 states that service charge payments made in advance must be reasonable, based on a reasonable decision-making process by the landlord and a reasonable amount to be charged under the circumstances. The statutory £250 limitation applies only where works have been completed and a consultation procedure has not been conducted beforehand.

The consultation process did not need to be conducted in this case in order to recover a sum exceeding £250 per tenant in respect of proposed works, and the management company was able to correct its lack of sufficient estimates in order to meet the statutory requirements. Therefore, the UT held that payment of an advance service charge was reasonable and the respondents were ordered to pay an additional £7,560.50.

J B Leitch comments on the decision:

“As the judge commented in 23 Dollis Avenue, it is important for tenants to voice concerns where they object to proposed works and the reasonableness of costs to be incurred. From a landlord’s viewpoint, provided that the relevant consultation procedure is adhered to, where no substantive objections are raised it can assume that the works are approved. Landlords and management companies are reminded to obtain legal advice before carrying out works to ensure that, where required, the statutory procedure is conducted to ensure that tenant contributions are not limited.”