Service Charge: Dispensation from statutory consultation where urgent works are required (Adriatic Land 3 Limited v Leaseholders of Sesame Apartments – 2021)

Where a landlord proposes to undertake urgent fire safety works at a residential block, can it obtain dispensation from the statutory consultation requirements under section 20 Landlord and Tenant Act 1985? J B Leitch successfully represented the freeholder in these proceedings.

The background

In Adriatic Land 3 Limited v Leaseholders of Sesame Apartments [2021], the freeholder proposed to undertake urgent works at a residential apartment block in London, including a) the removal and replacement of aluminium composite cladding, glazed curtain walling, Linit Glazing, window infill panels, other combustible elements of the building’s exterior and b) to incorporate suitable fire protection into cavities. The works were valued at over £3.5m+vat. The building contained 81 residential apartments, a youth club over 3 floors and a transformer chamber on the ground floor. The specimen lease contained a covenant on behalf of the tenant to pay service charges which included the cost to the landlord for works to the structural parts of the building.

The landlord’s agent issued section 20 notices to the tenants, however, the stage 2 notices did not include a schedule of all estimates and did not specify where and when the estimates might be inspected by the tenants.

Under the Service Charges (Consultation Requirements) Regulations 2003, the landlord is required to consult with tenants in respect of qualifying works where any tenant’s contribution will exceed a sum of £250. The landlord considered the works to be urgent given they were fire safety measures, and the works were also time-pressured as a result of the application to the ACM Cladding Remediation Fund and the requirements that the landlord were to comply with in order to achieve funding.

The landlord sought dispensation from the consultation requirements under section 20ZA of the Landlord and Tenant Act 1985 on the basis that if the landlord recommenced the consultation process it would cause significant delays to the essential works. The landlord further argued that the administrative errors contained within the section 20 notices issued by the agent were minor, and the failure to fully consult had not prejudiced the tenants.

The decision

The represented leaseholders agreed that the works were necessary and did not oppose the application, but requested that any dispensation be conditional upon the following:

1. That the landlord paid the represented leaseholders’ costs relating to the incorrect section 20 notices and the dispensation application;
2. That costs incurred by the landlord were not to be recovered from tenants by way of service charge; and
3. The landlord being obliged to have regard to the observations and reservations previously made on behalf of the represented leaseholders.

The First-tier Tribunal granted the landlord dispensation from consultation requirements in respect of the urgent fire safety works proposed. The grant was subject to 1) the landlord paying the respondents’ reasonable legal costs incurred in connection only with the dispensation application under section 20ZA and 2) the landlords’ own costs in connection with the application were not to be recovered by way of the service charge payable by the respondents.

In reaching its decision, the First-tier Tribunal made reference to the decision of Daejan Investments Ltd v Benson and others which provides the FTT with the requisite power to impose costs conditions on dispensation orders.

Advice and action for landlords

J B Leitch is pleased to have delivered a successful outcome for our landlord client in this application for dispensation from the statutory consultation requirements. With neither party in any doubt as to whether the works were necessary, and with understanding from both sides as to their urgency, the decision will enable works to be undertaken promptly.

Nevertheless, landlords are advised to be aware of the Tribunal’s ability to grant dispensation subject to conditions, which may include orders for costs in favour of the leaseholders and potentially, the barring of recovery of the landlord’s own costs through the service charge.