Service Charges: Appeal considers when a landlord may depart from statutory service charge consultation requirements (Aster Communities v Chapman and others – 2021)

This latest Court of Appeal judgment updates our earlier report on the Upper Tribunal’s decision in this case, which can be found here. The Upper Tribunal had dismissed the landlord’s earlier appeal, finding that the First-tier Tribunal’s judgment had been correct. The landlord was granted dispensation from the consultation requirements, but this was conditional on the landlord paying the lessees’ costs in obtaining an expert report.

The background

In Aster Communities v Chapman and others [2021], the landlord had carried out works to a large development comprising 5 blocks and sought to recover the costs of such works from lessees through the service charge. Consultation had not taken place in respect of one particular aspect of the works relating to asphalt replacement on balconies, and lessees argued that they had been unable to obtain expert advice as a result.

The FTT granted dispensation to the landlord from the statutory consultation requirements, but this was conditional on the landlord paying the costs of the lessees’ expert report. The Upper Tribunal dismissed the landlord’s appeal against the condition, finding that it was not at liberty to interfere with the FTT’s exercise of its discretion where this was done properly upon the hearing of evidence.

The landlord appealed further, asking the Court of Appeal to consider:

1. Whether the FTT’s decision that the lessees would have instructed an expert report if they had been consulted on the asphalt works was wrong;
2. Whether the FTT had disregarded a relevant consideration in that no lessees had raised objections to the landlord’s notice of intention and its omission of the asphalt works;
3. Whether one lessee was able to rely on other lessees acting differently if the consultation notice had included the asphalt works, so that other lessees did not suffer relevant prejudice;
4. Whether the conditions on the dispensation were legitimate.

The decision

The Court of Appeal dismissed the landlord’s appeal, agreeing with the decision of, and conditions imposed by, the FTT, which it found were reasonable.

It was within the FTT’s jurisdiction to reach a conclusion that the lessees would have acted differently and instructed an expert report had the asphalt works been included in the landlord’s notice. No evidence could be found to demonstrate that the FTT had not taken into account the lessees’ lack of complaint about the landlord’s notice of intention.

All lessees were to be treated in the same way, such that where they all suffered the same prejudice, they were all also entitled to the same benefit. Consultation was a group exercise, where every participant received the same information, and the landlord’s application for dispensation applied to all lessees equally. The FTT was entitled to make the dispensation granted to the landlord conditional on all lessees receiving the same compensation, as all lessees would benefit from a reduced service charge or cost of works.

The Court of Appeal upheld the FTT decision and the conditions imposed on the landlord’s dispensation.

Advice and action

This further appeal decision supports our earlier advice to landlords to ensure statutory processes are carefully and closely followed.

The upheld decision of the FTT concluded that lessees would have instructed an expert report on the asphalt works had the notice of intention of works not been defective. This was critical to the Court of Appeal’s decision, and the conditions imposed by the FTT on the landlord to fund the expert report required. As ever, landlords are advised to take legal advice prior to commencing any major programme of works to ensure that all aspects of the schedule are included in the consultation process.