JB Leitch successfully represents landlord in application for dispensation from s.20 consultation requirements

JB Leitch acted for our landlord client in a successful application for dispensation from the consultation requirements of s.20ZA Landlord and Tenant Act 1985, made in respect of works to install a common fire alarm and fire safety remediation works to the external façade of the building.

The background

JB Leitch was instructed by our landlord client to make this recent application to the First-tier Tribunal (“FTT”) in respect of a 15-storey residential block in the South East. The property, originally constructed as an office building in the 1950s, contains 73 residential units which are subject to long leases, and reaches a height of 45.9m.

Following inspection of the building, it was discovered that combustible materials were present in the building’s external façade. As a result of the risk to safety, interim fire safety measures were required in addition to works to remediate the external façade. A waking watch was implemented, and the need for a replacement common fire alarm system identified.

The landlord proposed to undertake remedial works via a JCT Design and Build contract following a competitive tender process, and further registered the property with the Building Safety Fund which, although having released some initial consultancy funds, was delayed due to a requirement for reassessment under the more recent PAS9980 methodology.

The fire alarm system was, however, installed urgently in order to potentially remove the waking watch patrol which was financially burdensome for the leaseholders. Some of the costs were covered by the government’s Waking Watch Relief Fund but leaving a surplus of £27,068 to be sought from leaseholders.

Under s.20 of the Landlord and Tenant Act 1985 and 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, which would be the case here.

The landlord commenced the statutory consultation process by issuing a Stage 1 Notice of Intention in respect of the external works to leaseholders, and provided general updates to leaseholders throughout. Arguing that the consultation procedure is incompatible with the Design & Build contract, the landlord then sought dispensation from the statutory consultation procedure in respect of the main works to the building’s façade. Dispensation of the consultation requirements in relation to the fire alarm install was sought retrospectively owing to the urgency of those works.

The landlord did not consider that dispensation from the consultation requirements would cause relevant financial prejudice to the leaseholders. The FTT received a number of objections to the application from leaseholders, including a query as to the amount of funding to be received from the BSF which the leaseholder argued should be ascertained before dispensing with consultation requirements. 54 other leaseholders sought orders in respect of limitation of costs and an order to reduce or extinguish liability to pay administration charges in respect of litigation costs.

The leaseholders were willing to consent to dispensation but sought that conditions be imposed in the following terms:

1. The landlord is to make a payment of £140,000 into the service charge account to represent what the leaseholders said to be wasted waking watch costs which could have been prevented had the landlord accepted the leaseholders’ proposed solution and installed the alarm earlier, using their appointed contractor.
2. Payment by the landlord of the legal costs incurred in responding to the application;
3. An indemnity to be provided by the landlord of up to £40,000 in respect of expert advice on the main works; and
4. Information to be provided by the landlord in respect of the progress of the building safety fund and any attempts to recover from third parties.

The decision

Determining whether it was reasonable to dispense with consultation requirements and, if so, on what terms, the FTT granted dispensation in respect of both the interim and main works, save for in respect of “any other works recommended by a fire engineer” which the FTT considered to be too wide.

The leaseholder’s objection relating to the BSF funding and uncertainty over the costs was not considered realistic by the Tribunal, which stated that it was in all parties’ mutual interest that the BSF application was as successful as possible, and obvious that a common fire alarm system would be cheaper than a waking watch.

The landlord argued that the leaseholders suffered no prejudice as a result of the landlord choosing to appoint its preferred contractor; the leaseholders’ contractor had presented a higher quote for the works. Further, the landlord could deal with any prejudice relating to the uncertain scope of works, and by the Design & Build contract, by providing a copy of the later survey, yet to be undertaken, and the contract and allowing for a period of observation.

The FTT agreed that the condition sought by the leaseholders in relation to the landlord making a contribution to the service charge in the sum of £140,000, was not a reasonable condition to impose. The FTT stated that the prejudice claimed by the leaseholders in this regard had no relation to the breach of consultation requirements and that there needs to be a causal link between the prejudice and the breach.

Given the element of uncertainty around the works to be undertaken, the FTT imposed  some conditions to balance the risk of prejudice caused to leaseholders against the landlord’s choice of Design & Build process and the unknown BSF sum.

The FTT granted an indemnity as to costs for the leaseholders’ Fire Engineer in the sum of £20,000+VAT, and agreed that the leaseholders were entitled to their costs in relation to the dispensation application in the sum of £16,500+VAT.

The grant of dispensation was also made conditional upon the landlord supplying to the leaseholders copies of the BSF application and correspondence, together with information relating to steps taken to recover costs of remedial works from any third party, copies of inspection reports and the Design and Build Contract, and to provide regular information to leaseholders with updates on the remedial works. The leaseholders were not to be responsible for the landlord’s costs in making the application.

Advice and action for landlords

JB Leitch is pleased to have secured a further grant of dispensation from the consultation requirements on behalf of our landlord client.

Considering relevant prejudice which may potentially be caused to leaseholders as a result of a lack of consultation, the FTT found that this could be balanced by the attachment of reasonable conditions, permitting works to proceed whilst ensuring leaseholders had access to the information required to resolve queries or concerns.