Service Charge Consultation: Successful application for dispensation from s.20 consultation requirements for JB Leitch

In this latest successful application by JB Leitch on behalf of our landlord client, the First-tier Tribunal has granted dispensation from the consultation requirements of s.20 Landlord and Tenant Act 1985  in respect of works to install a fire alarm and fire safety works to the external façade of the premises.

The background

JB Leitch made this recent application to the First-tier Tribunal (“FTT”) on behalf of our landlord client in respect of a 7-storey mixed-use block in Liverpool. The block contains commercial units to the lower storeys, with residential apartments above. Remedial fire safety works were required to be undertaken at the building, including the installation of a common fire alarm system, and removal and replacement of external wall systems, combustible cladding, balcony installations and external wood elements.

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.

During proceedings, the landlord was unaware of the extent (if any) the leaseholder protections under the Building Safety Act 2022 would apply. Further, the landlord’s application was issued in the Tribunal before the 2022 Act came into force.

The landlord sought dispensation from the statutory consultation procedure on the grounds that (1) the fire alarm works had been instructed urgently without a consultation process having been followed, (2)  the implementation of the fire alarm would remove the need for the waking watch patrol which was a significant financial burden to leaseholders and (3) the external remedial works were to be carried out as soon as possible via a Design and Build procurement route which is incompatible with the consultation requirements under section 20. The landlord had obtained competitive quotes for the works, and the building was eligible for a Building Safety Fund grant, for which the landlord had applied.

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. The landlord did not consider that dispensation from the consultation requirements would cause relevant financial prejudice the leaseholders.

Some leaseholder objections were received by the Tribunal, including grounds such as a belief that some of the proposed works may be unnecessary, that the works would be disruptive to residents, that the costs – estimated at over £8m – were high, that there is no longer a deadline for BSF applications meaning that the landlord could comply with consultation requirements, and that other parties such as the building’s developer should be responsible for the costs instead.

The decision

The FTT was satisfied that the landlord had good reason to undertake the works and to do so urgently. However, it stated that the urgency of the works is not a pressing reason for granting dispensation from consultation requirements.

Importantly, the Tribunal was satisfied that the landlord would find compliance with the consultation requirements difficult and impractical. It placed emphasis on the use of the Design and Build procurement route which it agreed was “inherently unsuited” to the consultation requirements. This is because the contract procurement route may generate different design solutions which are not easily comparable to one another in terms of cost, there may be multiple different means of achieving the same outcome and that the landlord had effectively adopted a “closed list” approach to potential contractors.

The FTT paid no regard to the respondent leaseholders’ concerns around whether the costs of the works could or should be recovered from the leaseholders or the developers because such considerations are not relevant to the consultation requirements.

Exercising its discretion, the First-tier Tribunal was satisfied that it was reasonable to do so and granted dispensation under section 20ZA of the 1985 Act in respect of the interim common fire alarm system installation and the external façade works. Further, the FTT went on to say that the landlord would have been unwise to have awaited the outcome of the legislative process for the Building Safety Act 2022 as it could have been amended or put on hold at any point.

On the issue of prejudice, the FTT said that the respondents had not set out what they would have done differently had the consultation been complied per the principles set out in Aster Communities v Chapman [2021] 4 WLR 74 and Wynne v Yates [2021] UKUT 278. The respondents had been unable to establish what specific prejudice they had suffered due to the landlord’s ability to consult.

Accordingly, unconditional dispensation was granted in respect of the fire alarm and external works (save for in respect of “any other works recommended by a fire engineer” which the FTT considered to be too wide).

Advice and action for landlords

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

The decision once again highlights the fact that relevant prejudice suffered as a result of a lack of consultation ought to be an FTT’s key consideration in deciding whether it is reasonable to grant dispensation.