Question 1

Section 20 requirements

Accepted Answer

Our landlord, a large and well-known company, has recently carried out major refurbishments to our block, but, we believe, did not consult us beforehand as required by Section 20. The situation is slightly complicated because as the refurbishment progressed, they found previously unknown problems for which they then hurriedly also ‘consulted’ us on, giving us only seven days to respond. If, as we suspect, the company did not consult us as the law requires, are we entitled to withhold payment for the works? The FPRA replies: You say that no consultation took place here. The notice issued in October 2012 does refer to a previous consultation notice issued in May 2012, but that does not of course mean that a proper consultation actually did take place. The consultation period of seven days referred to in the Octover Notice is too short, but the landord might argue that this is reasonable given that the need for the additional works became evident whilst the original works were being carried out. Until very recently I would have been able to advise you that it was likely that a failure to consult would mean that the landlord would be capped at charging no more than £250 per flat in respect of the works, unless they could get the Leasehold Valuation Tribunal (LVT) formally to dispense with those requirements. I would also have said that it was unlikely that the LVT would dispense with consultation if the landlord had flagrantly disregarded the consultation requirements. But the recent Supreme Court case of Daejan v Benson has entirely changed that (the decision was given only on 6 March 2013). The Supreme Court has rejected the idea that a failure to consult means that the excess over £250 per flat is irrecoverable. The Court has ruled that the purpose of s 20 is to protect leaseholders from having to pay more than they otherwise would, and that, if a ground landlord fails to consult, the leaseholders can expect to have the service charges reduced by whatever they would be likely to have saved had the ground landlord gone through the consultation procedures. The decision was given so recently that we are exploring new ground here, but what it must, I think, mean is that you would need to obtain equivalent quotations from other contractors confirming that the work could have been done more cheaply. In practical terms, this might be difficult, given that contractors will not be very keen to spend time inspecting the premises and drawing up quotations for work that has already been done! Also, it may be difficult now to judge the state that the balconies were in before the work was carried out. You might, in practice, need to get the expert opinion of a building surveyor as to what a reasonable cost should have been. You would then all decline to pay the element of the service charge that related to the work on the balconies (alternatively you could apply to the LVT for a ruling to this effect). The landlord would then apply to the LVT for dispensation from the consultation requirements. If you produced no evidence to challenge the quotation from the landlord’s builder, it would seem likely that the LVT would grant the dispensation, and you would have to pay in full, but if you could show that the work should have been carried out more cheaply, the dispensation would be on the basis that the cost was reduced by an appropriate amount. Again, the decision is so recent that (to change metaphors) we are navigating in uncharted waters, but my reading of the Supreme Court decision is that, if the landlord has to apply to the LVT for a dispensation from going through the consultation procedures on the basis that they simply overlooked them, you can expect the LVT to rule: (a) that the landlord would have to pay the legal and tribunal costs incurred in making their application to the LVT, and that the LVT would order that they should not be added to the service charge account; and (b) that the landlord should also pay any legal costs that you incur on obtaining advice on this; and further (c) although this specific point did not arise in Daejan v Benson, it would seem to me to be implicit in the judgment that, if there was a culpable failure to consult, and you have to incur expense in obtaining an expert opinion on whether the charges that they incurred were reasonable, it should follow that the LVT would then order the landlord to bear your expenses, as a condition of the LVT granting the landlord a dispensation. I appreciate that this reply may come as a disappointment to you, but I can advise only on the law as I see it. Yours sincerely Nicholas T M Roberts, BA, LLM, PhD Legal Adviser, FPRA Ltd.

Question 2

Section 20 requirements

Accepted Answer

Our landlord, a large and well-known company, has recently carried out major refurbishments to our block, but, we believe, did not consult us beforehand as required by Section 20. The situation is slightly complicated because as the refurbishment progressed, they found previously unknown problems for which they then hurriedly also ‘consulted’ us on, giving us only seven days to respond. If, as we suspect, the company did not consult us as the law requires, are we entitled to withhold payment for the works? The FPRA replies: You say that no consultation took place here. The notice issued in October 2012 does refer to a previous consultation notice issued in May 2012, but that does not of course mean that a proper consultation actually did take place. The consultation period of seven days referred to in the Octover Notice is too short, but the landord might argue that this is reasonable given that the need for the additional works became evident whilst the original works were being carried out. Until very recently I would have been able to advise you that it was likely that a failure to consult would mean that the landlord would be capped at charging no more than £250 per flat in respect of the works, unless they could get the Leasehold Valuation Tribunal (LVT) formally to dispense with those requirements. I would also have said that it was unlikely that the LVT would dispense with consultation if the landlord had flagrantly disregarded the consultation requirements. But the recent Supreme Court case of Daejan v Benson has entirely changed that (the decision was given only on 6 March 2013). The Supreme Court has rejected the idea that a failure to consult means that the excess over £250 per flat is irrecoverable. The Court has ruled that the purpose of s 20 is to protect leaseholders from having to pay more than they otherwise would, and that, if a ground landlord fails to consult, the leaseholders can expect to have the service charges reduced by whatever they would be likely to have saved had the ground landlord gone through the consultation procedures. The decision was given so recently that we are exploring new ground here, but what it must, I think, mean is that you would need to obtain equivalent quotations from other contractors confirming that the work could have been done more cheaply. In practical terms, this might be difficult, given that contractors will not be very keen to spend time inspecting the premises and drawing up quotations for work that has already been done! Also, it may be difficult now to judge the state that the balconies were in before the work was carried out. You might, in practice, need to get the expert opinion of a building surveyor as to what a reasonable cost should have been. You would then all decline to pay the element of the service charge that related to the work on the balconies (alternatively you could apply to the LVT for a ruling to this effect). The landlord would then apply to the LVT for dispensation from the consultation requirements. If you produced no evidence to challenge the quotation from the landlord’s builder, it would seem likely that the LVT would grant the dispensation, and you would have to pay in full, but if you could show that the work should have been carried out more cheaply, the dispensation would be on the basis that the cost was reduced by an appropriate amount. Again, the decision is so recent that (to change metaphors) we are navigating in uncharted waters, but my reading of the Supreme Court decision is that, if the landlord has to apply to the LVT for a dispensation from going through the consultation procedures on the basis that they simply overlooked them, you can expect the LVT to rule: (a) that the landlord would have to pay the legal and tribunal costs incurred in making their application to the LVT, and that the LVT would order that they should not be added to the service charge account; and (b) that the landlord should also pay any legal costs that you incur on obtaining advice on this; and further (c) although this specific point did not arise in Daejan v Benson, it would seem to me to be implicit in the judgment that, if there was a culpable failure to consult, and you have to incur expense in obtaining an expert opinion on whether the charges that they incurred were reasonable, it should follow that the LVT would then order the landlord to bear your expenses, as a condition of the LVT granting the landlord a dispensation. I appreciate that this reply may come as a disappointment to you, but I can advise only on the law as I see it. Yours sincerely Nicholas T M Roberts, BA, LLM, PhD Legal Adviser, FPRA Ltd.

Section 20 requirements

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