A landlord’s requirement to consult leaseholders about major service charge works has always been a difficult area for landlords.
A small error in any stage of the consultation process could render the consultation defective and as a result limit the amount that the landlord can recover from each leaseholder to £250. This can be a massive worry for landlords who may be carrying out works of a substantial value.
The Supreme Court has now issued some welcome guidance for landlords in the recent decision of Dejan Investments Limited v Benson and Others [2013]. In that case the Leasehold Valuation Tribunal and the Court of Appeal had agreed that minor errors in the consultation procedure meant that the landlord should only recover £250 per leaseholder. The cost of the works was just under £280,000. The Supreme Court disagreed.
The important guidance points from the decision are:
- The Tribunal should look at whether the tenant has suffered any relevant prejudice by the failure in the consultation process.
- The purpose of the consultation is to protect tenants regarding service charges. Undue weight should not be given to the landlord’s non-compliance.
- The Tribunal can grant dispensation from service charge consultations on appropriate terms to achieve a fair balance between landlords and tenants.
The hope is that the Tribunal will now grant more dispensations in appropriate circumstances, particularly where minor errors have occurred and where the tenants have not suffered any prejudice as a result.
However landlords still cannot afford to be complacent about the obligations to carry out proper section 20 consultations.
By commercial solicitor, Louise Hebborn
Louise provides advice to landlords on all stages of the section 20 consultation process. Contact her by email: loh@stephensons.co.uk
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