Q&A: Providing clarity on section 20 consultations

Hope Barton and Aaron Walder answer a question on section 20 consultations for works on residential properties under the Landlord and Tenant Act 1985.

Question

I am the landlord of a building that has been converted to six residential flats, all held on long leases. During the coldest week of the year, the communal heating system stopped working. I sent out notices to begin the consultation process, by post, on 16 November. I told the tenants they had until 16 December to reply. All but one of the tenants replied making general comments on the state of the building and complaining about the lack of communal heating but not suggesting any preferred contractors or disputing that the works were necessary. I completed the remaining consultation stages and engaged contractors but, during the course of the works, they became aware of asbestos encasing the boiler and did not have the appropriate certification to deal with this. Ultimately, new contractors were engaged who were able to complete the works. The total cost was £60,000, and each tenant was charged £10,000 towards the works as part of their service charge because there is no provision in the lease for a reserve fund. After the works completed, the one tenant who did not respond provided evidence that another contractor could have done the works for £54,000. One of the tenants has said that the statutory maximum of £250 applies because I did not comply with section 20 of the Landlord and Tenant Act 1985. Should I fight the case on the basis I did consult properly?

Answer

No, you did not consult properly. However, you could seek a retrospective dispensation, which may well be granted.

Explanation

The first point to make is that these works appear urgent as they are in relation to communal heating during a cold period. As the Upper Tribunal (Lands Chamber) confirmed recently in Marshall v Northumberland and Durham Property Trust [2022] UKUT 92 (LC); [2022] PLSCS 56, urgency may be a reason to dispense with the consultation requirements but it is not reason enough alone. Prejudice must be considered.

The First-tier Tribunal will follow the approach in Aster Communities v Chapman [2021] EWCA Civ 660; [2021] EGLR 33, where it was explained that after Daejan Investments Ltd v Benson [2013] UKSC 14; [2013] 2 EGLR 45, the exercise of the jurisdiction to dispense with the consultation requirements stood or fell on the issue of prejudice. An absence of prejudice could occur because of the urgency to undertake the works but prejudice must be the focus. It cannot be assumed urgency negates prejudice.

With regard to the notices sent out, the “relevant period” in respect of a notice means the period of 30 days beginning with the date of the notice, pursuant to paragraph 2(1) of the Service Charges (Consultation Requirements) (England) Regulations 2003. In Trafford Housing Trust Ltd v Rubinstein and others [2013] UKUT 581 (LC); [2014] 1 EGLR 34, it was held that the “date of the notice” from which the relevant period of 30 days is calculated is the date on which the notice is given to the recipient – the usual date of service.

In this case, given the notices were posted on 16 November, there is no way they could have arrived on the same day. As such, they do not give the requisite 30-day period if the tenants were asked to respond by 16 December and are not compliant. The consultation requirements have not been fulfilled.

As confirmed in Collingwood v Carillon House Eastbourne Ltd [2021] UKUT 246 (LC); [2021] PLSCS 168, the requirements of the Regulations are strict and consequential. There is no room for flexibility in their interpretation. The fact that the failings were minor shortcomings is an irrelevant consideration.

In fact, all but one tenant responded to the consultation process anyway and none of them offered alternate contractors to obtain quotes from. As such, the failure to comply strictly appears not to have caused a great deal of prejudice. It is important to understand that while prejudice is the guiding factor in an application for a dispensation, it has no bearing when considering if there has been a breach in the first place.

It is not always necessary to begin the consultation process again in the event of a change of contracts, even where a new contractor is needed and the price increases. The Upper Tribunal confirmed in Wynne v Yates and others [2021] UKUT 278 (LC); [2021] PLSCS 194 that only one consultation is necessary in respect of “a set of works”.

Whether or not something amounted to a fresh “set of works” was a matter of fact and degree in the circumstances.

Finally, the fact that the one tenant who did not respond to the consultation can now offer evidence that the works could have been done cheaper may affect the application for dispensation.

It may be that the FTT considers that the breach has caused substantial prejudice, because that tenant was not able to compel the landlord to seek a different quote and thus refuse the application for dispensation. If the result of a proper consultation might have avoided unnecessary costs or inappropriate work, dispensation should not be granted for the costs of those works.

Alternatively, it may grant the application but subject it to conditions, as happened in Marshall. Provided it was accepted that the works were necessary but could have been done cheaper, the FTT might find that proper consultation would have resulted in a cheaper contract and thus could dispense with consultation but limit the relevant costs reclaimed via the service charge to £54,000.

This article was first posted by the Estate Gazette.

Hope Barton is an associate at Charles Russell Speechlys LLP and Aaron Walder is a barrister at Landmark Chambers

Questions on any topic can be e-mailed to egq&a@crsblaw.com and egq&a@landmarkchambers.com