LEGAL Advice ABOUT?


WHAT’S ITALL


VBENSON: DAEJAN Theresidents objected to paying.Daejan NEIL SPURRIER considers the


implications for flat owners of the recent landmark decision in the Supreme Court


THE SUPREME COURT GAVE itsjudgement in thecaseofDaejanvBensonon6March,the case having been heard in December. Flat ownersmayhaveheard of this casebeforebut maynot understandwhy it is importantto themand their fellow residents. Thejudgement is importantbecauseit


hasaltered theway that LeaseholdValuation Tribunals(LVTs)willhavetoconsider applications by landlordswho wantto dispense with theconsultationrequirements forworks to be carried outonblocksofflats. Underthe servicechargeprovisionscontained in residential long leases, there is a statutory consultation processthatmustberespected by landlordsbeforetheycan spendresidents’ money.The changesmade to this process by thejudgement areconsiderablebut they only cameaboutbythe skin of theirteeth. The SupremeCourt was split and gave its judgement by three to two. Priortothe SupremeCourt’sjudgement it


was assumed that if a landlord wanted to get retrospective authority to carry out service charge works under section 20(ZA) of the Landlord andTenantAct 1985,itwould have to show absolutelynoprejudicetothe tenants by itsfailure to comply with theconsultation requirements.Thiswas set outbythe Court of Appeal in Daejan v Benson [2011] andthen followed by theUpper Tribunal in thecaseof Stenau Properties v Leek [2011].


THE CASEABOUT? Daejan were the owners of a seven flat build- ingatQueensMansions,London.Fiveofthe sevenflatswerelet outonlongleases and there was a shop on the ground floor. The


Flat Living Issue 14, Spring WHATWAS


Thechanges made by the


judgement are considerable


residential tenants had a residents’ associa- tion. Daejan needed to carry out substantial maintenance and repair work to the build- ing, a proportion ofwhich was to be charged underthe servicechargeprovisionsinthe five leases.The totalcost of theworks wasto be around £425,000 with £280,000 attribut- able to thefive longlease residentialflats amounting to £56,000 per flat. If the section 20 consultation requirements underthe 1985 Landlord&TenantAct were notfollowedand


It is stilluptothe landlordto prove theamountofthe damage


no dispensation granted, thecontributions per flat would go downto £250making a total re-imbursement to thelandlord of £1,250 – quite a difference! Daejan failed to follow thesection 20


procedurecorrectly.Itservedaninitial notice, enteredintoconsultations with theresidents’ associationand obtained twoestimates, but failed to provide copies of theestimatesorgive reasonsfor choosing theestimate that they optedfor.InadditionDaejanfailedtoanswer specificquestions posedbythe residents’ associationalthoughthere wassubstantial correspondence betweenthe partiesoverthe works. The LVT found that the residents were not unaware ofwhat was going on, apart from thefinalchoiceofcontractororthe reason for that choice.


offered acontributionof£50,000 towards the cost of theworks to compensate themfor the lack of consultation. The tenants still refusedtopay.Daejanapplied to theLVT fordispensationunder section20(ZA). The LVT found that theworks needed doing and that the questions posed by thetenants that needed answering were dealt with at the LVT hearing.However


the LVT found that therewas prejudice to the tenants because they had beendeprived of theirrightstobefully consultedand informed. TheLVTstated that it couldnot specifically cost the £50,000 offer and therefore ruled that it should be ignored. As the tenants had been prejudiced by thelackofconsultation, dispensationwas refused andDaejan could only recover £250 per flat.


DECIDED AT APPEAL? Daejan appealed to the Upper Chamberwho rejected their appeal as did the Court of Ap- peal.Daejanthenappealedtothe highest court, the SupremeCourt. Lord Neuberger gave theleading judgement on behalf of three of thefive judges. TheSupremeCourtreversed theCourt of Appeal’s decision,findingthat LVTs should properly enquireofdamagedone by thelackofconsultation. It is stilluptothe landlord to prove theamountofthe damage in order to getthe dispensation.However, in the SupremeCourt’s view, it is perfectly possible forthe LVTtogrant dispensation upon terms. So if thereare payments to be made by the landlord, including a reimburse- ment of part of thebuilding costsorthe costs of tribunal or courthearings, theLVT can buildthisintotheir dispensation order.The threejudgesfound that thedamagecould be reasonably calculated fromtheevidenceand that damage waslessthanthe £50,000 offered by Daejan,sothatDaejanshouldbegiven dispensation undersection 20(ZA) andbeable to recoverthe expenditureafter giving credit for the £50,000 that they offered. Somewill seethisasaserious relaxation of


theconsultationrules so that therewillbeless incentiveuponlandlordstofollowthe rules. Othersmaysee this as abreathofcommon sense so that tenants will not be able to obtain substantial repair works to their properties for £250 each, simply on a technicality.●


NeilSpurrierConsultantSolicitor AstonRose(WestEnd) Ltd www.astonrose.co.uk


25 WHATWAS


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