ISSUE No.105 Summer 2013
LEASEHOLDERS “BAMBOOZLED” BY THE EDITOR
Another legal judgement has caused further chaos and confusion for leaseholders in the field of Section 20 consultation. The upshot of the latest ruling is that leaseholders cannot refuse to pay more than the £250 per flat limit for major works because the landlord failed to follow the S20 procedures correctly.
Hot on the heels of the Phillips and Goddard v Francis case (reported in newsletter 104), we now have Daejan Investments v Benson. Until now the provision in the Landlord and Tenant Act 1985 was believed to rule that, if the freeholders did not follow the proper S20 procedure on renovations (and/or did not get dispensation from the Leasehold Valuation Tribunal) they could not add the whole cost to the service charges, but were limited to £250 per lessee. However, the Supreme Court has now ruled that this will only apply if leaseholders have suffered “relevant prejudice” as a result.
Leaseholders will now have to prove they lost out by showing that they could have found a contractor to do the work more cheaply. This could be a difficult task.
FPRA Chairman Bob Smytherman, said: “Managing agents will use decisions like this to bamboozle leaseholders into extra expense. They will be carrying out unnecessary bureaucratic works and charging it to the service charges account.”
Leaseholders had already been campaigning for reform of the limited protections of the consultation regulations, and the latest judgment would make things “substantially worse, making our processes even more complex,” he said.
INSIDE THIS ISSUE
What Legislation Applies to Us? 3 Your Guide to Mould Ask the FPRA Legal Jottings
4 6 9
Daejan owned Queens Mansion in Muswell Hill, north London, where five flats were held under long leases. The property’s management company complied with only part of the consultation requirements for a major renovation in 2005. Daejan wanted £280,000 from the leaseholders for the work, but offered a reduction of £50,000 during legal proceedings. A LVT refused to give the company a dispensation from the requirements. Thereby Daejan was only due £1,250 for the work. The court of appeal backed the leaseholders, but the Supreme Court ruled in favour of Daejan. Lord Neuburger’s ruling meant that the leaseholders had to show they were out of pocket as a result of the failure to consult properly, and the offer of £50,000 more than covered any harm they might have suffered.
“UNCHARTED WATERS” FPRA Legal Adviser, Nick Roberts, answers a member’s question directly affected by this ruling.
QUESTION 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?
NICK 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 October Notice is too short, but the landlord 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 Continued on page two
| Page 2
| Page 3
| Page 4
| Page 5
| Page 6
| Page 7
| Page 8
| Page 9
| Page 10
| Page 11
| Page 12