Landlord loses service charge appeal after failing to consult tenants

A landlord has lost its appeal against a decision that it could not impose service charges for certain works because it had failed to consult tenants properly.

The landlord owned several flats let on long leases. It carried out various works to the flats and, in 2017, sought to recover the cost from the lessees through the service charge.

It applied to the First Tier Tribunal (FTT) for a determination of how much the charge should be.

The FTT held that one aspect of the works, the complete replacement of the asphalt on balcony areas, had been unnecessary and its cost could not be passed on through the service charge. It also held that the asphalt replacement had not been part of the pre-works consultation conducted by the landlord as required by the Landlord and Tenant Act.

The landlord applied for dispensation from the consultation requirements so that it might again try to include the cost of the asphalt work in the service charge.

The lessees objected, arguing that the lack of consultation had deprived them of the opportunity to seek expert advice on the work and to assess whether there was a more economic approach.

The FTT found that the lessees had made out a credible case that they had been prejudiced by the lack of consultation.

In reaching that decision, it relied on evidence of one lessee (M) that she would have referred to an expert had the scale and extent of the balcony works been properly communicated at the start of the consultation process.

However, it granted dispensation on condition that the landlord paid the reasonable costs of an expert to advise the tenants on the necessity of replacing the asphalt plus the tenants' reasonable costs of the dispensation application.

The landlord appealed, arguing that the lessees had not shown prejudice because they had not adduced expert evidence that the asphalt replacement was unnecessary.

The case went all the way to the Court of Appeal, which upheld the tribunal’s decision.

It held that the FTT had been entitled to find that M would have commissioned a surveyor's report had the landlord's notice of intention referred to the balcony works.

M had inspected the estimates and put in observations, which made it the more plausible that she would have instructed an expert.

Consultation was a group process in which a landlord had to supply each tenant with notice of their intention to carry out works. If all tenants suffered prejudice because a defect in the consultation process meant that one had not persuaded the landlord to limit the cost of works in some respect, there was no reason why the FTT should be unable to make dispensation conditional on every tenant being compensated.

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