The Supreme Court, in the case of Daejan Investments v Benson (PDF) has produced a judgment that undermines protections for leaseholders of blocks of flats when faced with big repairs by their landlords – and on the face of it flies in the face of the will of Parliament in how those protections should work.
Under the Landlord and Tenant Act 1985 Section 20 any lessees in a block of flats have to be consulted regarding works done for the benefit of the whole block, the costs of which would go onto the service charges and cost more than £250 each. The main reason is that such works can be costly and lessees should have some say in the cost, their own “relevant contribution” under the terms of the lease and necessity for the work. Section 20ZA (5) of the Act outlines regulations that include lessees being given details of the works, possibly via a tenants’ association, along with estimates for the work. The lessees might suggest other builders from whom to get estimates and have other observations about how the work should be done.
Failure to consult comes with a big penalty for landlords. They can seek dispensation from a Leashold Valuation Tribunal (LVT), but if they fail they may be limited to recovering a fixed sum of only £250 per lessee for the work, whatever the actual expenditure.
Section 20ZA (1) says: “Where an application is made to a leasehold valuation tribunal for a determination to dispense with all or any of the consultation requirements in relation to any qualifying works or qualifying long term agreement, the tribunal may make the determination if satisfied that it is reasonable to dispense with the requirements.”
This was the situation for Daejan Investments who wanted to recover £280,000 through service charges for major works on Queens Mansion in Muswell Hill, North London. Continue reading