Not quite, explains Jeremy Weaver of Brady Solicitors, but the Aster case will make life harder – and more costly – for freeholders and their managing agents when it comes to securing dispensation from consultation.
It’s a well understood requirement of the Landlord and Tenant Act that leaseholders must be consulted if any works will cost a leaseholder more than £250 – if the freeholder is to be able to recover the costs through the service charge.
Clearly, it isn’t always possible to follow the consultation procedures and so freeholders can make a section 20ZA application to the First-tier Tribunal, for dispensation from consultation.
Since the precedent set by the Supreme Court case of Daejan v Benson in 2013, leaseholders have had to prove that a lack of consultation has prejudiced them. It was no longer enough to rely on procedural errors in the consultation process. Proving this prejudice can be difficult, and so Daejan has meant that freeholders and their managing agents have been largely successful in securing dispensation from consultation and have therefore been able to recover the sums from leaseholders.
So what happened in the Aster v Chapman case?
Aster, a large freeholder, had applied to the FTT for a determination of the service charge following a set of major works. The FTT found that one element, the asphalting, was not necessary and so the costs could not be recovered. Also, it was not part of the section 20 major works consultation.
Aster then went back to the FTT to apply for dispensation for consultation.
41 leaseholders objected and said they did not have enough information to enable them to get expert advice as to the need for the asphalting. The evidence provided by Aster to show why the asphalting was needed and not been presented in either the reasonableness or the dispensation hearings at the FTT.
The FTT granted dispensation from consultation but ruled that the freeholder must pay the cost of the leaseholders’ application and for the expert assessment of the asphalt replacement work.
The judge found that it was unreasonable to expect leaseholders to get expert advice to prove prejudice in advance of a s207a application:
“It seems to me that to have expected the lessees to instruct an expert in order to conduct a survey and to comment upon the necessity of the works to the balconies as a precursor to the current application would have been unrealistic. The landlord had failed to consult the lessees adequately and then carried out the works to the balconies with the intention of recovering its costs through the service charge. It presented the lessees with a fait accompli.” HH Judge Stuart Bridge
This effectively nullified the precedent set in Daejan, where the burden of proof was placed firmly on the leaseholders to show they had been prejudiced by a lack of consultation.
The freeholder appealed to the Upper Tribunal, but this was dismissed and the FTT’s decision upheld.
A renewed focus on section 20c major works consultations
The Aster case should encourage freeholders and their managing agents to focus attention on getting the section 20 consultation process right from the start.
With the Tribunal setting a precedent for ordering the freeholder to pay the leaseholders’ expert investigation costs, securing dispensation with no financial penalty may become a thing of the past – particularly where the leaseholders dispute the scope or necessity of the works.
The Brady Solicitors team has been guiding managing agents through the section 20c consultation process for over a decade. For expert advice in this area and help with securing dispensation from consultation if necessary, please do get in touch.
Read the judgment in full here