Previously we reported on the Aster Communities v Chapman case concerning dispensation from consultation. The Upper Tribunal had refused to reverse the decision of the First Tier Tribunal, but it did grant permission to appeal to the Court of Appeal.
Brady Solicitors’ Jeremy Weaver explains the outcome of the appeal case and what it means to RMCs, freeholders and their managing agents.
To recap, 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 had not been presented in either the reasonableness or the dispensation hearings at the FTT.
The Tribunal found that there was relevant prejudice to the leaseholders and that it was unreasonable to expect leaseholders to get expert advice to prove prejudice in advance of a s20ZA application.
The FTT granted dispensation to Aster but on terms that included:
- A requirement that the freeholder pays the reasonable costs of an expert report advising the leaseholders on the necessity of replacing the balcony asphalt.
- A requirement that the freeholder pays the leaseholders’ reasonable costs of the application.
The Upper Tribunal refused to overturn this decision, but the matter then went to the Court of Appeal.
Aster argued that the FTT was wrong to conclude that one of the leaseholders would have acted differently if the notice of intention in the section 20 consultation had referred to the replacement of the asphalt.
The Court of Appeal dismissed this argument on the facts.
Secondly, Aster argued that the issue of “relevant prejudice” must be separately assessed for each leaseholder. Aster contended that each leaseholder must show that they as individuals would have acted differently had the Consultation Requirements been complied with.
The Court of Appeal rejected this argument and held that consultation “is a group process… a landlord seeks dispensation against tenants generally. If all tenants suffer prejudice because a defect in the consultation process meant that one of their number did not persuade the landlord to limit the scope or cost of works in some respect, I cannot see why the FTT should be unable to make dispensation conditional on every tenant being compensated.” Newey LJ
Finally, Aster argued that, in any event, it was not possible for the FTT to impose the dispensation conditions (1) and (2) above.
The Court of Appeal dismissed this. Newey LJ found condition (1), which required the freeholder to pay for an expert report was “a condition which the FTT was entitled to impose in the specific circumstances of this case”.
The Court of Appeal also noted that condition (2), which required the freeholder to pay the leaseholders’ costs of the application was along the lines of a condition imposed by the Court in Daejan and on that basis should be upheld.
This decision reinforces the fact that where relevant financial prejudice can be proven, dispensation may only be granted on terms, and that those terms will apply to all leaseholders at the property irrespective of whether they have all proven that they were prejudiced.
It remains important to get the section 20 process correct – or risk an expensive process to secure dispensation.