If the boilers pack up and there’s no hot water or heating, leaseholders and residents will want it fixed quickly.
For urgent works like this, can you go ahead and carry out the work without consulting leaseholders?
This is a variation on a question that comes up time and again with emergency major works projects.
In this short article, Brady Solicitors’ Jeremy Weaver reviews a recent case where a freeholder undertook emergency works to fix a broken boiler system without correctly consulting the leaseholders – and ended up out of pocket. We also explain the section 20 consultation process and leaseholder prejudice.
Marshall v Northumberland & Durham Property Trust Ltd
In this recent case, the freeholder had applied to the FTT for dispensation for consultation following urgent boiler repair works. The freeholder had started the consultation process but had abandoned it at an early stage and not all leaseholders were consulted. Additionally, the freeholder had not made an urgent application for dispensation from consultation.
The FTT granted ‘unconditional dispensation’ for four reasons:
- The works were urgent;
- The freeholder had begun to consult: it had sent out stage 1 notices of intention;
- The leaseholder was made aware of possible works before buying his property;
- The FTT “was not swayed” by the leaseholder’s evidence.
The leaseholder was permitted to appeal to the Upper Tribunal on two grounds:
- There had been no assessment of prejudice to the leaseholders
- Every leaseholder should have had an opportunity for consultation
Before we go on, here’s a quick reminder of the rules on consulting leaseholders for major works. Skip to the next section if you’re already familiar with this!
If you’re going to be carrying out major works that will cost any one leaseholder more than £250 in a calendar year, you must follow the statutory Section 20 consultation process as set out here.
If you don’t consult, then you may not be able to recover more than this £250 from each leaseholder – and this generally doesn’t go very far in most major works projects! So, consultation is key.
There are however times when work is so urgent that it needs to be carried out before leaseholders can be consulted. In these situations, you can apply to the FTT for retrospective dispensation from consultation, under Section 20Za of the Landlord & Tenant Act 1985.
This requires the freeholder to explain and justify why the consultation process was not adhered to and, importantly, to demonstrate that the leaseholders have not suffered any prejudice through the lack of consultation.
What did the Upper Tribunal decide in Marshall v Northumberland?
The Upper Tribunal found that the FTT had failed to properly consider these two key points, namely the lack of consultation and the consequences of this on the leaseholders.
“Such obligations are part of the background to the whole of the statutory regulation of service charges and cannot be a reason for disregarding the safeguards provided for leaseholders or granting blanket dispensation simply because work was urgent.”
The Upper Tribunal said that this was an error of law by the FTT and made a fresh determination.
Dispensation from consultation was granted, but with a reduction of circa 15% in costs to the leaseholders and a requirement to pay the leaseholder’s costs of responding to the dispensation application, including the Tribunal fees.
Our advice at Brady Solicitors is to always endeavour to correctly follow the Section 20 process. You might find this Guide to the Notices helpful with this.
However, we appreciate that with emergency works this is not always possible and you may need to apply for retrospective dispensation.
In these situations, the key point to note is that urgency does not replace the need to consider prejudice to the leaseholders.
Whilst the now infamous 2013 case of Daejan placed the burden of proving prejudice firmly onto the leaseholders, this was effectively overturned by Aster v Chapman in 2021 making it much harder (and more expensive!) for freeholders to secure dispensation.
On a practical perspective, we would encourage you to give leaseholders as much information as possible in advance of any emergency works to assist with any future application for dispensation.
The Brady Solicitors team has been guiding managing agents through the section 20 and section 20Za processes for well over a decade.
For expert advice in this area and help with securing dispensation from consultation if necessary, please do get in touch.