As a landlord or managing agent, you have a statutory obligation to consult with leaseholders before carrying out major works to your properties if you are to recover the costs.
In certain circumstances, however, these requirements can be dispensed via an application to the FTT. Brady Solicitors’ Sam Andrews explains.
Section 20 of the Landlord and Tenant Act 1985 states that where leaseholders are required to contribute more than £250 towards the cost of a set of works, or more than £100 for service contracts of more than 12 months, the landlord must follow the Section 20 consultation procedure.
If the landlord fails to comply with the Section 20 consultation procedure, no matter how small the defect, every tenants’ contribution is capped at either £250 or £100, as set out above, and the remainder cannot be recovered.
This can lead to a significant shortfall which the landlord will have to bear.
However, all is not lost for the landlord if this is the case – they may be able to make an application for dispensation from Section 20.
Applications for dispensation from Section 20
Landlords can make an application under Section 20 to ask the Tribunal to dispense with the requirements to consult.
These applications will mostly be made in two sets of circumstances:
- Where the works are so urgent that the landlord does not have time to consult; or
- Where the landlord has made a mistake during the consultation process.
In a leading case on dispensation, Daejan Investments v Benson and others, the Supreme Court ruled that the only factor which is relevant in deciding whether to grant dispensation from Section 20 is the financial prejudice that the leaseholder has suffered as a result of the landlord’s failure to consult properly, and it is down to the leaseholder to show these losses.
In addition, the Tribunal will expect a leaseholder to suggest what observations they would have made if they had all the information available, effectively turning back the clock.
If dispensation is granted, the leaseholder will have to pay the full cost of the works, less any sum they can show they were prejudiced.
The Supreme Court’s approach does not seem particularly fair on leaseholders, who are often the innocent party; if the landlord is at fault, why should the leaseholder be faced with the burden of proving they have suffered a loss?
To even the playing field, the Supreme Court commented that once the leaseholder had made a reasonable case for prejudice, they should be given the benefit of the doubt and it would be for the landlord to rebut this.
Finally it is important to note that if it chooses to grant dispensation, the Tribunal can attach whatever conditions it sees fit. Usually, this includes an order that the landlord pays the leaseholder’s legal costs of dealing with the dispensation, but could include any other relevant factors which the Tribunal decides.
Need more information?
If you are a landlord or managing agent and need advice about applying for dispensation from Section 20, contact Brady Solicitors’ major works specialists for guidance. Call us on 0115 985 3450 or click here to contact us.
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