The majority of individuals responsible for dealing with leasehold property will be aware of the process to follow under Section 20 of the Landlord and Tenant Act 1985 (LTA). However, there are occasions when it isn’t followed, whether that be due to negligence, or more often than not, the works required are urgent and therefore consultation can’t be conducted before they begin.
What is a Section 20 consultation?
In short it is a consultation process provided to the leaseholders by those responsible for managing the property, which informs the leaseholders of the intention to carry out works that the leaseholders will be required to pay towards. This process will include information about the planned works and how much it is estimated to cost. It will also provide leaseholders with the opportunity to take part in the consultation process and comment on what is being planned.
What happens if you fail to consult in accordance with the regulations when required to do so?
In the case of major works, the amount which you can recover in respect of the cost of the works is capped at £250 per leaseholder irrespective of the cost of the works.
What do you do if you haven’t fully complied with Section 20 before work begins?
The alternative to the consultation process is an application to the First Tier Tribunal (FTT) under s.20ZA of the LTA for exemption from the consultation process, called Dispensation. The FTT is able to decide whether the request should be granted, and if it is, it also has the ability to impose conditions on such a grant. This is what happened in the case of Grey GR Limited Partnership v The Leaseholders at Vista Tower in Stevenage.
Vista Tower is one of many buildings in England that requires a waking watch, following the introduction of the BSA, as it is fitted with combustible cladding which needed to be removed. However, to reduce the cost to the leaseholders, the landlord looked to get a fire alarm fitted, which would have removed the requirement for a waking watch. There was however still the issue of the cost of resolving the cladding issue, which was around £10 million and payable by the leaseholders via the service charge.
Again, to reduce the cost to the leaseholders, the landlord applied for funding from the Building Safety Fund (BSF). This meant that the landlord would have to comply with certain criteria and deadlines, which they believed meant that they wouldn’t be able to fulfill the section 20 requirements, which led to their application to the FTT.
Although the leaseholders weren’t particularly worried by the application itself, they were concerned as to how they were protected with regards to the scope of the cladding works to take place, how necessary it was and the quality of the project on the whole.
Exemption from Section 20 processes, which is ultimately there to protect leaseholders, is usually provided when it is believed to be in the best interest of the leaseholder to do so. In this case the FTT took into account the fire alarm being fitted to reduce leaseholder costs, and that the funding being applied for was obviously in the best interest of the leaseholders, and therefore granted dispensation.
However, due to the concerns raised by the leaseholders, the FTT did put certain conditions in place, which were:
- The landlord was to pay a contribution toward the legal costs incurred by the leaseholders in respect of the dispensation application.
- The landlord was to provide a capped indemnity of £20,000 (plus VAT) to enable the leaseholders to obtain such expert advice as would assist them in making observations on the works and to prevent any likely prejudice arising from the landlord’s inability to consult in the usual Section 20 process.
- The landlord was to conduct an informal form of consultation with the leaseholders to include provision of full information and reports relating to the application to the BSF and other matters relating to the fire safety defects.
The key takeaways from this case are that the FTT will take a logical view on such cases, but are willing and able to include conditions to ensure the protection of leaseholders.
In this case it was relatively straightforward, as it was quite obvious that it was in the leaseholders’ best interest to provide dispensation. However, it’s worth noting that in submitting such an application, property managers may have new criteria to abide by which may prove awkward or costly, which is more likely to be the case when the initial application isn’t clear.