This article considers the case of Leaseholders of Foundling Court and O'Donnell Court v Camden LBC, in which the court ruled on who is responsible for serving consultation notices on residential tenants.

The court has held that the responsibility under the Landlord and Tenant Act 1985 for consulting residential tenants about proposed works lies with the superior landlord intending to carry out the works, even though it may not have any direct relationship with the tenants.

The Landlord and Tenant Act 1985 provides various protections for residential tenants under long leases. One of the most valuable is the requirement on landlords who propose carrying out works that will result in individual tenants having to contribute more than £250 to consult their tenants, using a prescribed procedure, before commissioning those works. The penalty for not following the correct procedure is that the landlord is unable to recover more than £250 from each tenant for those works.

Similar rules apply in the case of long-term agreements (those over 12 months in duration), except that the threshold is £100 instead of £250.

A complication arises where there is an intermediate landlord between the superior landlord, who is proposing to carry out the works, and the residential tenants, who are the people who need to be consulted. The Court of Appeal ruled ten years ago in Oakfern Properties Ltd v Ruddy that the requirements will apply where there is an intermediate landlord, even where the intermediate landlord has a lease of more than just a single flat.

However, it was unclear after that case just how the superior landlord was expected to consult the residential tenants, who are technically its undertenants. Is it able to rely on the intermediate landlord serving the consultation notices on the residential tenants, or does the superior landlord have to serve the notices on the residential tenants itself, even though it has no direct relationship with them?

Who should serve the notices?

We now have an answer to that question, from the recent case of Leaseholders of Foundling Court and O'Donnell Court v Camden LBC [2016] UKUT 366 (LC). The case concerned the Brunswick Centre, a Grade II listed complex of shops, flats, offices, car parks and other premises at Brunswick Square, which lies to the south of Euston station in London. The freehold was owned by the superior landlord, Allied London at the time, and the intermediate landlord was Camden LBC, which held a 99 year lease of the centre. Allied London carried out major works to the building and was seeking to recover the costs from Camden. Camden in turn was seeking to pass the costs on to those tenants in the complex that owned long leases. Of the 406 tenants, 87 needed to be consulted.

So which of Allied London and Camden was under the obligation to consult with the 87 tenants who owned long leases? Very inconveniently for landlords, the court has ruled that the responsibility fell on Allied London. This is in spite of the fact that Allied London, being the superior landlord, had no direct relationship with the residential tenants. The judge accepted that the statute leaves the position unclear, but said that this is the only sensible interpretation. It cannot be the intermediate landlord's responsibility to serve the notices, as the intermediate landlord is not proposing to carry out any works.

The judge also suggested various ways by which the superior landlord can obtain the information about the residential tenants that it needs in order to serve the consultation notices on them. If this is not possible, said the judge, the superior landlord can apply to the court for dispensation from the consultation requirements under section 20ZA of the 1985 Act.

Conclusions

This is not a helpful decision for landlords who find themselves in the position that Allied London was in, having to serve notices on undertenants about which they have very little, if any, information. However, one cannot fault the decision of the very experienced judge in this case. The outcome was inevitable, given the decision reached ten years ago in Oakfern Properties Ltd v Ruddy.

The problem lies in the drafting of the Landlord and Tenant Act 1985, which simply does not cater for what is to happen in these circumstances. We will be drawing this decision to the attention of the Law Commission in connection with the current consultation seeking views on suitable projects for the Law Commission to undertake in its forthcoming 13th programme of law reform.

In the meantime, landlords need to take great care to follow the judge's advice in this case, to ensure that the notices are served on the correct people, resulting in a valid consultation exercise. Landlords wishing to read the transcript will find it here.