Leaseholders of Foundling Court and O'Donnell Court v The Mayor and Burgesses of the London Borough of Camden and others [2016] UKUT 366 (LC) (10 August 2016)

The Upper Tribunal (Lands Chamber) has held that where a superior landlord intends to carry out qualifying works or enter into a qualifying long term agreement it must not only consult its own tenants but also any sub-tenants for the purposes of section 20 of the Landlord and Tenant Act 1985 (“the Act”).

The facts

Foundling Court and O’Donnell Court are residential blocks which form part of the Brunswick Centre, London; a mixed use development including flats, shops, offices and restaurants. The London Borough of Camden has a headlease of parts of the Brunswick Centre, including residential blocks, which consist of 408 flats. Camden is contractually obliged to pay the service charges to the head landlord pursuant to the headlease.

The head landlord intended to carry out major works and served a consultation notice on Camden on 11 June 2004 with a consultation period which expired on 16 July 2004. The head landlord did not send any notice to the sub-tenants although Camden wrote to its own tenants on 17 June 2004 enclosing a copy of the notice and inviting observations by 14 July 2004 (30 days from the date of the letter).

A second stage notice was sent by the head landlord to Camden on 24 September 2004 which Camden again forwarded on to its sub-tenants. However, the letter was not sent until 4 October and asked for observations within 21, as opposed to 30, days.

The sub-tenants argued that there had been a failure to consult by the head landlord and they had been given less than 30 days by Camden for observations in respect of the second notice. For those reasons they said that their contribution to the works was limited to £250 per flat.

The decision

The Tribunal found that the entity that was required to consult was the head landlord (and not Camden) because it was only the head landlord that had the relevant intention to carry out qualifying works.

It was also decided that the obligation on the head landlord to consult was not restricted to only its tenant, from whom it would ultimately recover the service charges, but also to any sub-tenants. This was for the following reasons:

  1. The purpose of the Act is to ensure that those who are ultimately responsible for paying for work or services are consulted on the extent of the work and the identity of the contractor. To decide the matter otherwise would frustrate that purpose.
  2. It would be inconsistent with the wording of the Act and in particular the extension in section 18(2) which defines “relevant cost” to include costs incurred by a superior landlord.
  3. It would be inconsistent with the definition of “qualifying long term agreement”, which is an agreement entered into by or on behalf of a landlord or superior landlord.
  4. There is an obligation in the Regulations for a landlord to give notice to any recognised tenants’ association and so it is not possible to restrict the interpretation of the Act so as to mean that the landlord only has to consult those with whom it has a direct contractual relationship.
  5. Finally, it would be strange if the Act conferred a right for a sub-tenant to receive information about the costs which have been incurred by a superior landlord but was not entitled to be consulted before those costs would be incurred.

The Tribunal accepted that there were practical difficulties with this conclusion because the superior landlord will not always know the identity of those it is required to consult. However, the Tribunal considered that these issues could be overcome in the following possible ways:

  • By delivering a consultation notice addressed to “the leaseholder” to each flat in the building. There is no guarantee that such a notice would reach the attention of every tenant but the Tribunal did not consider that this was fatal given there are no service provisions in the Act. Some people might submit observations who were not entitled to be consulted but that may be avoided by an appropriately worded notice.
  • The superior landlord could request the necessary information from the intermediate landlord. The Tribunal took the view that given the failure to consult would mean that the intermediate landlord’s recovery would be restricted it would be motivated to co-operate. Whilst some intermediate landlords may think that such a limitation would apply to their own liability, there was no guarantee that such an argument would work and a superior landlord would have a stronger case for dispensation if an intermediate landlord was un-cooperative.
  • The alternative would be for a superior landlord to apply for dispensation. Whilst the tribunal would usually require that notice of the consultation came to the attention of all those entitled to receive it, if the landlord did not know the identity of all sub-tenants it would have a good case for less stringent requirements to be imposed.

Well advised landlords will already be aware of this potential issue when it comes to major works and long term agreements. However, many are likely to take the approach taken by the superior landlord here but give some extra time for the intermediate landlord to consult with its sub-tenants. The sums recoverable in the event of non-compliance with the Act are currently £100 per flat for services provided under a qualifying long term agreement and £250 for qualifying works. Given the financial implications of failing to consult properly, previous practices are likely to have to be adjusted in light of this decision.