Daejan Investments Ltd v Benson & Others [2013] UKSC 14

Daejan was the landlord and Benson was the tenant of a residential building. Daejan had carried out substantial works to the building, but had failed to comply with all of the consultation requirements of the Landlord and Tenant Act 1985. The Leasehold Valuation Tribunal was not prepared to grant dispensation to allow Daejan to recover approximately £280,000 from the tenants towards the cost of the works. It was limited to recovering the statutory maximum of £250 from each tenant.

The decision of the LVT was upheld by the Court of Appeal. However, the Supreme Court overturned the decision. It held that if the failure to consult does not put the tenants in a materially worse position, dispensation should be granted to the landlord on terms which are fair to the tenants. This will be the case whether or not the landlord’s failure to comply with the statutory process was accidental or flagrant. The 1985 Act was designed to protect tenants against unfair and unreasonable service charges, but the consultation process is a means to an end and not an end in itself. If the tenant is required to pay a reasonable service charge, the landlord should not be unfairly prejudiced by its failure to comply with the statutory process, such that its ability to recover service charges is capped at a fraction of its (otherwise reasonable) costs. There was no evidence that Benson had suffered prejudice that could be valued as being in excess of the £50,000 discount already offered by Daejan to its tenants, so the LVT ought to have granted dispensation on terms that Daejan reduce Benson’s liability by £50,000 and pay their reasonable costs of the application.