The Court of Appeal has recently issued a stark warning to landlords that compliance with the consultation requirements prescribed by section 20 of the Landlord and Tenant Act 1985 (“s.20”) is vital in order to recover the costs of major works.

In Daejan Investments Ltd v Benson and others [2011] EWCA Civ 38 (“Daejan”), the leaseholders and the recognised tenants’ association applied to the LVT for a determination as to the reasonableness of the landlord’s proposed charges for major works in the sum of £270,000.

The LVT held that the landlord had failed to comply with s.20. In particular, the landlord failed to –

  • Provide a summary of the observations received within the stage one consultation;
  • Make all of the estimates available for inspection; and
  • Give the leaseholders a full 30 days to inspect all of the estimates and make observations. The landlord had, albeit mistakenly, indicated that the building contract had already been awarded. As a result, the consultation process was for all practical purposes curtailed.

The landlord applied to the LVT for dispensation, which was refused. Its appeals to the Upper Tribunal and subsequently the Court of Appeal were also refused.

The Court of Appeal, in upholding the decision of the Tribunal, held that –

  • The financial effect of the grant or refusal of dispensation is an irrelevant consideration for the LVT when exercising its discretion to grant dispensation;
  • The landlord’s non-compliance with s20 was a serious failing and caused the leaseholders serious prejudice; and
  • The landlord’s offer to ‘discount’ the works by £50,000 did not provide a ground for the grant of dispensation.

As a result, the landlord was left to foot a substantial £270,000 bill for the major works, with the five leaseholders contributing the statutory cap of just £250 each.

The decision in Daejan sends a clear message to landlords that “a proper consultation process is of the essence of this statutory scheme, devised as it is to protect the interests of tenants”.

Landlord disregard s20 at their peril!