Failure to Consult Does Not Cost Landlord

The landlord of a block of flats who instructed contractors to carry out substantial renovation works without consulting tenants in accordance with the Service Charges (Consultation Requirements) (England) Regulations 2003 has been relieved of the majority of the financial consequences of that failure by the Supreme Court.

Prior to commissioning the works, the landlord had provided tenants with only one fully itemised quotation for the project. It had failed to issue a statement with a summary of observations on estimates received and its responses to them, or to notify tenants of where this information would be available for inspection. Although the project had cost almost £280,000, the landlord was, by operation of the Regulations, only permitted to recover £250 from each tenant in respect of the works, a total of £1,250.

The Leasehold Valuation Tribunal (LVT) subsequently dismissed an application by the landlord to dispense with the strict requirements of the Regulations as it found that there had been a ‘serious breach’ that caused prejudice to the tenants. That decision was later upheld by the Court of Appeal.

However, in allowing the landlord’s appeal, the Supreme Court noted that the landlord had offered to reduce the sum payable by the tenants by £50,000 in order to reflect any prejudice that they had suffered. Observing that the purpose of the Regulations was to protect tenants against having to pay for inappropriate works, or paying too much for such works, the Court ruled by a majority that, in the light of the landlord’s offer, the full rigour of the Regulations could be waived.

Giving guidance for the future, the Court stated, “Insofar as the tenants will suffer relevant prejudice, the LVT should, in the absence of some good reason to the contrary, effectively require the landlord to reduce the amount claimed to compensate the tenants fully for that prejudice. This is a fair outcome, as the tenants will be in the same position as if the requirements have been satisfied.