In a landmark decision, the Supreme Court has recently made life much easier for landlords of blocks of flats let on long leases who fail to comply with service charge consultation requirements. A landlord has to go through a process of consultation with the Leaseholders in respect of building works which will result in a service charge cost of more than £250 per tenant (in a service charge year). The consultation requirements are complicated and often landlords fail to comply strictly. The consequences of not complying are that the landlord can only recover from each tenant £250.00 in the case of qualifying works.
The lifeline for landlords who haven't complied is that the Leasehold Valuation Tribunal have a power to grant dispensation.
The Supreme Court have now decided that dispensation should be granted unless the flat owners have suffered relevant prejudice and that a failure to comply with the consultation requirements, however serious, does not justify refusal of dispensation if it has not caused prejudice or if the leaseholders can be compensated for any such prejudice by imposing conditions on the grant of dispensation.
In other words the LVT can make dispensation conditional on the landlord reducing the amount claimed and paying the leaseholders costs.
In practice therefore landlords who have not complied with the consultation requirements should make an early offer to the leaseholders to discount the amount claimed as service charge to compensate for any prejudice that might have been caused to them and if any issue remains after that, then a prompt application to the Leasehold Valuation Tribunal should be made.
For advice about the consultation requirements contained in section 20 of the Landlord & Tenant Act 1985 and regulations made under that Act and for advice about what steps to take in the event of a failure to comply with this requirements, please contact Nick Lambert on 0114 266 6660, alternatively email [email protected].
