Service Charges & Estate Management Update – January 2012
1st January 2012
Stenau Properties Ltd v Leek  UKUT 478 (LC)
L appealed against an LVT’s refusal to order that the consultation requirements of the Landlord and Tenant Act 1985 s.20 could be dispensed with. Although L had consulted T to some extent, the LVT found that that there had been “a substantial failure to engage in consultation as required by s.20”. It did not set out in its reasons the extent of any prejudice to T arising from the breach. The words used by the LVT when granting leave were “whether the Tribunal were wrong in not considering the issue of prejudice and ought to have considered whether the failure to comply must have adversely affected the lessees in some way.”
The issues were whether (i) it was open to a tribunal to find that a breach of the s.20 consultation requirement was so substantial that prejudice was to be taken as having flowed from it even though there was no evidence that the tenants would have acted differently had the consultation been carried out properly; (ii) such a conclusion had been open to the tribunal on the facts of the instant case.
The LVT would have been entitled both in law and on the facts before it to conclude that the breach in the consultation process “must have prejudiced” the tenants. The LVT did not use those words in its conclusion but it was perfectly plain that it had the importance of prejudice well in mind.
The LVT was entitled to find that the breach was so substantial that prejudice must be taken to have flowed from it, even though there was no evidence of any work that would have been done differently if the consultation had been carried out properly.
“Where there has been a minor breach of procedure it will be important for a tribunal to find evidence that respondents were prejudiced or disadvantaged. Where the breach has been substantial it may be reasonable to assume prejudice… Even if it were possible to prove that further consultation would have made no difference to the end result, it still does not follow that therefore there has been no prejudice if the breach has been substantial. The effect of a properly conducted consultation process should be to give the tenants confidence in the decisions that are reached and leave them feeling as comfortable as they can be with the service charges that are likely to flow from those decisions. The opportunity to participate in a meaningful way in the decision-making process is of real value. Even if the end result would probably have been the same without their participation, it [is] very arguable that tenants who are substantially deprived of their right to be included in the decision-making process are genuinely prejudiced” (per HHJ Mole QC at ).
The Court of Appeal set out the principles applicable in an application for dispensation in Daejan Investments Ltd v Benson  EWCA Civ 38,  1 W.L.R. 2330.