Property Law UK Update
8th September 2016
Service Charges – Consultation Requirements
On the proper construction of the consultation requirements laid down by s.20 of the Landlord and Tenant Act 1985, a superior landlord intending to carry out works or enter into a qualifying long term agreement must consult each of its direct tenants, and each of its own tenants’ sub-tenants of a dwelling if those sub-tenants are liable to contribute towards the costs of the works.
The lessees of the flats concerned were required under the terms of their leases to contribute by way of service charges to costs incurred by their immediate landlord, the London Borough of Camden. In turn, Camden was required to contribute under the terms of its headlease to the costs incurred by the freeholder of the blocks, Allied London (Brunswick) Limited.
In 2005, Allied London carried out major works to the blocks. Camden paid the costs of those works under the headlease and then sought to recover those charges from the individual lessors under the terms of each flat lease.
Before starting the works, Allied London carried out the statutory consultation procedure under s.20 of the Landlord and Tenant Act 1985. However, it only gave consultation notices to Camden, as Camden was its only direct tenant. In turn, Camden gave copies of the notice to the individual leaseholders.
The case was dealt with at first instance by the Upper Tribunal because the issue was one of general importance.
The first question for the Upper Tribunal was whether Allied London, Camden, or both Allied London and Camden were the landlord for the purposes of s.20 of the Landlord and Tenant Act 1985. The second question was whether the requirement to consult “each tenant” set down by s.20 required Allied London to consult Camden only, or whether Allied London was required to consult the individual tenants of each flat.
The Tribunal made it clear that the primary purpose of the consultation requirements was to ensure that those ultimately paying for the works are consulted about them, and the legislation should be construed so as to give effect to that primary purpose.
The Tribunal held that “the landlord” for the purposes of s.20 must mean the landlord who intends to carry out the work, not an intermediate landlord who has no such intention. Therefore the only landlord in this case was Allied London, the freeholder.
The Tribunal then went on to hold that the landlord is required to consult “each tenant”. Where a dwelling is sub-let, the expression tenant includes a sub-tenant. Therefore, Allied London was obliged to give consultation notices to each of the individual flat lessees. Such a construction of the legislation gave appropriate effect to the word “each”. The requirement to consult each tenant means every person who is a tenant (which includes every person who is a sub-tenant) of a dwelling and liable to contribute to the costs through the service charge. Any other interpretation, it was held, would impermissibly frustrate the purpose of the legislation.
Whilst the superior landlord may not know the identity of the sub-tenants, this could be overcome by asking the headlessee for details of its tenants or delivering a consultation notice addressed merely to “the leaseholder”, as the individual lessees need not be identified in the consultation notice. Alternatively, the superior landlord could seek dispensation from the FTT.
Decision on Appeal
It is not known if this decision will be appealed to the Court of Appeal.
This decision is important because it represents a departure from the conventional approach to the consultation regulations, and will require superior landlords to consult with individual flat lessees on major works and qualifying long term agreements even where there is an intermediate landlord and even though there is no direct contractual relationship between the parties. This could lead to a far greater administrative burden on superior landlords.