The recent decision of Upper Tribunal in Various Occupational Leaseholders of Foundling Court and O’Donnell Court, Brunswick Centre, London v (1) Camden LBC; (2) Allied London (Brunswick) Ltd and others provided helpful guidance in dealing with the consultation process under S.20 where there is an intermediate landlord and occupational leaseholders.
Under S.20 of the Landlord and Tenant Act 1985 a landlord must comply with the statutory consultation process in order to recover costs through service charges over the statutory cap (£250 for works and £100 for Qualifying long term agreements) unless the landlord has obtained dispensation from the First Tier Tribunal from the consultation regulations.
In this case Allied London was the freeholder. Camden had been granted a headlease and Camden then granted a number of long leases for individual flats. As such Camden was the intermediate leaseholder while the individual flats were held by the occupational leaseholders with Camden as their landlord. This is a situation RP’s commonly find themselves in. The occupational leaseholders brought a challenge in the FTT on the basis that they had not been consulted with.
Allied London intended to carry out works and consulted with Camden in relation to the works but they did not consult with the occupational leaseholders. Camden did consult with the occupational leaseholders to an extent but it was not compliant with s.20.
Camden paid the sums sought by Allied London but then sought to recover these sums from the occupational leaseholders. The occupational leaseholders then brought an application in the FTT challenging their liability to contribute to the costs of the works on the basis that they had not been consulted with in accordance with S.20. Therefore, the costs recoverable by Allied London should be capped at £250. Allied London argued that they did not need to consult with the occupational leaseholders.
The Upper Tribunal found that the duty to consult was owed by Allied London. It was they who would place the contract, not Camden, and it was Allied London who would arrange for the works to be carried out and supervise their completion. The Upper Tribunal found that the consultation process was there to make sure leaseholders had an opportunity to influence the nature and cost of works. Therefore, Allied London should have consulted with both Camden and the occupational Leaseholders.
The Upper Tribunal recognised that consulting with occupational leaseholders could be difficult if the details of the occupational leaseholders is not known. Therefore, if that is the case, the freeholder/head landlord should seek dispensation from the FTT before placing any contract. The FTT could grant dispensation on terms allowing alternative methods of consultation so that the occupational leaseholders position is protected as far as possible. That may include, for example, placing notices in communal parts.
This is an important decision as it addresses a common concern of RPs in relation to consultation where there are intermediate leaseholders and occupational leaseholders. It is clear that the onus is on the freeholder/head landlord to consult and failure to do so exposes the head landlord to the services charges being capped. It is also clear that the fact that there are practical difficulties in consulting with the occupational long leaseholders does not act as a legitimate excuse for a head landlord’s failure to consult with all of the long leaseholders who may be required to contribute to the costs of the works or agreement. The practical way of addressing this is apply for dispensation.