Landlord ordered to pay costs in application for section 20 dispensation due to failure to consult

The Court of Appeal has dismissed a landlord’s appeal against a decision in the case of Aster Communities v Kerry Chapman & Ors [2021] EWCA Civ 660.   In this latest decision the Court of Appeal held that due to a failure to consult, the landlord’s costs could not be recovered through the service charge and the landlord should pay the leaseholders’ costs.

This case stems from an application for dispensation made by Aster Communities in respect of works to replace asphalt on the balconies at a block of flats let on long leases.  The landlord had carried out a substantial programme of works to the building, including the replacement of the asphalt on the balconies and had then applied to the FTT for determination of the service charge under section 27A of the Landlord and Tenant Act 1985.  The FTT held that the replacement of the asphalt on the balconies was unnecessary and the landlord had not properly consulted over the asphalt replacement on the leaseholders’ balconies under section 20 of the Landlord and Tenant Act 1985 (the Act).  As a result, Aster was forced to make an application for dispensation for these works under section 20ZA of the Act, to which a number of leaseholders objected.

The Tribunal found that the leaseholders had been prejudiced by a lack of consultation, but did grant dispensation on the basis that certain conditions were complied with.  Notably, the landlord was required to pay the leaseholders’ reasonable costs of the dispensation application and of obtaining an expert report on the asphalt replacement.

The landlord then appealed to the Upper Tribunal (Lands Chamber) who dismissed the appeal.  The landlord subsequently appealed to the Court of Appeal.

The Court of Appeal in reviewing the position held that amongst other things, the conditions upon which dispensation was granted by the FTT were permissible, applying the principles set out in Daejan Properties Limited v Griffin [2014] UKUT 206.  The Court of Appeal also found that the section 20 consultation process was a group process which should involve all leaseholders within a block generally.  If all leaseholders suffer prejudice because of a defect in the consultation process then there would be no reason why the FTT should be unable to make dispensation conditional on every leaseholder being compensated.

This latest judgment reinforces the need for freeholders and managing agents to follow the section 20 consultation process properly, and promptly, ensuring that there are no delays or defects in the process.  The Tribunal in this case set a precedent by ordering the freeholder to pay the leaseholders’ costs, suggesting that dispensation may no longer be the risk free endeavour it once was for freeholders and managing agents.

Joanna Osborne has experience in dealing with section 20 disputes and also in advising as to the consultation requirements required under legislation.  Should you have any queries then the Property Litigation team would be glad to discuss these with you.

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