Residential Service Charge Consultation and Sub Tenants

Stuart Merrison of Bishop & Sewell LLP discusses the recent case of the Leaseholders of Foundling Court and O’Donnell Court –v- The Mayor and Burgesses of the London Borough of Camden and Others [2016] which has now been heard in the Upper Tribunal and should be of significant interest to both long leaseholders and their landlords.
Arising out of the Landlord and Tenant Act 1985 and later statutory instrument are limitations on service charge recoverability relating to both qualifying works and services under the 1985 Act and in particular, provides expenditure thresholds that trigger consultation procedures.

The current thresholds for triggering a landlord’s liability to consult leaseholders are set at £100 per leaseholder per year for qualifying long term agreements and £250 per leaseholder per year for qualifying works.

In short, qualifying works means work on a building or any other premises that could readily be regarded as building works. A qualifying long term agreement is an agreement entered into by or on behalf of a landlord or a superior landlord for a term of more than 12 months and which is not limited just to building works but to any matter that falls within what might be reasonably considered to be part of a service charge.
The legislation has though never been explicit over who has the liability to consult when it is the superior landlord that has the intention to undertake qualifying works or enter into a long term qualifying contract and when it is subtenants who are ultimately liable to pay the costs of those works or services.

This was the arrangement at the Brunswick Centre, London (close to Bishop & Sewell’s offices), where 87 long leaseholders of Camden Council were also subtenants of a superior landlord, who was the council’s immediate landlord.

The superior landlord served appropriate statutory consultation on the Council who in turn forwarded that paperwork on to their leaseholders.

The council acknowledged that in forwarding the statutory paperwork to its leaseholders, and providing leaseholder replies to the superior landlord, the time limits imposed by the statutory consultation regime were not met in respect of the long leaseholders.
The court had to determine whether or not the consultation requirements were met by service only on the council, or whether the superior landlord also had to serve the long leaseholders, and if not were the council liable to undertake that consultation with its leaseholders.

The court commented that the primary purpose of the consultation regime is to ensure that those who ultimately are bound to pay for the works or services are appropriately consulted and that practical and contractual difficulties in achieving that should not interfere with the intention of Parliament.

In this case, the court found that the superior landlord had the necessary intention under the Act to do the works/services and that the superior landlord was the only landlord upon whom the consultation requirement was imposed by statute.

The court confirmed that when a dwelling is sublet, a subtenant who is ultimately liable to contribute to the costs of the works/services undertaken by a superior landlord should be appropriately consulted by that superior landlord.

Stuart Merrison is a Senior Solicitor in the Dispute Resolution Team at Bishop & Sewell LLP. Stuart has established over a number of years a broad practice in the Civil Courts regularly conducting claims in the County Court, High Court and the Court of Appeal, with particular emphasis on commercial litigation, property ownership and he is in particular concerned with resolving disputes in the wider property field.