As readers will no doubt be aware, the main legislation relating to major works is Section 20 of the Landlord and Tenant Act 1985. Section 20 provides that, in relation to any “qualifying works” (often referred to as major works) or “qualifying long term agreements”, the relevant service charge contributions of leaseholder tenants will be limited unless the consultation requirements have either been complied with or dispensed with by the First-tier Tribunal.
Qualifying works (or major works) are defined in Section 20ZA of the Act as meaning works on a building or any other premises. Qualifying Long Term agreements are agreements entered into by or on behalf of the landlord, for a term exceeding twelve months.
The Act requires landlords to ‘consult’ with leaseholders before carrying out any major works that would cost any leaseholder at the development more than £250 via their service charge contribution (as set out in Regulation 6 of The Service Charges (Consultation Requirements) (England) Regulations 2003).
The consultation process is set out in The Service Charges (Consultation Requirements) (England) Regulations 2003, specifically in relation to major works, as follows:
Firstly, a landlord must give notice in writing to all leaseholders, and any recognised tenant’s association, of its intention to carry out the qualifying works. This is known as a notice of intention. A notice of intention must describe the works proposed in general terms or specify the place and hours during which a description of the works may be inspected, confirm the reasons why the works are necessary to carry out and invite any leaseholder observations in relation to the proposed works. A notice of intention must also invite the leaseholders to propose, within the relevant period (30 days) the name of a contractor from whom the landlord should try to obtain a quote from.
A landlord must have due regard to any observations received and must attempt to obtain a quote from any contractors nominated by leaseholders within the relevant period.
Secondly, a landlord is to send a statement of estimates to all leaseholders and any recognised tenant’s association detailing at least two of the estimates received (ensuring that at least one is a company wholly unconnected to the landlord and that any estimates received from tenant nominated contractors are included), a summary of the observations received and the landlord’s responses to those observations. A statement of estimates must make all estimates obtained available for inspection and must again, invite leaseholders to make any written observations within a relevant period. A landlord must have due regard to any observations received.
Finally, if a landlord intends to enter into a contract in respect of major works it must send a final notice, unless it is proceeding with a leaseholder nominated contractor or the cheapest estimate.
A notice of award of contract must be sent within 21 days of any contract being entered into and should include the landlord’s reasons for awarding the contract to the specified contractor together with a summary of any observations received in relation to the estimates and the landlord’s responses to them.
It is not always possible for landlords to complete the consultation process for various reasons, in which case it should make an application to the First-tier Tribunal under section 20ZA Landlord and Tenant Act 1985 for dispensation of those requirements.
In order for the First-tier Tribunal to make an order for dispensation, it will consider whether it is reasonable to do so and primarily, whether the leaseholders have suffered relevant (financial) prejudice as a result of the landlord’s failure to consult.
Below, we look at a recent Upper Tribunal case which asked that where a landlord proposed to undertake major works, did it conduct a consultation procedure sufficient to satisfy the requirements of s.20 of the Landlord and Tenant Act 1985?
The background
In Ambercrown Ltd v Perrett and another [2024], the landlord undertook works to the roof of the subject property and sought to recover the costs of such works through the service charge. Each leaseholder would be liable for a sum exceeding £250, and the statutory consultation requirements of s.20 Landlord and Tenant Act 1985 applied.
The First-tier Tribunal found that the landlord had not carried out a consultation with the leaseholders as required by section 20, ordering that the landlord was only able to recover £250 from each leaseholder. The landlord appealed on the ground that it did consult, and that the FTT did not explain why its consultation was not adequate.
The question on appeal was whether a consultation carried out in 2019 and 2020 could be regarded as a consultation in respect of the roof works actually carried out in 2022.
The decision
The Upper Tribunal set aside the FTT’s decision, finding that the FTT had not given reasons to support its finding that the landlord had not undertaken sufficient consultation.
The landlord had argued that it had undertaken consultation in 2019 and 2020, and the UT concluded that the FTT had not considered the landlord’s case, nor explained why these consultations did not meet statutory requirements. The leaseholders had admitted the service charges in question and that the works were required to be carried out. As a result, the UT substituted its own decision that there was no jurisdiction to determine the payability of those charges as they had been “agreed or admitted by the tenant”. The practical result of this was that payments already made by the leaseholders did not have to be reimbursed.
Advice and action for landlords
This decision, albeit determined in the landlord’s favour, is nevertheless a timely reminder that landlords must wholly follow the statutory consultation procedure in accordance with the requirements of s.20 are met. Where the statutory consultation process cannot be followed, a landlord may seek dispensation of the consultation requirements in the First-tier Tribunal.
The Ambercrown decision is reassuring however, with the decision taking into consideration the FTT’s reasoning in its decision, whether the leaseholders had paid the service charges in question and whether it was accepted by the leaseholders that the works were required.
