M & M Savant Limited v Brown and others LRX/26/2006

It is a shame that this case was decided in 2008, and not in 1998 when it would have had a much greater relevance. It contains a comprehensive analysis of s.20 Landlord and Tenant Act 1985 prior to the wide ranging amendments made by the Commonhold and Leasehold Reform Act 2002. Sadly, it is probably now only of interest to those (few) of us with a particular interest in leasehold property disputes.

Mr Brown and the other respondents were the leaseholders of various flats in a block of flats in London, NW7. In 2005, they had applied to the Leasehold Valuation Tribunal in response to a service charge dispute with their landlord. In particular they contended that the Appellant had not complied with the consultation requirements set out in s.20 Landlord and Tenant Act 1985.

Prior to the Commonhold and Leasehold Reform Act 2002, s.20 Landlord and Tenant Act 1985 provided that:

“(1) Where relevant costs incurred on the carrying out of any qualifying works exceed the limit specified in subsection (3), the excess shall not be taken into account in determining the amount of a service charge unless the relevant requirements have been either –

(a)complied with, or

(b)dispensed with by the court in accordance with subsection (9); and the amount payable shall be limited accordingly.

(2)In subsection (1) ‘qualifying works’, in relation to a service charge, means works (whether on a building or on any other premises) to the costs of which the tenant by whom the service charge is payable may be required under the terms of his lease to contribute by the payment of such a charge.

(3)The limit is whichever is the greater of –

(a) £25, or such other amount as may be prescribed by order of the Secretary of State, multiplied by the number of dwellings let to the tenants concerned; or

(c)£1000, or such other amount as may be so prescribed.

(4)The relevant requirements in relation to such of the tenants concerned as are not represented by a recognised tenants’ association are –

(a) At least two estimates for the works shall be obtained, one of them from a person wholly unconnected with the landlord.

(b) A notice accompanied by a copy of the estimates shall be given to each of those tenants or shall be displayed in one or more places where it is likely to come to the notice of all those tenants.

(c) The notice shall describe the works to be carried out and invite observations on them and on the estimates and shall state the name and the address in the United Kingdom of the person to whom the observations may be sent and the date by which they are to be received.

(d) The date stated in the notice shall not be earlier than one month after the date on which the notice is given or displayed as required by paragraph (b).

(e) The landlord shall have regard to any observations received in pursuance of the notice; and unless the works are urgently required they shall not be begun earlier than the date specified in the notice.

(5) The relevant requirements in relation to such of the tenants concerned as are represented by a recognised tenants’ association are –

(a) The landlord shall give to the secretary of the association a notice containing a detailed specification of the works in question and specifying a reasonable period within which the association may propose to the landlord the names of one or more persons from whom estimates for the works should in its view be obtained by the landlord.

(b) At least two estimates for the works shall be obtained, one of them from a person wholly unconnected with the landlord.

(c) A copy of each of the estimates shall be given to the secretary of the association.

(d) A notice shall be given to each of the tenants concerned represented by the association, which shall

(i) describe briefly the works to be carried out,

(ii) summarise the estimates;

(iii) inform the tenant that he has a right to inspect and take copies of a detailed specification of the works to be carried out and of the estimates;

(iv) invite observations on those works and on the estimates, and

(v) specify the name and the address in the United Kingdom of the person to whom the observations may be sent and the date by which they are to be received.

(e) The date stated in the notice shall not be earlier than one month after the date on which the notice is given as required by paragraph (d).

(f) If any tenant to whom the notice is given so requests, the landlord shall afford him reasonable facilities for inspecting a detailed specification of the works to be carried out and the estimates, free of charge, and for taking copies of them on payment of such reasonable charge as the landlord may determine.

(g) The landlord shall have regard to any observations received in pursuance of the notice and, unless the works are urgently required, they shall not be begun earlier than the date specified in the notice.

(6) Paragraphs (d)(ii) and (iii) and (f) of subsection (5) shall not apply to any estimate of which a copy is enclosed with the notice given in pursuance of paragraph (d).

(7) The requirements imposed on the landlord by subsection (5)(f) to make any facilities available to a person free of charge shall not be construed as precluding the landlord from treating as part of his costs of management any costs incurred by him in connection with making those facilities so available.

(8) In this section ‘the tenants concerned’ means all the landlord’s tenants who may be required under the terms of their leases to contribute to the cost of the works in question by the payment of service charges.

(9) In proceedings relating to a service charge the court may, if satisfied that the landlord acted reasonably, dispense with all or any of the relevant requirements.

(10) An order under this section –

(a) may make different provision with respect to different cases or descriptions of cases, including different provision for different areas, and

(b) shall be made pursuant to statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.”

The Court of Appeal, in Martin v Maryland Estates Ltd [1999] L&TR 541 had held that s.20(9) was not a general dispensing power, but contemplated a two stage process. Before considering whether or not to dispense with any or all of the consultation requirements, the court had to be satisfied that the landlord had acted reasonably in all the circumstances in which s.20 had not been complied with.

In 2003, the landlord had obtained estimates from contractors in respect of major structural works. The estimates were not disclosed to the leaseholders, who were merely given a summary of the proposed prices. The estimates were, however, available for inspection at the offices of the managing agents, some 8-10 miles away from the property.

In May 2003, solicitors for Mr Brown wrote to the managing agents and pointed out that s.20 required them to provide a copy of the actual estimates or display them in one or more places where they were likely to come to the notice of the leaseholders. The description of the works was also said to be inadequate. The managing agents responded by enclosing copies of some of the estimates, but did not deal with the substantive objection that the requirements of s.20 had not been complied with, indeed, it appears that they did not give any consideration to the objections and had confirmed a contractor to start the necessary works before the statutory consultation period concluded, thus making it rather difficult to see how they could have “had regard” to the observations received from leaseholders.

The LVT concluded that the consultation requirements had not been complied with. However, under s.20 as it then read, the LVT had no jurisdiction to consider whether or not the landlord should be granted dispensation from the requirements of s.20 (although it does now have that jurisdiction). At the time, that jurisdiction was vested in the county court. Unfortunately, the mere fact that it lacked jurisdiction to consider these matters did not prevent the LVT from making a series of findings of fact about the circumstances in which s.20 was not complied with and making clear that, in the view of the LVT, dispensation should not be granted.

The appellant applied to the county court for dispensation and appealed to the Lands Tribunal against the decision that s.20 had not been complied with. The President of the Lands Tribunal granted permission for the appeal to be heard and directed that it be heard with the application for dispensation, before a Member of the Lands Tribunal who was also a Judge of the county court.

The Lands Tribunal rejected the appeal. It was very difficult to see how s.20(4)(b) could be satisfied by merely telling the tenant where the information could be inspected but, even if that was sufficient, on the facts of this case, the information was not displayed in a place where it was likely to come to the attention of all the tenants, but was only available in an office, some 8 to 10 miles away. This defect was not cured by the managing agents later sending some of the documentation to one of the leaseholders. The effect of this defect was that there had been no proper compliance with s.20(4)(b), with the result that the statutory consultation period had not started to run.

It was not appropriate to grant dispensation from the consultation requirements. This should have been a relatively simple consultation exercise and there was no reason to give any degree of latitude to the landlord. The managing agents had acted unreasonably in, effectively, ignoring the letter sent by Mr Brown’s solicitors – “[w]here a landlord receives a letter from solicitors for a tenant being a letter which correctly asserts that the landlord is failing to comply with the consultation requirements and gives reasons as to why the landlord is failing and what the consequences of such failure may be, then if a landlord merely carries on regardless and commences the works without first properly carrying out the consultation requirements I consider such a landlord acts unreasonably…” Accordingly, the landlord had not acted reasonable and, hence, the jurisdiction to dispense with the consultation requirements did not arise.

Even if it had arisen, it would have been wrong to exercise it in favour of the landlord. The leaseholders had lost an important opportunity to comment on the proposed works and contractor and this was not something that the court should overlook.

The reforms contained in the 2002 Act have deprived much of this case of any lasting significance. The Lands Tribunal has already indicated that, under the new consultation provisions, a much more generous approach will be afforded to landlords and dispensation more easily granted (see LB Camden v Various Leaseholders at Grafton Way LRX/185/2006 and Auger v LB Camden LRX/81/2007). What is of use, however, is the discussion about what it means to “have regard” to observations received from leaseholders. This obligation to has been retained in the new s.20 consultation procedures and seems to import an obligation to actively consider and respond to any observations received. It may be that leaseholders can find something useful in this case when seeking to challenge a landlord which appears to have had little regard to their observations.