Aster Communities v Kerry Chapman and other leaseholders of flats in Saxon Court, Stuart Court, Tudor Court and York Court, Kingsway Gardens, Andover
| Jurisdiction | England & Wales |
| Judge | Lord Justice Newey,Lord Justice Phillips,Lady Justice King |
| Judgment Date | 07 May 2021 |
| Neutral Citation | [2021] EWCA Civ 660 |
| Docket Number | Case No: C3/2020/1569 |
| Court | Court of Appeal (Civil Division) |
| Date | 07 May 2021 |
[2021] EWCA Civ 660
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL (LANDS CHAMBER)
His Honour Judge Stuart Bridge
[2020] UKUT 0177 (LC)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice King
Lord Justice Newey
and
Lord Justice Phillips
Case No: C3/2020/1569
Mr Ranjit Bhose QC (instructed by Capsticks Solicitors LLP) for the Appellant
Mr Philip Rainey QC and Miss Robyn Cunningham (instructed by Talbot Walker LLP) for 33 of the Respondents
Hearing date: 15 April 2021
Approved Judgment
This is an appeal by Aster Communities (“Aster”) from the dismissal by the Upper Tribunal (Lands Chamber) (His Honour Judge Stuart Bridge) of an appeal from the First-tier Tribunal (“the FTT”) (Judge E Morrison). It involves a challenge to conditions which the FTT attached when acceding to an application by Aster under section 20ZA of the Landlord and Tenant Act 1985 (“the 1985 Act”) for dispensation from consultation requirements.
The legal framework
Sections 18 to 30 of the 1985 Act deal with service charges. The expression “service charge” is defined by section 18(1) to mean:
“an amount payable by a tenant of a dwelling as part of or in addition to the rent—
(a) which is payable, directly or indirectly, for services, repairs, maintenance, improvements or insurance or the landlord's costs of management, and
(b) the whole or part of which varies or may vary according to the relevant costs”.
Section 18(2) explains that the “relevant costs” are “the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a superior landlord, in connection with the matters for which the service charge is payable”.
Section 19 of the 1985 Act imposes a requirement of reasonableness. By section 19(1), “relevant costs” are to be taken into account in determining the amount of a service charge payable for a period:
“(a) only to the extent that they are reasonably incurred, and
(b) where they are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard”.
Further, section 19(2) provides that, where a service charge is payable before the relevant costs are incurred, “no greater amount than is reasonable is so payable, and after the relevant costs have been incurred any necessary adjustment shall be made by repayment, reduction or subsequent charges or otherwise”.
Sections 20 and 20ZA are concerned with consultation requirements. Section 20(1) provides for the “relevant contributions of tenants” to be:
“limited in accordance with subsection ( 6) or (7) (or both) unless the consultation requirements have been either—
(a) complied with in relation to the works or agreement, or
(b) dispensed with in relation to the works or agreement by (or on appeal from) the appropriate tribunal”.
The “relevant contribution” of a tenant is “the amount which he may be required under the terms of his lease to contribute (by the payment of service charges) to relevant costs incurred on carrying out the works or under the agreement”: section 20(2). Under section 20(7) and regulation 6 of the Service Charges (Consultation Requirements) (England) Regulations 2003 (“the 2003 Regulations”), a tenant's “relevant contribution” is limited to £250. A landlord who has not complied with the “consultation requirements” can thus recover no more than £250 from a tenant unless the requirements in question have been dispensed with. By section 20ZA(1), however, a tribunal may dispense with “all or any of the consultation requirements” “if satisfied that it is reasonable to dispense with the requirements”.
Section 20ZA(4) of the 1985 Act provides for “the consultation requirements” to be prescribed by statutory instrument. The “consultation requirements” relevant to the present case are to be found in part 2 of schedule 4 to the 2003 Regulations. In Daejan Investments Ltd v Benson [2013] UKSC 14, [2013] 1 WLR 854 (“ Daejan”), Lord Neuberger summarised the requirements as follows in paragraph 12:
“ Stage 1: Notice of intention to do the works
Notice must be given to each tenant and any tenants' association, describing the works, or saying where and when a description may be inspected, stating the reasons for the works, specifying where and when observations and nominations for possible contractors should be sent, allowing at least 30 days. The landlord must have regard to those observations.
Stage 2: Estimates
The landlord must seek estimates for the works, including from any nominee identified by any tenants or the association.
Stage 3: Notices about estimates
The landlord must issue a statement to tenants and the association, with two or more estimates, a summary of the observations, and its responses. Any nominee's estimate must be included. The statement must say where and when estimates may be inspected, and where and by when observations can be sent, allowing at least 30 days. The landlord must have regard to such observations.
Stage 4: Notification of reasons
Unless the chosen contractor is a nominee or submitted the lowest estimate, the landlord must, within 21 days of contracting, give a statement to each tenant and the association of its reasons, or specifying where and when such a statement may be inspected.”
The statement which a landlord must issue at Lord Neuberger's Stage 3 is referred to as a “paragraph (b) statement”: see paragraph 4(5) of part 2 of schedule 4 to the 2003 Regulations.
Section 27A of the 1985 Act states that an application may be made to the appropriate tribunal (in England, the FTT) for a determination whether a service charge is payable and, if it is, the amount payable.
The leading authority on dispensation with consultation requirements is Daejan, where the Supreme Court held by a majority that, on the facts of the case, dispensation should be granted on certain terms. Lord Neuberger, with whom Lord Clarke and Lord Sumption agreed, observed in paragraph 52 that there were “no grounds for treating the obligations in sections 20 and 20ZA [of the 1985 Act] as doing any more than providing practical support for the two purposes identified in section 19(1)”. Lord Neuberger did “not accept the view that a dispensation should be refused … solely because the landlord seriously breached, or departed from, the requirements” (paragraph 46) and did not think it “convenient or sensible to distinguish in this context … between ‘a serious failing’ and ‘a technical, minor or excusable oversight’, save in relation to the prejudice it causes” (paragraph 47). The “main, indeed normally, the sole question” when considering whether to dispense with consultation requirements was whether there was “real prejudice to the tenants flowing from the landlord's breach of the requirements” (paragraph 50). Lord Neuberger said in paragraphs 44 and 45:
“44. Given that the purpose of the requirements is to ensure that the tenants are protected from (i) paying for inappropriate works or (ii) paying more than would be appropriate, it seems to me that the issue on which the LVT [i.e. the leasehold valuation tribunal] should focus when entertaining an application by a landlord under section 20ZA(1) must be the extent, if any, to which the tenants were prejudiced in either respect by the failure of the landlord to comply with the requirements.
45. Thus, in a case where it was common ground that the extent, quality and cost of the works were in no way affected by the landlord's failure to comply with the requirements, I find it hard to see why the dispensation should not be granted (at least in the absence of some very good reason): in such a case the tenants would be in precisely the position that the legislation intended them to be—ie as if the requirements had been complied with.”
The “only disadvantage of which [tenants] could legitimately complain”, Lord Neuberger said in paragraph 65, “is one which they would not have suffered if the requirements had been fully complied with, but which they will suffer if an unconditional dispensation were granted” and, while the legal burden of proof would throughout be on the landlord, “the factual burden of identifying some relevant prejudice that they would or might have suffered would be on the tenants” (paragraph 67). Since “the tenants' complaint will normally be … that they were not given the requisite opportunity to make representations about proposed works to the landlord”, “it does not appear onerous to suggest that the tenants have an obligation to identify what they would have said” (paragraph 69). In fact, Lord Neuberger explained in paragraph 69, the tenants will in most cases be better off, “as, knowing how the works have progressed, they will have the added benefit of wisdom of hindsight to assist them before the LVT, and they are likely to have their costs of consulting a surveyor and/or solicitor paid by the landlord”.
On the other hand, Lord Neuberger said in paragraphs 67 and 68:
“67. … [G]iven that the landlord will have failed to comply with the requirements, the landlord can scarcely complain if the LVT views the tenants' arguments sympathetically, for instance by resolving in their favour any doubts as to whether the works would have cost less (or, for instance, that some of the works would not have been carried out or would have been carried out in a different way), if the tenants had...
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