Landlord fails to recover £270,000 major works costs from tenants

A landlord must bear the costs of almost £270,000 for repairs to a block of flats after failing to recover these from the tenants due to non compliance with the statutory requirements to consult the tenants over the proposed costs.

The Court of Appeal concluded that it was not reasonable for the landlord to dispense with the requirements under the Landlord and Tenant Act 1985 to consult with the five tenants concerning major works costing £270,000 which would have been paid for by the tenants through the service charge. The consequence was that the recoverable contribution paid by each tenant was capped at £250 i.e. a total contribution of just £1,250 towards an overall bill of £270,000.

It was decided that:

1. The financial effect of the grant or refusal of dispensation and the disproportionate financial consequences for the landlord were irrelevant. The fact that the amount in question was high was more of a reason for the dispensation to be refused and for the landlord to ensure that it had complied with the requirements to consult with tenants.
2. It was irrelevant that the landlord was a corporate landlord; the Court was simply applying the legal requirements.
3. Significant prejudice to the tenants was a primary consideration when considering the seriousness of non-compliance. Even though this might have been through a lack of understanding or ineptitude rather than a deliberate flouting of consultation requirements, it was not a technical, minor or excusable oversight.

The message to landlords when contemplating works where the costs are due to be recovered through the service charge is to make sure that there is strict compliance with the statutory requirements to consult tenants or the financial penalties could be severe.

For tenants, if the position is that there has not been proper consultation under the 1985 Act, financial contribution to the works could be limited to just £250 for each tenant.

Daejan Investments Ltd v Benson & others – 28 January 2011