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To consult or not to consult?

Thu, 07 Mar 2013 16:16:00 Z

Daejan Investments Limited carried out works to a building in Muswell Hill and under section 20 of the Landlord and Tenant Act 1985 were required to consult with leaseholders. Deajan did not fully comply and the Leasehold Valuation Tribunal (LVT) rejected an application for dispensation resulting in leaseholders having to pay £250 each for works and Daejan being down by £278,750. Not surprisingly Daejan appealed. On 6 March 2013, Daejan succeeded in obtaining a dispensation on terms. Unfortunately, Daejan has had to go to the Supreme Court!

Although Daejan is a private landlord the decision is relevant to Registered Providers (RPs). So, when should an RP consult? RPs must consult where certain qualifying works are to be carried out and a variable service charge is applied. RPs need not consult where they charge a fixed service charge (e.g. where additional costs cannot be recovered at the end of a financial year).

RPs must now consult before carrying out qualifying works where a leaseholder/tenant will be charged more than £250 in a financial year (see “Qualifying works and consultation: a radical change?” article). Various notices must be served; the rules are prescriptive and errors can occur. If so, RPs can apply to the LVT to dispense with the consultation requirements. That is where Deajan is relevant as the Supreme Court provided guidance. In summary, the salient points are:-

In deciding whether to dispense with the consultation requirements the main question for the LVT is whether tenants have been prejudiced by the landlord’s failure. Prejudice could be that the works did not meet the requisite standard or tenants have had to pay more than they would have done had a different contractor been appointed.
In resisting a claim for dispensation the burden is on tenants to prove they have suffered prejudice.
The nature of the landlord (e.g. RP) is irrelevant when considering a dispensation application as are the financial consequences to the landlord.
The LVT can attach conditions to a dispensation such as reducing the amount claimed or requiring a landlord to pay the tenants’ costs of the application.

The Daejan decision assists landlords: it makes clear that if tenants are not prejudiced the landlord should be able to obtain dispensation. Furthermore, tenants will find it more difficult to use technical breaches of the regulations to limit the amount recoverable to £250.

Dispensation applications are no longer all or nothing. Daejan were looking to recover just under £280k but the statutory cap, having failed to consult was £1,250. In the end, the amount Daejan was entitled to recover was reduced by £50,000 as it had agreed to pay the leaseholders’ costs. Future battlegrounds are likely to be the extent to which tenants are prejudiced by breach and the conditions imposed by the LVT. Except for serious breaches landlords can probably expect to obtain dispensation, but at a cost.

For further information on this topic please contact Simon Bagg or Paul Hayes.

Qualifying works and consultation: a radical change?

Fri, 11 Jan 2013 09:42:00 Z

A recent decision has changed the way landlords have to consult in relation to variable service charges. Landlords need to amend their procedures to take this into account otherwise the amount of service charge recoverable will be capped at £250 in relation to each dwelling.

Where a landlord wishes to carry out qualifying works to residential premises and pass the costs on to tenants/leaseholders under a variable service charge, landlords need to consult with tenants if the amount payable by any tenant(s) of a dwelling is over £250. Previously, it was thought that the cap applied to each set of works and so if further works were required, the landlord would consult again if the contribution from the tenant towards those subsequent works was more than £250, If not, there would be no need to consult. The position has now changed. Landlords now have to consult tenants where any tenant of a dwelling is required to contribute more than £250 in any one service charge year.

In Phillips and Goddard v Francis [2012] EWHC 3650 (Ch) the Chancellor of the High Court, Andrew Morritt, had to consider a series of works (some where the contribution was less than £250). The landlord had not consulted at all prior to carrying out redevelopment works to a holiday park, and it was wrongly thought that the consultation requirements did not apply to holiday chalets. The leaseholders argued that the landlord was only entitled to recover £250 as the works had to be considered as a whole and could not be split. The landlord argued that you had to look at each set of works, not the works globally as they were not planned as one set of works, and if the contribution for a particular set of works was under £250 there was no need to consult and those costs would be recoverable.

The Chancellor, overturning the trial Judge’s decision, found for the leaseholders for different reasons than they argued. The Chancellor stated that on an estate in multiple occupation there is likely to be ongoing works of repair and maintenance carried out and there is a, “need for some limitation on an obligation to contribute” and that, “is at least as necessary with sporadic works … as with a redevelopment plan conceived and carried out as a whole” and went on to state that all qualifying works during a financial year, “should be brought into account” when deciding what contribution is payable by the Tenant(s) of each dwelling for the purpose of the £250 limit.

What does this mean? Additional burden and costs. More consultations and added administration. Landlords will be required to consult on all qualifying works, however small. Planned works may have required a contribution of under £250, unforeseen works then take the contribution over £250 consultation is required for the planned works otherwise the recoverable costs for the year will be capped at £250.

For further information on this topic please contact Simon Bagg or your usual Lewis Silkin contact.

Housing litigation, a practical tip

Wed, 04 Apr 2012 12:19:00 +0100

Where an assured tenant is no longer using a property as their only or principal home, they lose the protection of the Housing Act 1988. The Assured tenancy status ends leaving a contractual tenancy agreement which can be determined by service of a Notice to Quit. However, it is always advisable to serve a Notice Seeking Possession setting out the breaches of the tenancy agreement. The Notice Seeking Possession should be headed, “This Notice is served without prejudice to our contention that you have lost the protection of the Housing Act 1988 in failing to occupy the Premises as your only or principal home.” In the event that the Notice to Quit fails the Assured tenancy continues then the without prejudice Notice Seeking Possession may be relied upon. The same applies to secure tenancies under the Housing Act 1985.

For more information please contact Paul Hayes, or your Lewis Silkin contact.

Human Rights Act 1998 - Article 8: the advance of Pinnock

Wed, 04 Apr 2012 12:16:00 +0100

Where one joint tenant serves a notice to quit on the landlord terminating the tenancy, the other tenant has no right to remain. However, in Dixon v United Kingdom App. No. 3468/10, European Court of Human Rights, the Government accepted that this was in breach of Article 8, as Mr Dixon had not been able to have the proportionality of the decision to evict him determined by an independent tribunal. For further information regarding Article 8 see Great Scott.

For more detail and information please contact Paul Hayes, or your usual Lewis Silkin contact.

Squatters - avoiding court proceedings

Wed, 04 Apr 2012 11:52:00 +0100

The case of Wakolo v DPP [2012] EWHC 611 (Admin) is a reminder of the provisions of the Criminal Law Act 1977. There is a very helpful, but not often used provision, that gives the police power to arrest trespasser(s) (squatters), where there is a protected intending occupier and the trespasser(s) refuse to leave the property having been requested to do so. A protected intending occupier is someone who requires the premises for their own occupation; is excluded from occupation of the premises by trespasser(s); and they have a certificate issued by a registered provider of social housing stating that they have been granted a tenancy or a licence to occupy the premises. As a result, where a property is occupied by trespasser(s), registered providers can provide the relevant certificate to a tenant and the police can arrest the trespassers if they refuse to vacate thereby avoiding court proceedings. However, this does not apply to void residential premises where there is no protected intending occupier, or to commercial property.

For more information please contact Paul Hayes or your usual Lewis Silkin contact.

Regulatory Standards - the future

Wed, 04 Apr 2012 11:48:00 +0100

Welcome to the brave new world. Today is the second day without the TSA. The Social Housing Regulator, will operate within the Homes and Communities Agency. One of the last acts of the TSA was the introduction of the new regulatory standards that have applied from 1 April 2012. The regulatory standards can be viewed here.

For more information please contact Paul Hayes, or your usual Lewis Silkin contact.

Think You've Got It Covered?

Thu, 03 Sep 2009 11:50:00 +0100

Most property occupiers think that if a particular risk is insured against, they can rest easy: but can they?

Subrogation is the right of an insurer to take over any legal rights that a policy holder may have so that the insurer can recover its losses.

To illustrate the subrogation concept in practice:

L = a landlord of a building.

T = an existing tenant under a lease of part of the building.

U = a proposed undertenant of T who intends to undertake a fit-out.

L’s building is insured for the usual occupied property risks. U’s negligent fit-out contractor causes L’s building to be destroyed. L’s insurer, I, agrees to pay out under the insurance policy to L. I then decides to see whether it can recoup its losses by making a claim against anyone else.

Under T’s lease with L there is an indemnity clause whereby T agrees to indemnify L against any expenses, costs, claims or damages of whatsoever nature incurred by L caused by T, its undertenants, contractors, or agents.

I, applying the principle of subrogation, decides to enforce L’s rights under the indemnity clause against T to recoup its losses. T is then liable to I to the extent of I’s losses.

T may benefit from an indemnity provision in U’s underlease in similar terms to the indemnity clause in its lease with L. However, T may not be able to recover the extent of its losses from U: it will depend on whether U (or its contractor) carried the necessary insurance.

What is the moral of this story?

Occupiers of property should try to ensure that when they take a lease of premises, the lease specifies that the landlord is required to procure that the landlord’s insurer waives its rights of subrogation against occupiers of the building.

If that is unsuccessful the occupier could try to negotiate with the landlord to delete provisions in the lease such as indemnity clauses. If the landlord does not have a right against the occupier then the landlord’s insurer cannot pursue a claim against the occupier.

The occupier may also consider arranging a stand alone insurance policy to cover the risk of subrogation exposure.