First-tier Tribunal Grants Dispensation for Gas Contracts Without Consultation

OUTCOME: Allowed

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case Reference

:

CHI/00MW/LDC/2022/0060

Property

:

[ADDRESS] [POSTCODE]

Applicant: [redacted]

:

[APPELLANT]

Respondent: [redacted]

:

To dispense with the requirement to consult lessees about major works section 20ZA of the Landlord and Tenant Act 1985

Tribunal Member

:

[NAME] of Decision

:

9 August 2022

DECISION

The Tribunal is satisfied that on the facts presented in this application S.20 consultation is not required.

If wrong on that and the contracts do comprise a QLTA, again given the lack of objections and identification of prejudice the Tribunal would grant dispensation from the consultation requirements of S.20 Landlord and Tenant Act 1985 in respect of entering into the two gas contracts referred to at paragraph 3.

Nothing in this decision comprises a determination as to whether any service charge costs are reasonable or payable.

The Applicant is to send a copy of this determination to all of the lessees liable to contribute to service charges.

2 Background

1. The Applicant seeks dispensation under Section 20ZA of the Landlord and Tenant Act 1985 from the consultation requirements imposed on the landlord by Section 20 of the 1985 Act. The application was received on 17 June 2022.

2. The Applicant explains that the property comprises “39 leasehold units – 15 x 1 bedroom and 24 x 2 bedroom flats; 9 units unsold.”

3.

The application is in respect of two gas contracts entered into;

• 01/12/2021 – 30/09/2022 (10 months) – Contract 1 • 01/10/2022 – 30/09/2023 (12 months)- Contract 2

4. The contracts were entered into so as to fix charges for the periods to which they relate to avoid market fluctuations that could otherwise have resulted in substantial price increases.

5. The Residents Association has confirmed that the residents (the leaseholders) had voted overwhelmingly in favour of the Contracts.

6. The Application is made on what the Applicant describes as a “contingency basis” as whilst it considers that neither of these contracts exceeds 12 months it is concerned that if the contracts were taken together it could be that they formed a Qualifying Long Term Agreement (QLTA) requiring either consultation or dispensation from the same.

7. The Applicant asks the Tribunal to determine; • Do the contracts comprise a qualifying long term agreement?; and if so • Is it reasonable in all of the circumstances for the Tribunal to retrospectively dispense with the statutory consultation requirements?

8. The Tribunal made Directions on 22 June 2022 indicating that it considered that the application was suitable to be determined on the papers without a hearing in accordance with Rule 31 of the Tribunal Procedure Rules 2013 unless a party objected.

9. The Tribunal required the Applicant to send its Directions to the parties together with a form for the Leaseholders to indicate to the Tribunal whether they agreed with or opposed the application and whether they requested an oral hearing. Those Leaseholders who agreed with the application or failed to return the form would be removed as Respondents. The Applicant confirmed that the Tribunal’s Directions had been served as required.

3 10. [NAME] responded agreeing to the application and in accordance with the above, the lessees are therefore removed as Respondents.

11. No requests for an oral hearing were made and the matter is therefore determined on the papers in accordance with Rule 31 of the Tribunal’s Procedural Rules.

12. Before making this determination, the papers received were examined to determine whether the issues remained capable of determination without an oral hearing and it was decided that they were, given that the application remained unchallenged.

13. The only issue for the Tribunal is whether it is reasonable to dispense with any statutory consultation requirements. This decision does not concern the issue of whether any service charge costs will be reasonable or payable.

The Law

14. The relevant section of the Act reads as follows:

S.20 ZA Consultation requirements: Where an application is made to a Leasehold Valuation Tribunal for a determination to dispense with all or any of the consultation requirements in relation to any qualifying works or qualifying long- term agreement, the Tribunal may make the determination if satisfied that it is reasonable to dispense with the requirements.

15. The matter was examined in some detail by the Supreme Court in the case of [COMPANY] v [NAME]. In summary the Supreme Court noted the following; • The main question for the Tribunal when considering how to exercise its jurisdiction in accordance with section 20ZA is the real prejudice to the tenants flowing from the landlord’s breach of the consultation requirements.

• The financial consequence to the landlord of not granting a dispensation is not a relevant factor. The nature of the landlord is not a relevant factor.

• Dispensation should not be refused solely because the landlord seriously breached, or departed from, the consultation requirements.

• The Tribunal has power to grant a dispensation as it thinks fit, provided that any terms are appropriate.

• The Tribunal has power to impose a condition that the landlord pays the tenants’ reasonable costs (including [NAME] and/or

4 legal fees) incurred in connection with the landlord’s application under section 20ZA (1).

• The legal burden of proof in relation to dispensation applications is on the landlord. The factual burden of identifying some “relevant” prejudice that they would or might have suffered is on the tenants.

• The court considered that “relevant” prejudice should be given a narrow definition; it means whether non-compliance with the consultation requirements has led the landlord to incur costs in an unreasonable amount or to incur them in the provision of services, or in the carrying out of works, which fell below a reasonable standard, in other words whether the non- compliance has in that sense caused prejudice to the tenant.

• The more serious and/or deliberate the landlord's failure, the more readily a Tribunal would be likely to accept that the tenants had suffered prejudice.

• Once the tenants had shown a credible case for prejudice, the Tribunal should look to the landlord to rebut it.

Evidence

16. The Applicant’s case is set out in paragraphs 2 to 7 above.

Determination

17. Dispensation from the consultation requirements of S.20 of the Act may be given where the Tribunal is satisfied that it is reasonable to dispense with those requirements. Guidance on how such power may be exercised is provided by the leading case of [NAME] v [NAME] referred to above.

18. The issue I must consider is whether, by not being consulted as required by S.20, the Lessees have suffered prejudice. No objections have been received and no evidence of prejudice has been submitted.

19. The Tribunal has been asked to determine two issues, whether the contracts comprise a QLTA and if so whether dispensation should be given. The reason given for the application is to avoid any potential challenge by a [NAME] on the grounds of failing to comply with S.20.

20. No evidence has been submitted by the Applicant to assist the Tribunal in its determination, which is simply asked to review the position and apply its expertise.

5 21. Given that no objections have been received and no evidence has been submitted that these contracts form a QLTA the Tribunal is satisfied that on the facts presented in this application S.20 consultation is not required.

22. If the Tribunal is wrong on that and the contracts do comprise a QLTA, again, given the lack of objections and identification of prejudice, the Tribunal would grant dispensation from the consultation requirements of S.20 Landlord and Tenant Act 1985 in respect of entering into the two gas contracts referred to at paragraph 3.

23. Nothing in this decision comprises a determination as to whether any service charge costs are reasonable or payable.

24. The Applicant is to send a copy of this determination to all of the lessees liable to contribute to service charges.

D [NAME] [NAME] 9 August 2022 RIGHTS OF APPEAL

1. A person wishing to appeal this decision to the Upper Tribunal (Lands Chamber) must seek permission to do so by making written application by email to [EMAIL] to the First-tier Tribunal at the [NAME] office which has been dealing with the case.

2. The application must arrive at the Tribunal within 28 days after the Tribunal sends to the person making the application written reasons for the decision.

3. If the person wishing to appeal does not comply with the 28 day time limit, the person shall include with the application for permission to appeal a request for an extension of time and the reason for not complying with the 28 day time limit; the Tribunal will then decide whether to extend time or not to allow the application for permission to appeal to proceed.

4. The application for permission to appeal must identify the decision of the Tribunal to which it relates, state the grounds of appeal, and state the result the party making the application is seeking.