First-tier Tribunal Grants Dispensation for New Electricity Agreement

OUTCOME: Allowed

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDEN- TIAL PROPERTY) Case Reference : LON/0AS/LDC/2022/0072 Property : 1-56 [ADDRESS], [POSTCODE] Applicant : [redacted] : [APPELLANT] : Warwick Es- tates Respondents : [redacted] in the application. Type of Applica- tion : Application for the dispensation of consultation requirements pursuant to S. 20ZA of the Landlord and Ten- ant Act 1985 Tribunal : [RESPONDENT] of Determ- ination and De- cision : 2nd August 2022

DECISION © CROWN COPYRIGHT 2013

Decisions of the Tribunal (1) The Tribunal grants the application for the dispensation of all or any of the consultation requirements provided for by section 20 of the Landlord and Tenant Act 1985 (Section 20ZA of the same Act). (2) The reasons for the Tribunal’s decision are set out below. The background to the application 1. The property, 1-56 [ADDRESS] [POSTCODE] comprises a block of 56 flats over four floors.

2. The tribunal did not inspect the property as it considered the documen- tation and information before it in the trial bundle enabled the tribunal to proceed with this determination and also because of the restrictions and regulations arising out of the Covid-19 pandemic.

3. This has been a paper hearing which has been consented to by the par- ties. The documents that were referred to are in the bundle provided by [COMPANY], the contents of which we have recorded. Therefore, the tribunal had before it an electronic/digital trial bundle of docu- ments prepared by the applicant, in accordance with previous direc- tions.

4. The Applicant seeks dispensation under section 20ZA of the Landlord and Tenant Act 1985 (“the 1985 Act”) from all the consultation re- quirements imposed on the landlord by section 20 of the 1985 Act, (see the Service Charges (Consultation Requirements) (England) Regula- tions 2003 (SI2003/1987), Schedule 4.) The request for retrospective dispensation concerns the applicant entering into a new agreement for the supply of electricity to the block serving each of the flats, fixing the rate for a period of 15 months as set out in the application. The applica- tion is said to be urgent, as the new agreement will be able to take ad- vantage of fixing a more competitive energy price in the volatile energy procurement market with proposed significant electricity increases in the forthcoming year. It is stated, it would not be possible to obtain such cost savings for the benefit of each leaseholder if it were required to carry out the section 20 consultation process.

5. Section 20ZA relates to consultation requirements and provides as fol- lows: “(1)Where an application is made to a leasehold valuation tri- bunal for a determination to dispense with all or any of the consultation requirements in relation to any qualifying works 2

or qualifying long term agreement, the tribunal may make the determination if satisfied that it is reasonable to dispense with the requirements. (2) In section 20 and this section— “qualifying works” means works on a building or any other premises, and “qualifying long term agreement” means (subject to subsection (3)) an agreement entered into, by or on behalf of the landlord or a superior landlord, for a term of more than twelve months. …. (4)In section 20 and this section “the consultation require- ments” means requirements prescribed by regulations made by the Secretary of State. (5)Regulations under subsection (4) may in particular include provision requiring the landlord— (a) to provide details of proposed works or agreements to ten- ants or the recognised tenants’ association representing them, (b) to obtain estimates for proposed works or agreements, (c) to invite tenants or the recognised tenants’ association to propose the names of persons from whom the landlord should try to obtain other estimates, (d) to have regard to observations made by tenants or the recognised tenants’ association in relation to proposed works or agreements and estimates, and (e) to give reasons in prescribed circumstances for carrying out works or entering into agreements.

6. The Directions on 18th May 2022 required any tenants who opposed the application to make their objections known on the reply form pro- duced with the Directions.It was confirmed to the Tribunal notification was sent to the tenants on the 23rd May 2022 and as far as the Tribunal is aware no objections were received from any of the tenants.

7. In essence, the new energy agreement mentioned above is required to to fix electricity prices for a period of 15 months in this very volatile en- ergy pricing market. Dispensation was thought necessary to speed up the process and take advantage of such an agreement. The decision 8. By Directions of the tribunal dated 18th May 2022 it was decided that the application be determined without a hearing or by way of a video hearing if no objection was made. There, being no such objection the case will be determined on written representations.

9. The tribunal had before it a bundle of documents prepared by the ap- plicant that contained the application, grounds for making the applica- 3

tion together with a specimen copy lease and copy of Tribunal Direc- tions.

10. The issues 11. The only issue for the Tribunal to decide is whether or not it is reason- able to dispense with the statutory consultation requirements. This application does not concern the issue of whether or not ser- vice charges will be reasonable or payable.

12. Having read the evidence and submissions from the Applicant and hav- ing considered all of the documents and grounds for making the appli- cation provided by the applicant, the Tribunal determines the dispensa- tion issues as follows.

13. Section 20 of the Landlord and Tenant Act 1985 (as amended) and the Service Charges (Consultation Requirements) (England) Regulations 2003 require a landlord planning to undertake major works, where a leaseholder will be required to contribute over £250 towards those works, to consult the leaseholders in a specified form.

14. Should a landlord not comply with the correct consultation procedure, it is possible to obtain dispensation from compliance with these re- quirements by such an application as is this one before the Tribunal. Essentially the Tribunal must be satisfied that it is reasonable to do so.

15. In the case of [COMPANY] v Benson [2013] UKSC 14, by a majority decision (3-2), the Supreme Court considered the dispen- sation provisions and set out guidelines as to how they should be ap- plied.

16. The Supreme Court came to the following conclusions: a. The correct legal test on an application to the Tribunal for dis- pensation is: ! ! “Would the flat owners suffer any relevant prejudice, and if so, what relevant prejudice, as a result of the landlord’s failure to comply with the requirements?” b. The purpose of the consultation procedure is to ensure lease- holders are protected from paying for inappropriate works or paying more than would be appropriate. 4

c. In considering applications for dispensation the Tribunal should focus on whether the leaseholders were prejudiced in either re- spect by the landlord’s failure to comply. d. The Tribunal has the power to grant dispensation on appropriate terms and can impose conditions. e. The factual burden of identifying some relevant prejudice is on the leaseholders. Once they have shown a credible case for prej- udice, the Tribunal should look to the landlord to rebut it. f. The onus is on the leaseholders to establish: i. what steps they would have taken had the breach not happened and ii. in what way their rights under (b) above have been preju- diced as a consequence.

17.

Accordingly, the Tribunal had to consider whether there was any preju- dice that may have arisen out of the conduct of the lessor/applicant and whether it was reasonable for the Tribunal to grant dispensation follow- ing the guidance set out above.

18. The tribunal is of the view that, taking into account that there were no objecting leaseholders, it could not find prejudice to any of the lease- holders of the property by the granting of dispensation relating to the entering into of a new agreement for a period of 15 months for the sup- ply of electricity to the block, serving each flat as set out in the docu- mentation in the trial bundle submitted in support of the application.

19. The Tribunal was mindful of the fact that the new agreement com- menced on the 15th April 2022 being supported by managing agents and therefore dispensation is wholly appropriate.

20. The applicants agent believes that the new agreement will make signifi- cant cost savings to each of the tenants. The applicant also says that in effect the tenants of the properties have not suffered any prejudice by the failure to consult. On the evidence before it the Tribunal agrees with this conclusion and believes that it is reasonable to allow dispensation in relation to the subject matter of the application. It must be the case that the necessary agreement should have been entered into as a mat- ter of urgency to ensure a competitive long term fixed energy price.

21. Rights of appeal made available to parties to this dispute are set out in an Annex to this decision. 5

22. The applicant shall be responsible for formally serving a copy of the tri- bunal’s decision on all 56 leaseholders. Furthermore, the applicant shall place a copy of the tribunal’s decision on dispensation together with an explanation of the leaseholders’ appeal rights on its website (if any) within 7 days of receipt and shall maintain it there for at least 3 months, with a sufficiently prominent link to both on its home page. Copies must also be placed in a prominent place in the common parts of the building. In this way, leaseholders who have not returned the re- ply form may view the tribunal’s eventual decision on dispensation and their appeal rights. Name: Mr [NAME]: 2nd August 2022 6

ANNEX - RIGHTS OF APPEAL 1. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber) then a written application for permission must be made to the First-tier Tribunal at the Regional office which has been dealing with the case.

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

3. If the application is not made within the 28 day time limit, such appli- cation must include a request for an extension of time and the reason for not complying with the 28 day time limit; the Tribunal will then look at such reason(s) and decide whether to allow the application for permission to appeal to proceed despite not being within the time limit.

4. The application for permission to appeal must identify the decision of the Tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal, and state the result the party making the application is seeking. 7