Tribunal Grants Urgent Works Dispensation, Excluding Two Apartments

OUTCOME: Allowed

1

Case Reference : BIR/00CN/LDC/2021/0018

HMCTS : V: CLOUD VIDEO PLATFORM (CVP)

Property : [NAME], 15 [ADDRESS], [POSTCODE]

Applicant : [redacted]

Representative : Counsel – Miss N [COUNSEL] of [ADDRESS], instructed by [NAME] : The residential long [NAME] of [NAME] of Application : Application under section 20ZA of the Landlord and Tenant Act 1985 to dispense with consultation requirements in respect of qualifying works

Tribunal Members : Judge [NAME]

[NAME] of Hearing : 25 October 2021 Hearing

Date of Decision : 3 December 2021

_________________________________________________

DECISION _____________________________________

© CROWN COPYRIGHT 2021

FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

2 Covid-19 Pandemic: Remote Video Hearing

This determination included a remote video hearing which had been consented to by the parties. The form of remote hearing was Video (V: CLOUD VIDEO PLATFORM). A face-to-face hearing was not held because it was not practicable, no-one requested the same and all issues could be determined in a remote hearing/on paper. The documents referred to were contained within the parties’ bundles, the contents of which are noted.

Pursuant to Rule 33(2A) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, and to enable this case to be heard remotely during the COVID-19 pandemic in accordance with the Pilot Practice Direction: Contingency Arrangements in the First-tier Tribunal and the Upper Tribunal, the Tribunal directed that the hearing be held in private. The Tribunal had directed that the proceedings were to be conducted wholly as video proceedings; it was not reasonably practicable for such a hearing, or such part, to be accessed in a court or tribunal venue by persons who were not parties entitled to participate in the hearing; a media representative was not able to access the proceedings remotely while they were taking place; and such a direction was necessary to secure the proper administration of justice.

Reasons for Decision

Introduction

1. On 5 August 2021, the Tribunal received an application from [NAME] (Warstone) [APPELLANT] (‘the Applicant’) under Section 20ZA of the Landlord and Tenant Act 1985 (‘the Act’), for dispensation from the consultation requirements contained in Section 20 of the Act for works to be carried out at [NAME], 15 [ADDRESS], [POSTCODE] (‘the Property’). The application related to maintenance and repair issues caused by water ingress which affected numerous apartments at the Property. The application stated that works were commenced prior to consultation as the works were urgent and that there had been a risk of further damage or disrepair should they have been delayed.

2. A Directions Order was issued on 11 August 2021 requiring the Applicant to place in the hall/communal notice board, and to forward to each of the residential long [NAME] (‘the Respondents’) and the landlord: a copy of the application and any accompanying documents, a copy of the Directions Order (which included a form for the Respondents to indicate whether they supported the application) and a copy of the Tribunal’s covering letter. The Directions Order also confirmed that the Tribunal did not consider that an inspection of the Property was required.

3. The Tribunal received 23 completed forms from various [NAME], 18 of which supported the application and 5 of which did not. Ms [NAME] (the leaseholder of Apartment 91, [NAME]), in her email enclosing her form,

3 stated that she objected to the application as the documents were vague and that the Applicant’s [NAME] agent would only talk to [NAME] on an individual basis, which she stated was one example of a lack of transparency by them and the [NAME].

4. Following a request from [NAME] and Mr [NAME] (the [NAME] of Apartment 14, [NAME]), the Tribunal extended the time in the Directions Order for receipt of any [NAME]’ cases to 15 October 2021. As no bundle or statement of reasons had been received by that date from any of the objecting [NAME] the deadline was, again, extended to 22 October 2021. The only [NAME] to forward any written representations or to confirm that they wished to participate in the hearing were [NAME] and Mr [NAME].

5. The only issue for the Tribunal to determine is whether or not it is reasonable to dispense with the consultation requirements, under section 20ZA of the Act. This Application does not concern the issue of whether any service charge costs are reasonable or payable and the Respondents will continue to enjoy the protection of section 27A of the Act.

The Law

6. Section 18 of the Act defines what is meant by the term ‘service charge’ and defines the expression for ‘relevant costs’. Section 19 of the Act limits the amount of any relevant costs which may be included in a service charge to costs which are reasonably incurred.

Section 20 details consultation requirements and section 20(1) provides:

Where this section applies to any qualifying works or qualifying long term agreement, the relevant contributions of tenants are limited … 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.

As such, section 20 of the Act limits the amount which tenants can be charged for qualifying works unless certain consultation requirements have been either complied with or dispensed with by First-tier Tribunal (Property Chamber).

The detailed consultation requirements are set out in Schedule 4, Part 2 to the Service Charges (Consultation Requirements) (England) Regulations 2003. These, amongst other things, require the landlord to serve on tenants a Notice of Intention, provide a facility for inspection of documents and require the landlord to have regard to tenants’ observations. There is also a duty on the landlord to seek estimates from any contractor nominated by or on behalf of tenants. The requirements also detail the procedure for the preparation and delivery of the landlord’s proposals.

4 Section 20ZA of the Act provides:

(1) Where an application is made to the appropriate 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. (2) In section 20 and this section— “qualifying works” means works on a building or any other premises… Therefore, section 20ZA of the Act allows the Tribunal to make a determination to dispense with the consultation requirements “if satisfied that it is reasonable” to do so.

The Leases

7. The leases of the residential apartments in [NAME] contain a provision in clause 5.5 that the lessor is responsible for providing the services, which, in Part II of the Second Schedule include:

“1 The maintenance repair provision service inspection and where necessary renewal of the Development and each and every part thereof and the keeping of the same in a good state of repair and condition”

The Hearing

8. An oral hearing was held via CVP on 25 October 2021. The Applicant was represented by Miss [COUNSEL] (Counsel), accompanied by Miss [COUNSEL] and Ms [COUNSEL] (an associate solicitor and trainee solicitor, respectively, both from [NAME]) and Mr [NAME] (a Senior Property Manager with [APPELLANT] ‘[NAME]’, the Applicant’s [NAME] agent). Mr [APPELLANT] attended on behalf of himself and [APPELLANT]. No other Respondents attended.

Applicant’s Submissions

9. The Applicant, in its Statement of Case, confirmed that it was the ‘right to manage company’ for [NAME], which was a mixed use building comprising of 4 commercial units, on the ground floor, and 116 residential leasehold apartments, located between the ground and fifth floors. The Applicant confirmed that the freehold was held by [APPELLANT] and that all of the residential leases were in similar terms to the copy lease (of Apartment 108, [NAME]) provided to the Tribunal.

10. Mr [NAME] confirmed that [NAME] took over the management of the Property, from [COMPANY], in December 2020 and that it was clear, from a review of the handover documentation and meetings with contractors and [NAME] in January 2021, that major works were urgently required due to water ingress and that some of the apartments were uninhabitable. He stated that, due to a number of historical claims, the buildings insurance for the Property had an excess of £50,000 for water claims

5 and did not cover claims for water ingress. As such, he stated that any works would need to be charged to the [NAME] under the service charge.

11. Mr [APPELLANT] confirmed that the Applicant had appointed [APPELLANT] (‘[NAME]’) to undertake a scheme of works to remedy the problems prior to [NAME]’s instruction. He stated that, due to the nature of the works, the Applicant had instructed [NAME] to begin the works at the earliest opportunity but that these works were briefly stopped in October 2020. [NAME]’s appointment, Mr [NAME] stated that, although the information available from the [NAME] [NAME] was limited, they noted that the costs for the completion of the works that [NAME] had commenced would have exceeded the section 20 consultation threshold. As they considered that the works were urgent and had already been started, they believed that an application for dispensation should be made to the Tribunal for the remaining works.

12. Mr [NAME] confirmed that they instructed [NAME] (‘[NAME]’) to produce a schedule of works (‘the Schedule of Works’) based on the outstanding works which [NAME] had been appointed to urgently complete. The works contained within the Schedule of Works were referred to as the ‘Phase 1 works’. Mr [NAME] stated that the Phase 1 works included urgent works, such as the sanitation of apartments, installing floor insulation, reinstating the apartments after works had been completed and checking the electrics and various works to balconies. Although other works to the Property, due to the damage, were also required, Mr [NAME] confirmed that these would be part of a second project, Phase 2, for which the Applicant expected to carry out formal consultation under section 20 of the Act.

13. He stated that [NAME] had provided costings in relation to the Schedule of Works, which amounted to £72,144.02, which [NAME] stated were in line with the market. In addition, he stated that the Applicant had obtained a further quote from [NAME], which amounted to £101,320.18. Mr [NAME] considered that instructing an alternative contractor to continue works already started by [NAME] would have resulted in a higher cost to the [NAME].

14. Mr [NAME] stated that it took time to make the application to the Tribunal due to the lack of information from the [NAME] [NAME]. He stated that solicitors were instructed in February/March 2021, after the Schedule of Works had been produced and quotes obtained. Mr [NAME] also stated that [NAME] were in regular communication with the [NAME], holding residents’ meetings, via Zoom conference calls, on 23 February 2021 and 7 May 2021, and giving them updates as to the works.

15. In relation to the Schedule of Works, Mr [NAME] stated that the resident of Apartment 1 had vacated the Property, at his own expense, some time ago as it was uninhabitable. He confirmed that the Schedule of Works did not detail either the works or the estimated costs to Apartment 112 or Apartment 86, as they had been unable to gain access to them. He also clarified that the Schedule of Works did not include the works which had already been completed by [NAME], as those had been completed by October 2020 and the costs of those works had already been included in the 2020 year-end accounts.

6 16. Miss [NAME] confirmed that [NAME] had initially been contacted by the Applicant in March 2021 and were formally instructed in late April 2021. She confirmed that the application to the Tribunal was made as soon as they had received all the necessary documentation.

17. Miss [APPELLANT] stated, on behalf of the Applicant, that the Tribunal has a power to dispense with the consultation requirements if it considers it reasonable to do so. She submitted that the leading authority in such matters was the decision of the Supreme Court in [COMPANY] v [NAME] et al [2013] UKSC 14 (‘Daejan’), which essentially set out the test as to whether dispensation should be granted. She submitted that in Daejan, the Supreme Court stated that the Tribunal should focus on any relevant prejudice caused to the Respondents by the failure to comply with the consultation requirements set out in section 20 of the Act and that the burden was on the Respondents to show what prejudice had been caused.

18. She stated that the works were urgent and pointed to the fact that only 5 of the 116 [NAME] had raised any objections and that Mr [NAME] and [NAME] were the only ones who had forwarded any formal representations and participated in the hearing.

19. She stated that Mr [NAME] and [NAME] objections generally related to queries regarding the management of the Property and lack of correspondence. They also referred to works relating to Phase 2 and fire safety and cladding, which, she stated, were completely separate to the application before the Tribunal and for which the Applicant had already stated consultation would be carried out.

20. She further stated that their objections in relation to whether works were required and the reasonableness of the costs of those works, were section 27A objections and did not show any prejudice in relation to the lack of consultation. In any event, she confirmed that the instruction of [NAME] to provide the Schedule of Works and the quote from [NAME], showed that the proposed works were not only required, but that the costs quoted by [NAME] were also reasonable and proportionate.

21. [NAME] submitted that the lack of any major objection and the urgency of the works made the matter appropriate for dispensation, although she confirmed that the Applicant was willing to accept a condition that six-weekly updates as to the works could be provided to the Respondents, should the Tribunal consider this appropriate

Respondents’ Submissions

22. At the hearing, Mr [NAME], on behalf of himself and [NAME], stated that, although they had no objections to the works being required – as long as the Schedule of Works was correct and that all [NAME] works had been paid for – they were unhappy with the way in which the works had been approached and that, due to having already had three service charge increases, there was a lack of trust between the parties.

7 23. Mr [NAME] stated that there had been no evidence as to what works had already been carried out and he queried whether some of the works were duplicated within the Schedule of Works drawn up by [NAME]. In addition, although he confirmed that [NAME] had been an improvement on the [NAME] [NAME] agent, he stated that they were worried that, as with the [NAME] [NAME] agent, there would be a lack of consultation and information provided to the leaseholder and, as such, submitted that formal consultation was required.

24. In their written submission, Mr [NAME] and [NAME] stated that they had no confidence that the works would be completed within budget and that they lacked confidence in the suppliers. In addition, they stated that, where any works were required due to the fault of the contractor, the cost of those works should be recovered from the contractor or the contractor should make good the damage caused by them. (Although they did not clarify which apartment this related to, they referred to works to a balcony which were included within the Schedule of Works but which had not been detailed in the original scope of works with [NAME]).

25. Mr [NAME] and [NAME] also referred to works not having been prioritised correctly and a lack of clarity as to the works being pursued. They queried an entry regarding scaffold removal in the Schedule of Works, as they stated that there was no scaffolding in place at the Property. They also stated that, although works to Apartments 86 and 112 were detailed within the Schedule of Works, due to the Applicant not having been able to gain access to those apartments, those works should be moved into Phase 2 until the works could be confirmed and costed accurately. They also queried whether some of the works detailed in Phase 2 should be moved to Phase 1.

26. They stated that they were worried about spiralling costs and having to “foot the bill” for building defects, including cladding costs which were yet to be clarified by the Applicant. As such, they submitted that, in order to give the [NAME] confidence that the works would be managed correctly and efficiently, they proposed that: [NAME] should be consulted if the costs of the works were to exceed £72,144.02; that if works were due to building defects, the [NAME] should be pursued; that the [NAME] should be kept fully informed of the progress of any works; that the [NAME] should be consulted on the use of any suppliers and that the [NAME] [NAME] agent should be pursued for damages.

The Tribunal’s Deliberations and Decision

27. The Tribunal considered all of the written and oral evidence submitted and summarised above.

28. The Tribunal must decide whether it is reasonable for the works to proceed without the Applicant first complying with the section 20 consultation requirements, as is required under the Act.

8 29. Section 20ZA confirms that a tribunal may make a determination to dispense with all or any of the consultation requirements, if it is satisfied that it is “reasonable” to dispense with the same. [NAME] is correct in that, the leading authority for the way in which the Tribunal should approach this question was considered by the Supreme Court in Daejan, which determined (amongst other things) that the correct approach was to consider the extent to which the tenants might be prejudiced by a lack of consultation. In considering that issue, the legal burden of proof rests with an applicant, but the factual burden of identifying some relevant prejudice rests with a respondent. Relevant prejudice refers to a disadvantage that a respondent would not have suffered had the consultation requirements been fully complied with.

30. In this matter, the Applicant confirmed that major works to the Property were urgently required due to water ingress and that, as [NAME] had already commenced some of the works, granting dispensation for the remainder of the works, as detailed in the Schedule of Works, was reasonable. In addition, they submitted that the costs quoted by [NAME] were in line with market prices and much lower than an alternative quote that they had obtained from [NAME].

31. The Tribunal noted that, although there had been 5 objections to the application to dispense, only Mr [NAME] and [NAME] had forwarded any written representations for the Tribunal to consider out of the 116 residential [NAME]. The Tribunal also noted that, other than the works to Apartment 86 and Apartment 112, Mr [NAME] and [NAME] did not submit that works were not urgent. The majority of their concerns related to the increased service charge, the lack of information provided to [NAME] when the works were originally commenced and a breakdown in trust between the [NAME], the Applicant and the [NAME]. Although the Tribunal is sympathetic to those concerns, it does not consider that they amount to relevant prejudice which would be caused by a result of the failure by the landlord to comply with the consultation requirements.

32. The Tribunal is satisfied that the works detailed in the Schedule of Works are urgently required, other than any works relating to Apartment 86 and Apartment 112, and that, as the works have already been commenced by [NAME], dispensation should be granted for the works to be completed by them. In relation to Apartment 86 and Apartment 112, the Tribunal concurs with Mr [NAME] and [NAME] that, without having access those apartments, the Applicant cannot state with any certainty that any works required to them are urgently required.

33. With regard to Mr [NAME] and [NAME] concerns regarding the potential costs exceeding those quoted by [NAME] and whether the supplier would carry out the works to a reasonable standard, the reasonableness of the costs and standard of the works proposed is not in issue before this Tribunal. If there is any dispute about those matters, then they would have to form the basis of a separate application under section 27A of the Act after the works had been completed and accounted for.

9 34. In relation to any duplication of works, the Tribunal noted that Mr [NAME] and [NAME] did not provide any evidence that this was the case and, if it was, the Tribunal considered that the [NAME] of the apartments concerned would have raised objections to this. In addition, with regard to the works to the balcony referred to by Mr [NAME] and [NAME] in their written submission, the Tribunal noted that some of the works to the balconies detailed in the quote by [NAME] appeared to be at no cost to the [NAME] and, again, the Tribunal considered that if costs for repairing faulty workmanship had been included, this would have been objected to by the relevant [NAME]. In any event, the Tribunal considered that both of these matters could also be dealt with by way of an application under section 27A of the Act if required.

35. In relation to whether any of the works in Phase 2 should be moved to Phase 1, the Tribunal was only concerned with whether dispensation should be granted for any of the works detailed in Phase 1, so did not consider this relevant.

36. Finally, with regard to the proposals put forward by Mr [NAME] and [NAME], the Tribunal did not consider it appropriate that dispensation should be subject to any conditions relating to the costs or to the supplier instructed (as previously stated the [NAME] still had the benefit of making an application under section 27A of the Act if required), nor any negotiations regarding action relating to the [NAME] or [NAME] agent. In relation to keeping the [NAME] informed on the progress of the works, the Tribunal noted that the Applicant was willing to provide six-weekly updates and the Tribunal considered that such a condition was reasonable.

37. Having considered all of the evidence submitted, the Tribunal finds that the works detailed in the Schedule of Works, other than any works to Apartment 86 and Apartment 112, are required as a matter of urgency and that the issues raised by the Respondents have not identified that they had suffered or will suffer any relevant prejudice as a result of the lack of consultation.

38.

Accordingly, the Tribunal is satisfied and determines that, other than any works to Apartment 86 and Apartment 112, it is reasonable to dispense with the consultation requirements of section 20 of the Landlord and Tenant Act 1985 in relation to the remaining works detailed in the Schedule of Works, subject to the Applicant (or its [NAME] agent) providing six-weekly updates to the Respondents as to the progress of such works.

Appeal

39. If either party is dissatisfied with this decision they may apply to this Tribunal for permission to appeal to the Upper tribunal (Lands Chamber). Any such application must be received within 28 days after these written reasons have been sent to the parties (rule 52 of The Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013).

[NAME] ………………………… Judge [NAME]