Supreme Court to deliver landmark ruling on service charges and consultation

The Supreme Court is expected to hand down this week (6 March) a landmark ruling in relation to residential service charges and compliance with statutory consultation requirements.

At issue in Daejan Investments Limited v Benson and others is whether the Court of Appeal was wrong in law to hold that, when considering, under s.20ZA(1) of the Landlord and Tenant Act 1985, whether it is reasonable to dispense with the consultation requirements under s.20:

• The amount of money involved is irrelevant;
• The failure to comply strictly with the requirements will itself be treated as constituting serious prejudice, without the need to consider whether the lessees would have been better off if there had been strict compliance;
• An offer by the landlord to reduce the cost of the works taken into account in calculating the service charges, is irrelevant.

The case involves five flats in Queens Mansions, Muswell Hill that are held under long leases which provide for the payment of service charges. Daejan was the landlord and the respondents were the lessees.

By December 2005, four priced tenders had been received in relation to works to be carried out at Queens Mansions. The priced specifications were not available for inspection by the respondents until 11 August 2006.

However, by that date, the leaseholders had already been informed that the contract had in effect been awarded to a particular contractor and that the statutory consultation process had for all practical purposes ended.

The Leasehold Valuation Tribunal found that Daejan had failed to comply with the Consultation Regulations. The LVT declined to make an order for dispensation. The Upper Tribunal (Lands Chamber) and the Court of Appeal dismissed Daejan’s appeal.