Landlords of residential premises with both tenants and sub-tenants wishing to recover costs of more than £250 from all or some of them in their service charges for major works, must consult with them all, a recent ruling makes clear.
The law states that residential landlords proposing to carry out major works (which include repair, maintenance and improvement) which would require each tenant to contribute more than £250 in their service charge to pay for them, must follow a consultation process first, otherwise they cannot request more than £250 from each tenant in relation to the works.
In this case, a landlord proposing to carry out works had let the premises to the tenant, but there was also a substantial number of sub-tenants who were ultimately liable to contribute to the costs of the works in their service charges.
It was unclear who the superior landlord had to consult with about proposed works – the tenant, the sub-tenants, or both? It was also unclear whether the tenant had to consult with the sub-tenants separately, as the tenant was their landlord.
Firstly, the Upper Tribunal decided that only the landlord proposing to carry out the works had to consult. Therefore, the tenant did not have to consult with the sub-tenants.
Secondly, it said that the superior landlord had to consult not only with its tenant, but also any sub-tenants who were liable to contribute towards the cost of the works in their service charges.
This can create significant practical difficulties for landlords. As counsel for the landlord in this case pointed out, this meant her client:
‘…was required to consult up to 408 leaseholders, none of whom it had any contractual relationship with and whose names, addresses and tenures it would not know. That information might be available from the Land Registry but only for registered leases. A short lease with a service charge would not be registered. Nor would a superior landlord necessarily know whether there was a recognised tenant’s association which would also need to be consulted. Consultation is only necessary in relation to works to which the tenant is required to make a relevant contribution, but the superior landlord would not know the terms of individual leases. It would therefore not know whether it was under a statutory obligation to consult particular leaseholders, or to have regard to their observations. Nor would it have any way of compelling the cooperation of the intermediate landlord, with whom it did have a relationship.’
Nevertheless, the Tribunal did not feel that the practical difficulties suggested were a sufficient reason to overturn its construction of the statutory consultation requirements ‘which seems … to be the natural effect of the statutory language’.
In practice, the Tribunal suggested that superior landlords should ask its tenants for details of sub-tenants who need to be notified. If that was not possible, a possible fallback was to send notification to ‘the leaseholder’ in each of the relevant premises.
• Landlords of residential premises with both tenants and sub-tenants, who wish to recover costs of more than £250 from all or some of them as a result of carrying out major works from tenants in their service charges, are required to consult with both tenants and sub-tenants
- Intermediate tenant must be able to justify service charges passed on to sub-tenants as reasonable
- Tenants paying disputed service charges should make it clear at the time that they do not agree those charges
Case ref: Various Occupational Leaseholders of Foundling Court and O’Donnell Court, Brunswick Centre, London v (1) Camden LBC; (2) Allied London (Brunswick) Ltd and others  UKUT 366
31 October 2016
Alex Cook is a Director at Helix. Alex initially trained academically as an unregistered barrister and was a Partner and Head of Civil Litigation at a large firm based in the South East before joining Helix Law. As well as focussing on expanding Helix, Alex specialises in commercial and property related litigation and he has acted for a broad range of clients including offshore property investment funds, small businesses and individual property owners.
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