Churchill Retirement Living LimitedApplicantAll Leaseholders of dwellings who may be liable to contribute towards the cost of the relevant works at the PropertyRespondent
Before
Judge JR MorrisChurchill Estates Management Limited for the ApplicantDate 12 December 2024
DECISION
[1]The Tribunal is satisfied that it is reasonable to dispense with compliance with the consultation requirements of Schedule 4 Part 2 to the Service Charges (Consultation etc) (England) Regulations 2003 (SI 2003/1987) which the Applicant and its Representative have not been able to fulfil.[2]The Applicant shall serve a copy of the Tribunal’s decision on dispensation, together with the relevant appeal rights attached, to the Leaseholders.
REASONS
[3]On 16 October 2024 the Applicant’s Representative applied for retrospective dispensation from the statutory consultation requirements in respect of qualifying works which are to repair an area of the roof at the Property.[4]Haddenhurst Court is a retirement housing development occupied by leaseholders over the age of 55 years. The development was built in 1989 and, prior to 30 June 2024, was owned and managed by Housing 21, a Registered Social Landlord. Churchill Living acquired several Housing 21 retirement housing developments and subsequently became the Landlord from 1 July 2024 and Churchill Estates Management (the Applicant’s Representative), became the appointed Property Management company. The development consists of 37 flats. The block is two storeys with shared corridors to access apartments and communal facilities of a lift, laundry room, guest suite, internal refuse room, lounge, and kitchen for the use of all Leaseholders.[5]A quotation from the contractor engaged was of £13,800 inclusive of VAT. Therefore between 37 flats the total cost of the qualifying work exceeds the threshold of £250.00 per unit which requires the Applicant to consult the Leaseholders in accordance with the procedure required under section 20 of the Landlord and Tenant Act 1985.[6]It was said that these works were required as a matter of urgency due to the ingress of water into the flats below, the risk of further damage with the approach of the winter months bringing the likelihood of inclement weather and the vulnerability of the Leaseholders.[7]Directions were issued on 6 November 2024 which stated that the Application would be determined on or after 9 December 2024 based on written representations and without an inspection, unless either party made a request for an oral hearing by 25 November 2024. No request was received.[8]The Directions required the Applicant to send by 15 November 2024 to each of the Respondent Leaseholders, by hand delivery or by first class post and by email, if practicable, copies of: i. The application form without the list of leaseholders’ names and addresses; ii. The Directions; iii. A clear concise description of the relevant works for which dispensation is sought; iv. The estimate of the cost of the relevant works, including any professional fees and VAT; v. Any other evidence relied upon; and To file with the tribunal confirming that this had been done and stating the date on which this was done.[9]On 15 November 2024 the Applicant’s Representative confirmed that this Direction had been complied with that day.[10]If the Respondent Leaseholders wished to make representations the Directions required them to do so via an attached reply form by 26 November 2024. It was stated that:• A copy of the Application for Dispensation had been sent to all Leaseholders on 21 October 2024 by first class post of Apartments 13, 22 and 36 and hand delivered to all other Apartments.• A copy of the Directions was sent to all Leaseholders on 15 November 2024 by first class post to Apartment 13 and hand delivered to all other Apartments.• A copy of the Application and the Directives was sent to the Leaseholders of Apartment 22 and 36 on 15 November 2024 as they had taken up residence after the Application.• A covering letter was sent to all Leaseholders on 15 November 2024 first class post to Apartment 13 and hand delivered to all other Apartments which included details of the professional fees and VAT and a description of the relevant work and reasons as to why it was required. No representations were received. The Law[11]Section 20 of the Landlord and Tenant Act 1985 limits the relevant service charge contribution of tenants unless the prescribed consultation requirements have been complied with or dispensed with under section 20ZA. The requirements are set out in The Service Charges (Consultation Requirements) (England) Regulations 2003. Section 20 applies to qualifying works if the relevant costs incurred in carrying out the works exceed an amount which results in the relevant contribution of any tenant being more than £250.[12]The consultation provisions appropriate to the present case are set out in Schedule 4 Part 2 to the Service Charges (Consultation etc) (England) Regulations 2003 (SI 2003/1987) (the 2003 Regulations). The Procedure of the Regulations are summarised in Annex 2 of this Decision and Reasons.[13]Section 20ZA allows a Landlord to seek dispensation from these requirements, as set out Annex 2 of this Decision and Reasons and this is an Application for such dispensation.[14]References to “tenants” includes “leaseholders” and vice versa. Submissions & Evidence[15]The Applicant’s Representative provided a bundle to the Tribunal which included:• A copy of the Lease• Application to the Tribunal• List of Leaseholders• Tribunal Directions• Applicant’s confirmation regarding compliance with Direction 2b)• Statement of Case• Quotations from contractors• Section 20 Compliance:• Notice of Intention dated 16 October 2024• Notice of Application for Dispensation dated 21 October 2024• Notice of Estimates 14 November 2024 These together set out the Applicant’s case as follows:[16]The relevant provisions of the Lease are: a) Under Clause 5 (4)(A)(i) of the lease the Lessor is responsible to "maintain renew replace and keep in good and substantial repair and condition the main structure of the Building including the foundations and the roof thereof with its gutters and rain water pipes" b) Under Clause 3(2) the Tenant covenants to pay the Service Charge which includes the costs incurred by the Lessor in the repair maintenance renewal and management of the Building and the Estates[17]The Application Form and Statement of Case stated that:[18]Water ingress causing damage and staining to the ceiling tiles of the first-floor corridor adjacent to apartments 30 and 33 had occurred. This was reported to the Applicant's Representative’s Property Services team. The Managing Surveyor visited Haddenhurst Court on 6 September 2024 and noted that areas of the roof were in a poor condition, having deteriorated through time. The Surveyor considered a patch repair would not resolve the matter and that remedial work to the whole section of that area of the roof was required.[19]A copy of the Managing Surveyor’s Report was provided which stated that the flat roof covering had a life expectancy of 20-30 years and appeared to be original. It was not economical to patch it and therefore there was a need to replace the entire section of the flat roof. It was added that the work was urgent.[20]There was heavy rain immediately following our Managing Surveyor's visit resulting in water ingress in two locations of the first-floor corridor ceiling adjacent to apartments 30 and 33. (Photographs were provided).[21]Two contractors, VMR CS Ltd and Thermoseal, were asked for quotations both of whom agreed with the recommendation of the Managing Surveyor. To ensure a longer-term repair and to avoid water penetration extending along the corridor beyond the area of repair the quotations included work to remedy the deterioration of the roofing materials adjacent to the valley where the pitched roof meets the flat roof. (Copies of the quotations were provided)• VMR Construction Solutions Limited provided us with a quote on 14.09.2024 in the sum of £13,800, (inclusive of VAT).• Thermoseal Roofing Services Limited provided a quotation on 24.09.2024 in the sum of £14,250. (This company is VAT exempt).[22]Both quotations gave similar detailed information as to the work required. That provided by VMR CS Ltd, the chosen contractor stated:• Erecting scaffolding.• Removing loose mortar and loose ridge and hip tiles,• Cleaning cracked and old mortar from valley and ridge tiles and relaying and• re-pointing the valley.• Removing the bottom course of tiles to the valley.• Applying bitumen and installing three layers of membrane.• Installing damp proof course upstands.• Installing plastic eave trays and relaying tiles. and• Installing new gutter and drain caps in the valley.[23]In accordance with the Landlord and Tenant Act 1985 a Notice of Intention was sent to all leaseholders on 16 October 2024 (copy provided). A further letter was sent to all Leaseholders on 21 October 2024 (copy provided) enclosing the Application for Dispensation as the work was considered too urgent to complete the section 20 procedure.[24]The Applicant’s Representative stated that the decision and motive for taking this course of action was set out in a letter dated 14 November 2024 to all Leaseholders (copy provided). To prioritise the wellbeing of owners on the first floor and to protect the building the following factors were considered:• Damage to the ceiling tiles adjacent to apartments 30 and 33 is evident every time it rains and the extent and spread of damage is increasing.• With the winter months upon us, more bouts of stormy weather and heavy rain is likely.• At the point when quotations were obtained, there was no evidence of rain penetration, staining or damage to the decor within any apartment along the first-floor corridor. However it was considered important to carry out the necessary work before any apartment became adversely affected.• As well as the damage that was visible, there was concern that damage was being caused that was not visible from the communal corridor. It was likely that water ingress could be causing damage to the roof structure as rain was entering the roof, travelling down through the loft space before reaching the ceiling tiles. It was felt work was urgently needed to ensure the rain penetration did not continue and cause more severe. and possibly structural. damage to the roof.• Delaying work to satisfy the requirements of Section 20 consultation may have resulted in more damage occurring and subsequently a higher cost implication to leaseholders in terms of remedial work.• The area of water ingress was near to the electrical lighting circuit. It was considered work was needed urgently to prevent the rainwater reaching the electrics and causing the potential risk of fire within the loft space. (an unoccupied part of the building).[25]No communication was received from any Respondent Leaseholder in respect of the correspondence to Leaseholders of 16 October 2024, 21 October 2024, or 14 November 2024.[26]The Applicant’s representative submitted that the breach of Section 20 procedures had not had a detrimental impact on the extent, quality, or cost of work and that:• The extent and scope of work is appropriate and necessary. We are confident the contractor has sufficient expertise, resource, and knowledge to carry out work to stop the leak and prevent further damage.• By undertaking the work without delay, the extent of damage did not increase. the scope of work did not expand and therefore the cost recoverable from leaseholders did not increase. Findings[27]The Tribunal finds from the Lease that the Landlord is obliged to make repairs to the roof and that these are chargeable to the Leaseholders through the Service Charge.[28]The Tribunal from its knowledge and experience is aware of the need to act promptly when there is water ingress from a roof. Such ingress can cause not only damage to the accommodation below and the structure of the building but can amount to a health and safety risk as it can result in damp and mould and have a serious effect regarding the electrical installation.[29]The Tribunal finds that the above matters were considered by the Applicant and its Representative in deciding the extent to which the section 20 procedure should be followed. The Tribunal finds that the Applicant and its Representative fulfilled the requirements of the section 20 procedure in that a Notice of Intention was served and the required period for representations given. The Leaseholders were also informed that application would be made for dispensation from the other requirements of secton 20. The Tribunal found that two estimates were obtained and a Statement of Estimates detailing the work to be undertaken was served on the Leaseholders. Notwithstanding that this was served after the contractor who gave the lowest estimate was appointed and no period for making representations was specified, nevertheless, in addition, to the Notice of Intention, Leaseholders were invited to make representations as part of the Application for dispensation process. The Tribunal found that the Leaseholders made no response to either invitation.[30]Therefore, considering the necessity and urgency of the work, that an opportunity was given to the Leaseholders to make representations in respect of the Notice of Intention and the procedure for dispensation, the Tribunal finds that the Leaseholders have not suffered any relevant prejudice by the failure to carry out the consultation procedure in full. Determination[31]In making its decision the Tribunal had regard to the decision of the Supreme Court in Daejan Investments Ltd v Benson and others [2013] UKSC 14. In summary, the Supreme Court noted the following: 1) The main question for the Tribunal whether the landlord’s breach of the section 20 consultation requirements resulted in the leaseholders suffering real prejudice. 2) The financial consequence to the landlord of not granting a dispensation is not a relevant factor. 3) The nature of the landlord is not a relevant factor. 4) Dispensation should not be refused solely because the landlord seriously breached, or departed from, the consultation requirements. 5) The Tribunal has power to grant a dispensation as it thinks fit, provided that any terms are appropriate. 6) The Tribunal has power to impose a condition that the landlord pays the tenants’ reasonable costs (including surveyor and/ or legal fees) incurred in connection with the landlord’s application under section 20ZA. 7) 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. 8) The Supreme 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. 9) 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. 10) Once the tenants had shown a credible case for prejudice, the Tribunal should look to the landlord to rebut it.[32]The Tribunal is satisfied that it is reasonable to dispense with compliance with the consultation requirements of Schedule 4 Part 2 to the Service Charges (Consultation etc) (England) Regulations 2003 (SI 2003/1987) which the Applicant and its Representative have not fulfilled.[33]The Leaseholders should note that this is not an application to determine the reasonableness of the works or their cost. If, when the service charge demands in respect of these works are sent out, any Leaseholder objects to the cost or the reasonableness of the work or the way it was undertaken, an application can be made to this Tribunal under section 27A of the Act. A landlord can also seek a determination as to the reasonableness of the cost of the work.[34]The Applicant shall serve a copy of the Tribunal’s decision on dispensation, together with the relevant appeal rights attached, to all Leaseholders. Judge JR Morris Annex 1 – Right 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 application 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. Annex 2 – The Law[1]Section 20 of the Landlord and Tenant Act 1985 limits the relevant service charge contribution of tenants unless the prescribed consultation requirements have been complied with or dispensed with under section 20ZA. The requirements are set out in The Service Charges (Consultation Requirements) (England) Regulations 2003. Section 20 applies to qualifying works if the relevant costs incurred in carrying out the works exceed an amount which results in the relevant contribution of any tenant being more than £250.[2]The consultation provisions appropriate to the present case are set out in Schedule 4 Part 2 to the Service Charges (Consultation etc) (England) Regulations 2003 (SI 2003/1987) (the 2003 Regulations). The Procedure of the Regulations and are summarised as being in 4 stages as follows: A Notice of Intention to carry out qualifying works must be served on all the tenants. The Notice must describe the works and give an opportunity for tenants to view the schedule of works to be carried out and invite observations to be made and the nomination of contractors with a time limit for responding of no less than 30 days. (Referred to in the 2003 Regulations as the “relevant period” and defined in Regulation 2.) Estimates must be obtained from contractors identified by the landlord (if these have not already been obtained) and any contractors nominated by the Tenants. A Notice of the Landlord’s Proposals must be served on all tenants to whom an opportunity is given to view the estimates for the works to be carried out. At least two estimates must be set out in the Proposal and an invitation must be made to the tenants to make observations with a time limit of no less than 30 days. (Also referred to as the “relevant period” and defined in Regulation 2.) This is for tenants to check that the works to be carried out are permitted under the Lease, conform to the schedule of works, are appropriately guaranteed, are likely to be best value (not necessarily the cheapest) and so on. A Notice of Works must be given if the contractor to be employed is not a nominated contractor or is not the lowest estimate submitted. The Landlord must within 21 days of entering into the contract give notice in writing to each tenant giving the reasons for awarding the contract and, where the tenants made observations, to summarise those observations and set out the Landlord’s response to them.[3]Section 20ZA allows a Landlord to seek dispensation from these requirements, as follows –(1) 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.(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.(3) The Secretary of State may by regulations provide that an agreement is not a qualifying long term agreement— if it is an agreement of a description prescribed by the regulations, or in any circumstances so prescribed.(4) to (7)… not relevant to this application.