Cases - Daejan Investments v Benson

Record details

Name

Daejan Investments v Benson

Date

[2009]; [2013]; [2013]; [2013]

Citation

UKUT 233 (LC); UKSC 14; 1 WLR 854; 2 All ER 375

Legislation

• Service Charges (Consultation Requirements) (England) Regulations 2003
• Landlord and Tenant Act 1985

Keywords

Landlord and tenant – service charges – consultation requirements – Service Charges (Consultation Requirements) (England) Regulations 2003, Sch. 4 Pt 2 – dispensation from consultation – Landlord and Tenant Act 1985

Summary

A landlord consulted with residential tenants over major expenditure, but did not do so exactly as prescribed. In consequence, five tenants were liable for a mere £250 each of the landlord's expenditure of £270,000.

In Daejan, the Appellant landlord sought to overturn the decision of the Court of Appeal (upholding the decision of the LVT and Upper Tribunal below) in refusing a grant of dispensation under section 20(1)(b) of the Landlord and Tenant Act 1985 ('the Act'), in circumstances where it had curtailed consultation in relation to qualifying works.  Due to Daejan’s breach of the consultation requirements it could only recover the statutory minimum of £250 per leaseholder through the service charge.

The Supreme Court held, by a majority of 3 to 5, that compliance with the consultation requirements was not an end in itself. The correct approach was to make an assessment of the level of prejudice suffered by the leaseholders from the landlord’s failure to consult. An example of prejudice suffered would be paying for unnecessary works or paying more than necessary. While the failure of a landlord to comply was relevant, it was the relevant prejudice suffered by the tenant that was crucial. The onus was therefore on the leaseholders to show that some credible prejudice had been suffered and for the landlord to rebut the same.

Where a leaseholder was able to satisfy the Tribunal that it had suffered relevant prejudice, in an application for dispensation the landlord would ordinarily need to accord the leaseholder a reduction to compensate fully for any relevant prejudice suffered; knowing that the LVT would adopt a sympathetic (albeit not unrealistically) sympathetic attitude to the tenants on that issue. Further a landlord would be required to pay its own costs of making and pursuing an application to the LVT for section 20(1)(b) dispensation. Further, the landlord would also be liable to pay the leaseholders’ reasonable costs that stemmed from investigating and challenging that application.

This judgment will be a welcome relief to landlords as it makes the grant of a conditional dispensation more likely where a breach of the consultation requirements has occurred.