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You can find the current article at its original source at http://www.guardian.co.uk/money/2013/mar/08/leaseholders-risk-supreme-court-consultation-judgment
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| Leaseholders 'at risk' from supreme court consultation judgment | Leaseholders 'at risk' from supreme court consultation judgment |
| (25 days later) | |
| Leaseholders in blocks of flats have lost a significant protection against landlords who fail to properly consult about often enormously expensive repairs to their properties. | Leaseholders in blocks of flats have lost a significant protection against landlords who fail to properly consult about often enormously expensive repairs to their properties. |
| One leaseholder group fears a judgment in the UK supreme court this week, limiting consultation rights, will be used by freeholders to "bamboozle" lessees into paying for expensive and unnecessary work on their blocks. | One leaseholder group fears a judgment in the UK supreme court this week, limiting consultation rights, will be used by freeholders to "bamboozle" lessees into paying for expensive and unnecessary work on their blocks. |
| Until now, if freeholders failed to follow proper procedure for consulting lessees on renovations, the cost of which can be added to service charges, they risked having to foot almost the whole bill for themselves. | Until now, if freeholders failed to follow proper procedure for consulting lessees on renovations, the cost of which can be added to service charges, they risked having to foot almost the whole bill for themselves. |
| Now the UK supreme court has ruled that the tough sanction, contained in Section 20 of the Landlord and Tenant Act 1985, should only apply if leaseholders have suffered actual "relevant prejudice" as a result of a landlord's failure to follow the procedures. | Now the UK supreme court has ruled that the tough sanction, contained in Section 20 of the Landlord and Tenant Act 1985, should only apply if leaseholders have suffered actual "relevant prejudice" as a result of a landlord's failure to follow the procedures. |
| The lessees will now have to prove they have lost out by showing, for example, that they could have found a cheaper contractor for the work if properly consulted. | The lessees will now have to prove they have lost out by showing, for example, that they could have found a cheaper contractor for the work if properly consulted. |
| The regulations, brought in by Labour in 2002, arose out of fears that freehold owners of leasehold flats had no incentive to get the best deals for work on their buildings, since any inflated costs would simply go on the service charges of their lessees. | The regulations, brought in by Labour in 2002, arose out of fears that freehold owners of leasehold flats had no incentive to get the best deals for work on their buildings, since any inflated costs would simply go on the service charges of their lessees. |
| There have been particular problems where local authority tenants have bought their flats only to find huge bills for repairs added to their service charges. | There have been particular problems where local authority tenants have bought their flats only to find huge bills for repairs added to their service charges. |
| The law says that unless the consultation requirements are followed, or a dispensation is given by the leasehold valuation tribunal (LVT), the landlord cannot recover more than £250 from each lessee for the work – a tiny sum when bills can run into hundreds of thousands of pounds. | The law says that unless the consultation requirements are followed, or a dispensation is given by the leasehold valuation tribunal (LVT), the landlord cannot recover more than £250 from each lessee for the work – a tiny sum when bills can run into hundreds of thousands of pounds. |
| Landlords complain the law gives huge windfall gains for technical breaches of the regulations – often when consultation would have made no difference to the lessees. | Landlords complain the law gives huge windfall gains for technical breaches of the regulations – often when consultation would have made no difference to the lessees. |
| Under the rules landlords should provide details of proposed work to lessees; obtain estimates for the work; invite the lessees to propose other contractors; and take account of their views on the work. | Under the rules landlords should provide details of proposed work to lessees; obtain estimates for the work; invite the lessees to propose other contractors; and take account of their views on the work. |
| In the case before the supreme court, Daejan Investments v Benson, Lord Neuberger noted: "The purpose of the requirements is to ensure that tenants [ie lessees] are protected from paying for inappropriate works, or paying more than would be appropriate." | In the case before the supreme court, Daejan Investments v Benson, Lord Neuberger noted: "The purpose of the requirements is to ensure that tenants [ie lessees] are protected from paying for inappropriate works, or paying more than would be appropriate." |
| But he added: "There is no justification for treating consultation and transparency as appropriate ends in themselves." | But he added: "There is no justification for treating consultation and transparency as appropriate ends in themselves." |
| Daejan owned Queens Mansion in Muswell Hill, north London, where five flats were held under long leases. The property's management company complied with only part of the consultation requirements for a big renovation in 2005, according to evidence to the LVT. | Daejan owned Queens Mansion in Muswell Hill, north London, where five flats were held under long leases. The property's management company complied with only part of the consultation requirements for a big renovation in 2005, according to evidence to the LVT. |
| Daejan wanted £280,000 from the leaseholders for the work, but offered a reduction of £50,000 during legal proceedings. However, a LVT considered Daejan's failure to be serious and refused to give the company a dispensation from the requirements. Daejan was faced with having to accept only £1,250 for the work. | Daejan wanted £280,000 from the leaseholders for the work, but offered a reduction of £50,000 during legal proceedings. However, a LVT considered Daejan's failure to be serious and refused to give the company a dispensation from the requirements. Daejan was faced with having to accept only £1,250 for the work. |
| The court of appeal backed the leaseholders, but the supreme court ruled in favour of Daejan, with Neuberger saying: "The correct question in this case was whether, if dispensation was granted, the respondents would suffer any relevant prejudice." | The court of appeal backed the leaseholders, but the supreme court ruled in favour of Daejan, with Neuberger saying: "The correct question in this case was whether, if dispensation was granted, the respondents would suffer any relevant prejudice." |
| In other words the leaseholders needed to show they were out of pocket as a result of the failure to consult properly. In this case the court decided Daejan's £50,000 offer more than covered any harm they might have suffered. | In other words the leaseholders needed to show they were out of pocket as a result of the failure to consult properly. In this case the court decided Daejan's £50,000 offer more than covered any harm they might have suffered. |
| Bob Smytherman, chairman of the Federation of Private Residents' Associations, said: "Managing agents will use decisions like this to bamboozle leaseholders into extra expense. They will be carrying out unnecessary bureaucratic works and charging it to the service charges account." | Bob Smytherman, chairman of the Federation of Private Residents' Associations, said: "Managing agents will use decisions like this to bamboozle leaseholders into extra expense. They will be carrying out unnecessary bureaucratic works and charging it to the service charges account." |
| Leaseholders had already been campaigning for reform of the limited protections of the consultation regulations, and the latest judgment would make things "substantially worse, making our processes even more complex," he said. | Leaseholders had already been campaigning for reform of the limited protections of the consultation regulations, and the latest judgment would make things "substantially worse, making our processes even more complex," he said. |
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| Chelsea Building Society | Chelsea Building Society |
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| Provided by London & Country for the Guardian | Provided by London & Country for the Guardian |