The Supreme Court gave its much anticipated judgment on Wednesday, overruling the decisions of the lower courts and tribunals and finding that the landlord is entitled to dispensation.

FACTS
You will recall that in this case the landlord carried out major works to the building at a cost of almost £280,000, expecting to recover the costs from the lessees. The works were “qualifying works” and required the landlord to follow the statutory consultation requirements under the Landlord and Tenant Act 1985. In the event that the consultation requirements (“the Requirements”) are not complied with, a landlord can only recover £250 from each lessee, unless the Requirements are dispensed with by the LVT.

Although the landlord made an attempt to consult, it did not follow the procedure correctly. The lessees argued that they should only be required to contribute £250 each (equating to £1,250 in total) towards the cost of the works as a result of the landlord’s failure to comply with the Requirements.

The landlord applied to the LVT for dispensation. The LVT refused to give dispensation, as did the Upper Tribunal and the Court of Appeal, on the basis that the landlord’s failure to comply with the Requirements had caused serious prejudice to the lessees.

THE DECISION OF THE SUPREME COURT
The Supreme Court disagreed and granted the landlord dispensation on terms that (1) the lessees’ aggregate contribution to the cost of the works be reduced by £50,000 (in the course of the proceedings the landlord had already offered to deduct £50,000) and (2) the landlord pay the reasonable costs of the lessees in relation to the LVT proceedings.

It confirmed that, in considering a request for dispensation, the LVT must focus on whether the lessees suffered actual prejudice (in terms of paying for inappropriate works or paying more than would be appropriate) by the landlord’s failure to comply with the Requirements. The onus is on the lessees to show that there has been some prejudice. Once the lessees have shown prejudice, the LVT should reduce the amount claimed to compensate the lessees for that prejudice.

The Supreme Court found that the £50,000 offered by the landlord in this case exceeded any prejudice suffered by the lessees.

The case raises very interesting questions as to how the LVT will deal with applications for dispensation going forwards, in particular as to how it will exercise its discretion to attach conditions to any dispensation. Will the fact that the LVT can reduce the charges claimed to reflect the prejudice suffered mean that the £250 cap becomes, in all reality, obsolete?

A full article on this case and the questions raised by it will appear in our Spring Edition of PG Lore. If you are not already on our mailing list, and wish to receive a copy, please do let us know.

Laura Checkley , Solicitor
Property Litigation Practice
email [email protected]
tel 020 7591 3340