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Daejan v Benson [2013] UKSC 14

The recent decision in Daejan v Benson in the Supreme Court has established the scope of the Leasehold Valuation Tribunal’s (LVT) jurisdiction to dispense with the consultation requirements under section 20(1) of the Landlord and Tenant Act 1985 (the Act) and set the principles on how that jurisdiction should be exercised.

Under the Act, a landlord is required to consult with tenants in accordance with section 20 if he intends to carry out qualifying works. If the landlord fails to comply with the consultation requirements, he will be limited to £250 as the amount that he can collect from each tenant via the service charge. Section 20 provides that a landlord can apply to the LVT for an order that the consultation requirements can be dispensed with. In particular, section 20ZA(1) makes it clear that dispensation can be granted by the LVT if they consider it reasonable to do so.

This matter concerned a retrospective application for dispensation by the landlord. The landlord carried out qualifying works at the property and was found by the LVT to have failed to comply with the consultation requirements. The LVT ruled that there should be no grant of dispensation of the consultation requirements as the tenants had suffered prejudice as a result of the landlord’s failure.

The landlord appealed to the Upper Tribunal who rejected the appeal on the basis that, although it was a relatively minor breach which caused no prejudice to the tenants, it was nevertheless a technical breach and the landlord should be prevented from recovering the full cost of the works from the tenants. This decision was echoed in the Court of Appeal and the landlord appealed to the Supreme Court

Lord Neuberger explored the potential prejudice suffered by a tenant when the landlord hasn’t complied with the consultation requirements. He considered that the purpose of section 20 was to ensure that the tenants were not prejudiced, but at the same time that the tenants did not receive a windfall to which they were not entitled. Lord Neuberger stated that for the purposes of an application for dispensation, the nature of the breach is irrelevant (i.e. whether it is serious or minor) save for the prejudice it causes to tenants. The evidential burden is on the tenants and they must show how they have been prejudiced by the landlord’s failure to comply with the consultation requirements.

Once the LVT has established that the tenants have suffered a prejudice, they can decide on how the prejudice is remedied through the grant of dispensation. This can be done by applying a discount to the sums recoverable by the landlord calculated with reference to the value of the prejudice suffered. The aim of this is to put the tenant back into the position s/he would have been had the prejudice not been suffered. The LVT also has the power to order that one of the conditions for granting dispensation is for the landlord to pay the tenant’s costs of the hearing. However, Lord Neuberger made it clear that the LVT was still a no-costs forum.

This decision seems to be a good one for landlords. The LVT will be able to grant dispensation to a landlord on terms, rather than a simple yes or no decision. This means that a landlord who fails to comply with the consultation requirements will be able to recover the cost of the works through the service charge, less the cost of any prejudice suffered by the tenants. It is also apparent that real prejudice will need to be identified by the tenant, not just a failure by the landlord to comply with the consultation requirements.

However, the cost to a landlord of an application for dispensation once works have been carried out may prove to be costly, with the tenant’s costs payable as well as their own. This should prevent landlords from ignoring the consultation requirements and applying for retrospective dispensation.

This article is for information purposes only and is not legal advice. It should not be acted or relied upon and legal advice should be sought before applying any of the information in this article to any facts or circumstances.

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