The majority judgement by the Supreme Court in Daejan investments v Benson appears to have modified the previously strict interpretation of S20 Landlord and Tenant Act 1985 (as amended). Previously, if a freeholder failed to follow proper procedures to consult leaseholders re major works or renovations then the freeholder was at risk of footing the bill.
This is a huge issue for freeholders and leaseholders alike, particularly in London which has many large ageing mansion flats requiring extensive work programmes. It also affects many "right to buy " purchasers who, having bought former local authority properties can find themselves facing massive renovation programmes to which they must contribute.
The Supreme Court has held that S20 should only apply if the leaseholder has suffered actual relevant prejudice, ie the onus will be upon the leaseholder to prove that had they been properly consulted they could have found a cheaper builder or that they are out of pocket as a result of the failure to consult.
This decision will assist the Leasehold Valuation Tribunal (LVT) to clarify the position when considering an application for dispensation for statutory consultation under s20 and indeed it can be argued that this decision has widened the LVT discretion to grant dispensation in these cases.
If a freeholder is in serious breach of S20, as long as they offer to reduce the overall bill so that it accurately compensates the leaseholder for any prejudice and pay their reasonable costs all is not lost.
However, its wise for freeholders/landlords to consult their leaseholders (tenants) in full or prepare to pay the price.
If you have any similar concerns, either as a freeholder or leaseholder: contact Richard McConnell, Janak Bakrania or our property litigation specialist Jasbir Kaur.
