Social landlord fails in Court of Appeal battle over dispensation of service charge consultation requirements
Social landlord Aster Communities has lost a Court of Appeal case brought over the dispensation of leaseholder consultation requirements in relation to service charges.
In Aster Communities v Kerry Chapman & Ors [2021] EWCA Civ 660 Lord Justice Newey, with whom Lord Justice Phillips and Lady Justice King agreed, ruled in favour of litigant Kerry Chapman and other lessees of a group of flats in Andover.
Aster had unsuccessfully challenged a condition imposed by the First Tier Tribunal (FTT), and upheld by the Upper Tribunal (Lands Chamber), concerning an application by Aster under section 20ZA of the Landlord and Tenant Act 1985 for dispensation from consultation requirements.
The case concerns works at a 1960s development named Kingsway Gardens, which comprises 160 flats, 114 of which are occupied on long leases.
In March 2016, Aster sent each notices of its intention to carry out works which included using a liquid coating to repair balconies where asphalt had been damaged.
But when Aster sent residents a note saying the lowest bid by a contractor to carry out the works was £4.8m this included instead complete replacement of balcony asphalt at almost £300,000 plus VAT, preliminaries and management fees.
Residents obtained an expert report that said it would be "poor economy…to strip and renew all the balcony finishes when repair and overlaying would be equally effective but at a considerably reduced cost”.
They therefore disputed that full replacement of all balcony asphalt was reasonable.
The FTT ruled that on the evidence put to it “full replacement of all balcony asphalt is unnecessary” and that this had anyway not been part of the section 20 consultation”.
It went on: “Even if Aster can eventually justify some or complete balcony asphalt replacement based on what has been discovered in the course of the works, and seeks to recover the cost from the lessees, an application for dispensation under section 20ZA of the Act would seem to be required.”
Aster made this application in February 2019. This was agreed by the FTT but it imposed conditions on Aster to pay the reasonable costs of an expert nominated by the lessees to advise them on the asphalt issue.
Aster was also required to pay the lessees’ reasonable costs and not to recover tases through the service charge.
The FTT refused Aster permission to appeal against the first two conditions and it failed again at the Upper Tribunal. It did not challenge the third.
Giving judgment, Newey LJ said the FTT was entitled to conclude that residents would have acted differently if the notice of intention had referred to the full balcony works.
The failure to do so in the notice of intention gave rise to a “credible case of relevant prejudice” to every lessee and the FTT was entitled to take that into account.
It was also proper for the FTT to require Aster to bear a cost which it would have had to meet if the issue of prejudice had not been left for later but had rather been settled in the course of the dispensation application.
Mark Smulian
