Residential service charge consultation

Landlords will welcome a Supreme Court decision clarifying how the Leasehold Valuation Tribunal (LVT) should approach dispensation applications. The decision confirms that if the landlord can show that no relevant prejudice was caused, a breach of the requirements will not automatically bar the grant of a dispensation.

In this case, the landlord gave notice to the tenants that it intended to carry out major works amounting to just under £280,000. However, the landlord failed to comply fully with the statutory consultation requirements of the Landlord and Tenant Act 1985. The Court of Appeal agreed with the LVT’s refusal to grant a dispensation from compliance. Therefore, the liability of the tenants was restricted to £250 each. During the LVT proceedings, the landlord offered a £50,000 deduction to the cost of the works.

The Supreme Court overturned the Court of Appeal decision and granted the landlord dispensation from the requirements. It held that the correct question was whether, if dispensation from the requirements was granted, the tenants would suffer any relevant prejudice. It was questionable whether the tenants would have suffered any relevant prejudice. The £50,000 discount offered by the landlord exceeded any possible relevant prejudice.

This checklist explains what a service charge is, when consultation is required, what the penalties are for failing to comply with the consultation requirements and what the time limits are for making service charge demands.