Lydia Anderson, block management specialist at Brady Solicitors, highlights a recent case that has clarified major works consultation requirements in situations where a development has an intermediate landlord.
As most freeholders and managing agents are aware, there is a statutory obligation under Sections 20 and 20ZA of the Landlord and Tenant Act 1985 to carry out a consultation process prior to carrying out ‘qualifying works’ or entering into a ‘qualifying long-term agreement’.
To recap, qualifying works are those where works of repair, maintenance or improvement are carried out to the premises. The landlord must consult the relevant leaseholders if these works will cost more than £250 per leaseholder.
A qualifying long-term agreement is one entered into by a landlord with a contractor (such as a cleaning company or a gardener) for a period of more than 12 months. The landlord must consult the relevant leaseholders if the amount payable in one period will exceed the sum of £100 per leaseholder.
Without this consultation, the landlord can’t recover more than £250 for major works or £100 for a QLTA from each leaseholder – leading to potential shortfalls in the service charge account.
Where there is an intermediate landlord (usually called a head lessee), who is responsible for carrying out the statutory consultation process?
And if it is the freeholder, who do they need to be consulting with?
The Upper Tribunal case of Foundling Court and O’Donnell Court considered this very situation.
The intermediate landlord (head lessee) owned a long lease to the properties and collected service charges from the leaseholders. The head lessee in turn paid a service charge to the freeholder.
In 2005, the freeholder carried out major works that were completed in 2006 albeit presenting various defects which required further remedial works over years to come.
The freeholder consulted the head lessee, but not the leaseholders
While the leaseholders were ultimately given notice by the head lessee, they brought an application under Section 27A for a determination as to the extent of which they were liable to pay for the works and also the subsequent repairs.
The Upper Tribunal had to consider:
- Who was responsible for the consultation – was it the freeholder or the head lessee, and
- If the freeholder was responsible for the consultation, did they need to consult with both the head lessee and the leaseholders or just the head lessee?
It was ultimately determined by the Upper Tribunal (Lands Chamber) that the statutory obligation to consult leaseholders lay with the freeholder and not the head lessee.
In addition it was determined that the freeholder should have consulted both the head lessee and the individual leaseholders.
This major works case brings clarity for landlords and managing agents in situations where the estate has a head lessee / intermediate landlord.
Leaseholders should also be aware that their right to statutory consultation exists, regardless of the presence of a head lessee.
The challenge for freeholders will be obtaining the necessary information to enable them to consult with the leaseholders. The Deputy President suggested asking the head lessee for the information or, failing that, delivering a consultation notice to each flat addressed to ‘the leaseholder’.
If you need help with major works and the consultation requirements, contact Brady Solicitors for pragmatic and expert advice.
For more information on major works and the statutory consultations you may find these recent blog posts helpful
Tackling a major works project for the first time?
Section 20 major works – Brady Solicitors’ guide to the Notices
