If a landlord wishes to carry out work to a building which exceeds the applicable limit (currently £250 per property), then the contributions will be capped at that limit.
That is unless the landlord has either complied with statutory consultation requirements or can demonstrate that the consultation requirements have been dispensed with by the First-tier Tribunal (Property Chamber). However, this becomes complicated when there is a freeholder (the superior landlord) and a head lessee (the immediate landlord). In those circumstances, who is required to comply with the consultation requirements, the superior landlord or the immediate landlord?
In Leaseholders of Foundling Court v The Mayor and Burgesses of the London Borough of Camden and others [2016] UKUT 0366 (LC), the freehold was subject to a head lease of various parts, including two blocks of flats – O’Donnell Court and Foundling Court – which were also subject to a number of underleases.
The underleases required the leaseholders to contribute towards the service charges, which included costs incurred by the immediate landlord in respect of the maintenance and management of the development.
In 2005, the previous superior landlord conducted major works of an unsatisfactory standard and since then, defects have lead to subsequent freeholders incurring further costs in order to rectify them.
In 2014, some of the leaseholders made an application to the FTT for a determination in respect of the liability to pay various service charges dating back to 2007. One of the issues raised was the fact that the leaseholders had not been properly consulted. Whilst the then superior landlord served a notice of intention and statement of estimates on the head lessee (the immediate landlord), it failed to serve those notices on the underlessees.
It was the immediate landlord who then circulated those notices to the underlessees, who unfortunately did not have sufficient time to respond to the superior landlord as by the time they received the documents, the 30 day response deadline had reduced to 21 days.
The superior landlord argued that the immediate landlord was responsible for complying with the consultation requirements.
However, it was held that it was the superior landlords’ responsibility to consult with the immediate landlord and the underlessees. Here is a warning: Freeholders who have developments with intermediate leases, must ensure they work closely with their head leaseholders and agents when planning any major works. They may even wish to consider amending their management agreements to deal with circumstances such as this.
Brethertons LLP acted for the leaseholders in this matter.
Roger Hardwick is Head of Residential Leasehold - Enfranchisement at Brethertons
Disclaimer
Please treat the contents of this article as food for thought, but do not take any action based on its content unless you have received professional legal advice. Brethertons LLP cannot accept responsibility for any errors or inaccuracies, loss or damage unless we have given you, personally, specific advice relating to a matter about which you have given us full background details.
