The Upper Tribunal has clarified the law on whether the urgency of major works is a pre-condition for dispensation from the need for consultation with residential long leaseholders.
The First Tier Tribunal has discretion to dispense with the mandatory service charge consultation procedure for residential service charges in respect of major works under Section 20A of the Landlord and Tenant Act 1985.
This case concerns the exercise of that discretion. It was an appeal to the Upper Tribunal (Lands Chamber) from the FTT against a refusal of consent. The case also dealt with what is known as the registration gap – ie. the period of time after a land transaction has taken place but before it is registered at HM Land Registry. Under the Land Registration Act 2002, ownership does not pass in law until registration, so what rights does a buyer have before registration and does this include carrying out major works, and applying for dispensation under s 20ZA?
The freehold of a mixed leasehold residential/commercial block was bought in December 2020. The sale was not registered at HM Land Registry until January 2022. In April 2021, before the sale had been registered, a structural report concluded that asbestos was present, that the building was in a dangerously poor state of repair and several issues needed to be rectified immediately. The new landlord immediately set about stabilising the structure of the property and carried out the works identified by the consultants as necessary. They did not consult with the leaseholders before doing so.
In January 2023 they applied to the FTT for dispensation from the consultation requirements. The FTT refused dispensation on the grounds that (i) they had no standing to apply for dispensation as they did not own the property when the works were carried out and (ii) and they had not satisfied the FTT that the works were so urgent that they could not wait two or three months before starting such that they could have gone through a consultation process. This decision was appealed and we now have the Upper Tribunal's ruling.
Although legal title to the land does not pass until the new owner is registered, the new owner owns the property in equity and is still entitled to exercise the powers of the owner's estate because they are a person entitled to be registered as the proprietor, which is all that is needed under s24 of the Land Registration Act 2002.
The purchaser is therefore entitled to enter into the property, and is entitled to exercise whatever rights it has as landlord. Equally the new owner takes on, in equity, all the landlord obligations under the leases, including the obligation to maintain the property . It follows that it has legal standing to do major works, and to apply to the FTT for dispensation of the need to consult.
The Upper Tribunal was then left with the question as to whether dispensation should actually be granted in this particular case. Although most of the decision was specific to the facts of the case, some comments of general application and importance were made.
The most important of these concerned the urgency for doing the works. The FTT had proceeded on the basis that the law required the works to be urgently needed as a pre-condition for dispensation being granted. The Upper Tribunal on appeal said that this was a misunderstanding of the law.
Urgency is a factor in the exercise of the tribunal's discretion to grant dispensation. However it is only one of a number of factors that the tribunal should take into account when deciding whether or not to grant dispensation. It is not a precondition to granting dispensation. Even if there is no urgency, that does not mean that dispensation cannot be granted if the circumstances merit it, such as in the current case.
The Upper Tribunal also found as fact that (i) the costs had been properly detailed to the leaseholders, (ii) the works had been properly done, and (iii) the works had been carried out satisfactorily.
As a result, the new owner got its dispensation and was able to recover the cost of doing all of the works necessary to make sure the building did not collapse.
Even if major works are not urgent, a landlord might still, in certain circumstances, get dispensation from the statutory consultation requirements.
And they can still apply for dispensation, even if they are not yet registered as Landlord at HMLR.
