Property litigation weekly update - 22 October 2021


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In this week's bulletin the team discuss the assessment of bedroom tax and service charge consultation requirements in a recent appeal decision in the Upper Tribunal. All this along with the usual positive news and quiz.

Secretary of State for Work and Pensions v Hockley [2019] EWCA Civ 1080

The case of the Secretary of State for Work and Pensions v Hockley came before the Court of Appeal some time ago but it is worthy of a reminder on the issues concerning the assessment of the bedroom tax. The appeal concerned the consideration of whether the Housing Benefit of a tenant in social housing should be reduced under Regulation B 13 of the Housing Benefit Regulations i.e. the bedroom tax.

The tenant, who received Housing Benefit lived with her husband and two sons in a property with three bedrooms, two of which were small and awkwardly shaped. The adults slept in the larger bedroom whilst the sons slept in the two remaining bedrooms. As of April 2013 when the bedroom tax was introduced, the local authority decided that the family had one bedroom too many over their actual needs ( as the sons could share a bedroom) and therefore reduced the Housing Benefit. The Upper Tribunal held that neither bedroom occupied by the sons could accommodate both of them and therefore there was no spare room.

In the Court of Appeal, it was held that “bedroom“ was an ordinary word which is neither defined nor qualified in the Regulations and therefore had to be construed and applied in its context, having regard to the underlying purpose of the legislation. There is nothing in the regulations that indicated that any assessment was required to take account of how a property and its bedrooms will be used by a particular family unit. Were that to be so, the purpose the legislation could be frustrated as a tenant could by their use of a property, change the classification so as to reduce the relevant number of bedrooms. The word “bedroom“ should not be interpreted as a room capable of being used as a bedroom by a particular claimant.

As such, the Tribunal held that the decision was wrong and the Court of Appeal found that the claimant was in fact only entitled to a two bedroomed property.

Social landlords will be all-too familiar with the difficulties the bedroom tax has caused certain family units and such issues are unlikely to subside. Whilst claimants in such circumstances can make a claim, for Discretionary Housing Payments, there is never any guarantee that they will be successful and this leaves many tenants with a shortfall when paying their rent in times when household budgets are already being squeezed.
 
Collingwood v Carillon House Eastbourne Ltd (LANDLORD AND TENANT - SERVICE CHARGES - consultation requirements) [2021] UKUT 246 (LC)


A recent appeal decision in the Upper Tribunal case of Collingwood v Carillon House Eastbourne Ltd (LANDLORD AND TENANT - SERVICE CHARGES - consultation requirements) [2021] UKUT 246 (LC) demonstrates how strict compliance with residential service charge process requirements is necessary, in order for costs of works to not be capped at £250 by section 20 of the Landlord and Tenant Act 1985, even when there is no prejudice to leaseholders in non-compliance with the process.

In this case, the landlord's managing agents initially sent all leaseholders a notice setting out its intention to carry out works, inviting observations on the proposals and nominations of contractors. This notice complied with the requirements of the Service Charge (Consultation Requirements) (England) Regulations 2003.

However, after service of this notice, one of the leaseholders nominated his own company Affordable Roofing Eastbourne Limited (AREL). Despite this, new managing agents then sent the leaseholders a notice of estimates, intending to comply with stage 3 of the consultation process. No quote had been obtained from AREL prior to this.

The leaseholder challenged the agents on why AREL was not given the opportunity to quote and was informed that the nomination had not been forwarded by the previous agents and they were therefore not aware of it. Had the landlord at this point started the consultation process again, this would not have been an issue. However, instead, the new agents then invited AREL to quote for the work, which it did.

The agents then wrote to the leaseholders explaining their surveyor had recommended one of the contractors in the notice of estimates and that the lower quote from AREL had been rejected because AREL had not supplied the price specification and breakdown of charges that had been requested.

Further correspondence followed and an additional quote was obtained and a contract eventually awarded to that further contractor. After the work was done, the leaseholders were each required to pay £5,322.53 towards the cost of the works. They made an application to the FTT for a determination of the reasonableness and payability of the service charges and this case concerned an appeal of that decision.

The Upper Tribunal noted that the requirements of the Consultation Regulations are strict and consequential. They held there is no room in the clear wording for flexibility in their interpretation and rejected the landlord's argument they were "woolly". Whilst noting that the regulations do not specify a time when the landlord must try to obtain as estimate from the tenant's nominee, they held that it must be included in the notice of estimates and therefore the notice cannot be given until the landlord has tried to obtain all quotes. The landlord did obtain a quote from AREL and was therefore obliged to include the quote in its notice of estimates, which it failed to do so before issuing the notice. It therefore did not comply with the consultation requirements.

In commenting on the FTT's decision, which had stated there was "no evidence that the interests of the [leaseholders] had been materially prejudiced by any shortcomings which may have occurred through the Section 20 consultation process" the UT noted this was only relevant if the landlord had made an application for dispensation of the consultation requirements – which it had not done as its case was that it had complied. The UT noted it was not open to FTT on the evidence before it to find therefore was no breach of the consultation process and it was wrong to take into account an irrelevant consideration of the absence of prejudice to the leaseholders.

As a further point, the UT also held that management company charges for the running of the landlord company, filing its accounts and annual return etc. were not recoverable under the terms of the lease. The tenant's covenants required them to pay proper expenses incurred by the landlord in and about the maintenance and proper and convenient management and running of the property, as well as the fees and disbursements paid to any managing agents accountants and auditors appointed by the landlord in respect of the property. This covenant to pay fees incurred in the management of the property did not extend to fees incurred in the management of the landlord company and therefore those charges were not held to be payable.

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