Aster Communities v Kerry Chapman & Ors

Dispensation from service-charge consultation depends on relevant prejudice to tenants, not simply on the seriousness of the landlord’s breach. The tribunal may consider whether tenants might have secured more appropriate works or lower costs, and may impose terms addressing that prejudice. Consultation is a group process. If one tenant could have prompted a saving benefiting all tenants, compensation may be ordered for all, apportioned according to their service-charge liabilities. The tribunal has a broad, fact-sensitive power to impose appropriate terms, including payment of reasonable expert and application costs. The principles in Daejan Investments Ltd v Benson [2013] UKSC 14 are not rigid rules.

Aster, a social landlord, sought dispensation under section 20ZA of the Landlord and Tenant Act 1985 after the First-tier Tribunal found that wholesale replacement of balcony asphalt had not been included in the consultation process. The First-tier Tribunal granted dispensation subject to conditions requiring Aster to fund expert advice and the tenants’ reasonable costs. The Upper Tribunal dismissed Aster’s appeal: [2020] UKUT 0177 (LC). The central issues before the Court of Appeal were whether the First-tier Tribunal was entitled to find that a tenant would have acted differently, whether prejudice caused by one tenant’s lost opportunity could benefit all tenants, and whether the conditions were permissible.

1. Appeal dismissed. Lord Justice Newey gave the leading judgment. Lord Justice Phillips and Lady Justice King agreed.
2. Under section 20ZA of the Landlord and Tenant Act 1985, the tribunal’s central inquiry is whether tenants have suffered or may suffer relevant prejudice from the consultation failure. The relevant prejudice may concern paying for inappropriate works or paying more than appropriate. The principles in Daejan Investments Ltd v Benson [2013] UKSC 14 do not require refusal of dispensation merely because the breach was serious, and permit dispensation on appropriate terms.
3. The First-tier Tribunal was entitled to accept Miss Motovilova’s evidence that, had the balcony works been disclosed, she would have obtained expert advice and challenged wholesale replacement. Her evidence was unchallenged, she had inspected the estimates and made observations, and the absence of an earlier objection did not require a different conclusion.
4. Consultation under the Service Charges (Consultation Requirements) (England) Regulations 2003 is a group process. If a defect deprived one tenant of an opportunity to secure a reduction in the scope or cost of works, and that reduction would benefit all tenants, the tribunal may make dispensation conditional on compensation for all tenants. The allocation must reflect differing service-charge proportions and may be confined to the block affected.
5. The tribunal’s power to impose terms is broad and fact-sensitive. In the circumstances, it was permissible to require Aster to fund a reasonable expert report even though the report would be obtained after the dispensation application, because the potential prejudice had effectively been deferred to later proceedings under section 27A. Requiring Aster to pay the tenants’ reasonable costs of the dispensation application was also permissible.

1. Court of Appeal (Civil Division) dismissed Aster’s appeal.
2. Upper Tribunal (Lands Chamber) dismissed Aster’s appeal from the First-tier Tribunal: [2020] UKUT 0177 (LC).
3. First-tier Tribunal granted dispensation under section 20ZA of the Landlord and Tenant Act 1985, subject to conditions requiring expert costs and the tenants’ reasonable costs of the application.