Holding & Management (Solitaire) Limited v Leaseholders of Sovereign View

On an application to dispense with consultation for qualifying works, the decisive question is whether leaseholders suffer relevant prejudice: prejudice caused by the failure to consult, through inappropriate works or excessive cost. The consultation regime is not punitive and is not an end in itself.

A condition attached to dispensation must be relevant and appropriate. It must address that relevant prejudice, rather than penalise other conduct by the landlord or determine a separate challenge to the reasonableness of service charges under the Landlord and Tenant Act 1985.

The freeholder appealed against a First-tier Tribunal decision granting dispensation from the consultation requirements for installation of an estate-wide fire alarm system. The First-tier Tribunal made the dispensation conditional on the freeholder bearing the cost of a temporary waking watch and being unable to recover its legal costs through the service charge.

The leaseholders had raised concerns about the delay in addressing fire-risk assessments and the necessity and cost of the waking watch. The central issue was whether those concerns amounted to relevant prejudice arising from the failure to consult about the fire-alarm works, so as to justify either condition.

1. Appeal allowed. The two conditions attached to the dispensation were set aside. The dispensation was therefore unconditional.

2. Under section 20ZA, the tribunal must focus on prejudice caused by the landlord’s failure to comply with the consultation requirements. Following Daejan Investments Limited v Benson [2013] UKSC 14, the relevant questions are whether the leaseholders may pay for inappropriate works or more than an appropriate amount because consultation did not occur. The jurisdiction is neither punitive nor exemplary.

3. The cost or alleged unnecessary nature of the waking watch was not relevant prejudice. Even if the waking watch had been unnecessary, that would concern the reasonableness of its service-charge cost, not whether dispensation from consultation about the fire-alarm works should be granted. The First-tier Tribunal had effectively penalised the landlord for failing to consult about a service for which consultation was not legally required.

4. A condition may be imposed only if appropriate in its nature and effect and directed to relevant prejudice. The condition requiring the landlord to fund the waking watch was therefore irrelevant and inappropriate.

5. The costs condition rested on the same erroneous reasoning. There was no relevant prejudice from the absence of consultation. Prompt installation of the alarm was plainly in the interests of all concerned, and it was not appropriate to remove the landlord’s contractual ability to recover its costs through the service charge.

• Upper Tribunal (Lands Chamber): allowed the appeal and set aside both conditions imposed on the dispensation: [2023] UKUT 174 (LC).
• First-tier Tribunal (Property Chamber): granted dispensation under the Landlord and Tenant Act 1985 subject to conditions concerning the waking-watch cost and recovery of legal costs. No citation was stated.