Adriatic Land 5 Limited v The Long Leaseholders at Hippersley Point

A tribunal considering dispensation from statutory consultation requirements may impose a costs condition only where the condition is appropriate in its nature and effect. There is no general rule that the landlord must bear its application costs whenever dispensation is granted. The central question remains whether leaseholders suffered prejudice from the failure to consult, assessed in the circumstances of the particular case.

Where Building Safety Act 2022, Schedule 8, paragraph 9 applies, no service charge is payable for legal or other professional services relating to a person’s liability or potential liability arising from a relevant defect. That restriction applies from commencement regardless of when the services were provided or when the service charge became payable.

The freeholder appealed against a reviewed decision of the First-tier Tribunal (Property Chamber), which granted dispensation from the consultation requirements under sections 20 and 20ZA of the Landlord and Tenant Act 1985 but imposed a condition preventing recovery of the application costs from the leaseholders.

The appeal raised whether that condition was procedurally and substantively lawful, and whether paragraph 9 of Schedule 8 to the Building Safety Act 2022 independently prevented recovery of the costs from leaseholders holding qualifying leases.

1. Appeal allowed. The FTT’s costs condition was set aside and the decision was re-made.
2. The FTT acted procedurally unfairly by imposing the costs condition on its own initiative without giving the parties an opportunity to make submissions. The later opportunity to apply to set aside the decision did not cure that error.
3. The substantive reasoning was also legally flawed. The FTT had found that the building was unsafe, that the landlord had sought to address the danger promptly, and that the leaseholders had established no prejudice from the failure to consult. Those findings were inconsistent with describing dispensation as a forbearance or recovery of the landlord’s application costs as unfair.
4. Daejan Investments Ltd v Benson established that conditions may be imposed where appropriate in their nature and effect, with the focus on prejudice. It did not establish a rule that a costs condition is appropriate in every dispensation application. The analogy with relief from forfeiture was not automatically applicable where the landlord was not in default.
5. Legal and other professional services connected with a dispensation application concerning works required to remedy a relevant defect fall within the wide words “relating to” in paragraph 9 of Schedule 8. As from 28 June 2022, the paragraph prevented recovery through the service charge from leaseholders with qualifying leases, regardless of when the costs were incurred or when the charge became payable.
6. The Reviewed Decision was therefore re-made to grant dispensation unconditionally and to determine that paragraph 9 prevented recovery of the costs from qualifying leaseholders. Applications under section 20C remained for determination by the FTT.

• First-tier Tribunal (Property Chamber): Dispensation was granted. On review, the FTT replaced an earlier section 20C order with a condition preventing recovery of the landlord’s application costs.
• Upper Tribunal (Lands Chamber): The appeal was allowed. The reviewed decision was set aside so far as it imposed the costs condition and was re-made.