RM Residential Limited v Westacre Estates Limited & Anor

Under section 20ZA of the Landlord and Tenant Act 1985, urgency is not a condition of dispensation from the service-charge consultation requirements. The tribunal must normally focus on whether tenants suffered prejudice through the failure to consult, namely a disadvantage which full consultation would have avoided.

An unregistered purchaser during the registration gap is the equitable owner. The registered vendor holds the legal estate on bare trust and must act at the purchaser’s direction. The purchaser may exercise the landlord’s relevant rights and obligations, including carrying out works and applying for dispensation.

RM Residential Limited, having bought the freehold of a mixed-use building, carried out structural and related works without fully complying with the statutory consultation procedure. It applied retrospectively for dispensation under section 20ZA of the Landlord and Tenant Act 1985.

The First-tier Tribunal refused relief. It held that, because the purchaser was not yet registered as proprietor when the works were done, it lacked standing to carry them out or seek dispensation. It also regarded urgency as necessary and found the works insufficiently urgent.

The landlord appealed. The central issues were the rights of an equitable purchaser during the registration gap and whether lack of urgency could justify refusing dispensation where the tenants had suffered no prejudice from incomplete consultation.

1. Appeal allowed. The First-tier Tribunal’s decision was set aside and the Upper Tribunal substituted a dispensation from the section 20 consultation requirements for the 2021 works and the later asbestos removal.

2. The First-tier Tribunal misunderstood the registration gap. Although legal title to registered land does not pass until registration, after completion the vendor holds that title on bare trust for the purchaser and must act at the purchaser’s direction. The equitable purchaser was entitled to enter the property in accordance with the rights reserved to the landlord, undertake the works, assume the landlord’s maintenance obligations, and enforce the tenants’ service-charge covenants. It therefore had standing to seek dispensation.

3. Section 20ZA gives a discretion; it creates neither a basic right to relief nor an urgency requirement. Following Daejan Investments Limited v Benson [2013] UKSC 14, the principal and normally sole question is whether the tenants were prejudiced by the failure to comply with consultation requirements. Relevant prejudice is a disadvantage which full compliance would have avoided, such as the loss of an opportunity to propose cheaper or better works. Dispensation may be conditioned to remedy such prejudice.

4. The First-tier Tribunal found that the respondents had not suffered prejudice from the incomplete consultation. It was therefore impossible to identify a proper reason for refusing dispensation. Its insistence that the works had to be urgent imposed an extraneous precondition and exceeded the bounds of its discretion.

5. The Upper Tribunal also set aside findings that the landlord had inadequately explained the works and their cost, and that there was no evidence of satisfactory completion. Those findings were against the weight of the documentary evidence. The finding that a director’s report created a conflict of interest was erroneous and irrelevant. The director was not an expert witness owing a duty to the tribunal, and the First-tier Tribunal’s unusual cross-examination procedure had been unfair.

• Upper Tribunal (Lands Chamber): allowed the landlord’s appeal and substituted a decision granting dispensation under section 20ZA of the Landlord and Tenant Act 1985.
• First-tier Tribunal (Property Chamber): on 4 May 2023, refused retrospective dispensation from the consultation requirements.