David Whitney of Painsmith Solicitors: Daejan v Benson s20: In Laymans Terms
There has already been much written about the reasoning behind the decision of the Supreme Court in the case of Dajean v Benson from the legal profession but what could it really mean in practice to leaseholders? Leasehold Life is very pleased to publish an opinion piece by Solicitor David Whitney of Landlord and Tenant specialist law firm (and ALEP member) Painsmith Soliciitors. David also contributes to the PainSmith Landlord and Tenant Law Blog.
To summarise: the Court decided that simply because there has been a breach of the consultation requirements themselves does not mean that a Leasehold Valuation Tribunal should refuse dispensation. The tribunal should be mindful of any suggestions of prejudice raised by the leaseholders and can (and should) impose reasonable conditions upon any grant of dispensation including limiting the amount chargeable.
These conditions ought to be sufficient to compensate the leaseholders for any prejudice. The Supreme Court made clear that a tribunal should look sympathetically on any prejudice argument proposed by the leaseholders.
Dispensation and Leaseholder Prejudice
What seems clear is that Landlords do not have ‘carte blanche’ to ignore the consultation regulations and they will still have to persuade a tribunal that it is proportionate for dispensation to be granted. For a leaseholder who is faced with a landlords application for dispensation they should think carefully about how they respond. Respond they certainly should though as the tribunal cannot presume prejudice and will need information from the leaseholder. It will be for the leaseholder to suggest the prejudice which in effect means that they are being asked to say how they would have reacted if the consultation was done properly and then what effect this would have, no matter how remote. Such prejudice may not simply be in monetary terms but could relate to the speed of works or whether costs and works could be staggered for example.
Once leaseholders have raised any suggestion of prejudice this will then set the benchmark for the landlords response as to how it would have been dealt with and to explain how the outcome may have been effected. All of this will then assist the tribunal who will be looking to see if and how this prejudice could be compensated for by way of the imposition of conditions. If reasonable conditions can compensate such prejudice then dispensation should be granted with those conditions attached.
It does however seem that landlords will have a high hurdle to overcome to refute any such allegation as the benefit of the doubt on prejudice will be firmly weighted in favour of the leaseholders.
What Should the Landlord Offer?
It appears that the well advised landlord who discovers they have not complied with the consultation requirements will at the outset consider as part of their application what they should offer, if anything. The Supreme Court suggested that often landlords should cover costs which the leaseholders have incurred. I believe that it may be prudent in some circumstances for the freeholder to offer to underwrite some costs of advice from a surveyor or lawyer prior to making the application on the basis that an application will be made in due course. Clearly this may make a tribunal more amenable to a request for dispensation. Any offer made just needs to show it more than adequately compensates the leaseholders. It does not have to be scientific. In fact in the Daejan case the landlord offered to reduce the total bill by £50,000. It was accepted this was a figure without specific rhyme nor reason but was said to exceed any prejudice which the leaseholders had suffered. As a result the Supreme Court accepted that by imposing this as a condition any prejudice which the leaseholders may have suffered was adequately compensated.
Many commentators have said that this is a landlords charter and others that it is simply a decision giving commercial effect to the consultation regulations as leaseholders were not meant to obtain a windfall. My view is that it is the latter. I think tribunals will still expect landlords who have failed to comply with the requirements for consultation to provide a reasoned explanation and will show little sympathy with those who have failed to comply in the conditions imposed and blatant disregard may still lead to applications being refused. The tribunal will rely upon the Supreme Court decision which said tribunals should be sympathetic to leaseholders prejudice arguments.
Interestingly the Supreme Court has said that generally the landlord should pay the leaseholders costs. This appears to be a move away from the ‘no costs’ regime of the tribunal. The Supreme Court dressed it up by saying this wasn’t costs in the usual sense but a condition for ensuring the leaseholders were properly able to investigate any prejudice. My suspicion is that tribunals will allow as a condition genuine costs of proving or demonstrating prejudice but not all the costs of the litigation process.
It seems clear, given certain other decisions which appear to have extended what works require consultation, that many such applications will need to be made by landlords. Inevitably we are likely to obtain more case law on this topic and particularly what conditions should be imposed as I suspect that is where the battle now lies. For the time being the field is wide open but the decision still provides much uncertainty for all sides as to what conditions will become the norm.
For further information on this and any other leasehold matter please contact David on:
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