Clarification on the requirement to consult
The obligation in long residential leases to pay a service charge can be capped if the lessor intends to carry out significant works. If the lessor does not follow the consultation procedure then the amount recoverable can be limited to £250 per property, which of course can lead to a significant shortfall. It is therefore important that the consultation requirements are followed.
The requirement can be made more complex in circumstances where you have a freehold owner of a building who intends to carry out works. His immediate tenant has a long lease over the whole building and it is this intermediate landlord who has granted the individual long leases. The service charge is ultimately passed down to the individual leaseholders but is the freeholder required to consult with them, or just its own tenant? Clarity has now been provided by a recent Upper Tribunal case (Re Foundling Court and O’Donnell Court) which concerned a building in WC1. The Tribunal concluded that the obligation is to consult with both. The obligation to consult is placed on the person carrying out the works (in this case the freeholder) and that it was not inconsistent with the wording of the Landlord and Tenant Act 1985 (which contains the consultation obligations) to require the freeholder to consult with the individual leaseholders as well as the intermediate landlord.
A concern was raised over how, if this was right, the freeholder could know who to consult with – what if there were unregistered leases for example? The Tribunal offered the following solutions:
- A search at the Land Registry would be likely to identify the majority of leaseholders;
- A consultation notice could be hand delivered to each property addressed to “the Leaseholder”; and
- The intermediate landlord could be asked (in the vast majority of cases the intermediate landlord ought to assist as it might otherwise find itself bearing the shortfall, rather than the freeholder).
In some respects this case has clarified but not materially changed the law as the cautious approach has always been to consult with both. This case does provide a degree of comfort for those that have been previously adopting the cautious approach.
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