Landlord and Tenant Act 1985 – Service charge – Qualifying works – Service Charges (Consultation Requirements) (Wales) Regulations 2004 – Claimant landlord of flats engaging contractor to carry out qualifying works within section 20 of 1985 Act to which consultation requirements of 2004 Regulations applying – Claimant seeking revised estimates from contractors after receiving observations of leaseholders under consultation procedure – Whether entitled to recover proportion of cost of works from defendant leaseholder – Whether required to repeat consultation in respect of revised estimates – Claim allowed
The claimant was the freeholder and management company of a large complex of flats in Cardiff. The defendant was the leaseholder of one of the flats. In 2012, the claimant engaged a contractor to carry out extensive works to the exterior and structure of the building for a contract price of £317,943. The works were “qualifying works”, within section 20 of the Landlord and Tenant Act 1985, such that the consultation requirements of the Service Charges (Consultation Requirements) (Wales) Regulations 2004 applied. The contractor was chosen, in response to observations made by leaseholders in consultation, as offering a cheaper estimate than the contractor who the claimant had initially preferred.
In February 2012, the claimant invoiced the defendant in advance for £2,794, as her due proportion of the cost of the works, under the service charge provisions in her lease. When the defendant did not pay, the claimant brought proceedings in the county court to recover that sum. Meanwhile, the works were carried out between June and December 2012. By her amended defence, the defendant contended that the claimant had failed properly to comply with the consultation requirements, with the result that its recovery was limited to £250. The issue was transferred to the leasehold valuation tribunal for its determination.
The defendant’s primary contention was that, although the claimant had provided the leaseholders with three estimates for the works and invited their comments, it had subsequently awarded the contract by reference to revised estimates that had not been supplied to the leaseholders; it had also invited two new estimates, which it had discounted as being much higher than the others. The defendant contended that the claimant had been required to serve a fresh statement on the leaseholders in respect of the revised and new estimates, pursuant to para 4(5)(b) of Part 2 of Schedule 4 to the 2004 Regulations, and then to repeat the following stages of consultation. The defendant did not attend the hearing, which proceeded in her absence.
Held: The claim was allowed.
(1) The claimant’s decision to appoint the particular contractor it had at its revised estimate figure was a direct result of the concerns raised by leaseholders on consultation. Those concerns had led the claimant to appoint a different contractor from that which it had initially preferred, at a saving of more than £75,000, plus VAT. By that process, the claimant had clearly “had regard” to the observations made by the leaseholders as required by para 5 of Part 2 of Schedule 4 to the 2004 Regulations. It had acted on those observations and thereby saved the leaseholders a considerable amount of money. A landlord was not required to recommence the para 4(5) procedure and serve fresh statements under para 4(5)(b) at any and every stage of the contract process if there was any change, of any degree, to any of the original figures provided. Contractors might revise their prices or terms for a large number of reasons. Where the lessees had had the benefit of seeing and making observations on estimates from various contractors within a particular range of figures, the landlord was entitled to deal and negotiate with those contractors to arrive at a final figure for the works, at least within that range. A landlord was not required to repeat the expensive and time-consuming notice and observations procedure in respect of every change or “tweak” to the original estimates. Although that might be necessary where, for example, the landlord decided that all of the original estimates were unsatisfactory and went back to the drawing board with a fresh set of estimates from different contractors, that was not the case here.
The contractor that the landlord had ultimately selected had been asked to revise its estimate in response to issues over accuracy that the landlord had raised in its initial statement under para 4(5)(b). The other contractors had also been asked to revisit their estimates and, by that process, the range of figures from those contractors had been narrowed. The claimant had then placed the contract at the lowest end of that range, providing a substantial saving to the leaseholders. That process of asking contractors to revisit their figures, in an effort to lower the figures and narrow their range, for the ultimate benefit of the leaseholders who would be paying for the works through the service charge, was an implicit and necessary part of the final decision over the awarding of the contract. It had not been affected by the obtaining of two additional estimates, since those figures had immediately been rejected. They had been mentioned to leaseholders only for information purposes, to reaffirm the claimant’s decision to award the contract to one of the original three contractors.
(2) The defendant was also ordered to pay the maximum £500 contribution to the claimant’s costs of the proceedings, pursuant to para 10 of Schedule 12 to the Commonhold and Leasehold Reform Act 2002. By raising the consultation issue in her amended defence, leaving it hanging over the claimant and never withdrawing it, then failing, without explanation, to attend the hearing and argue the point, despite being in correspondence with the tribunal until the day before, the defendant had conducted the proceedings in a frivolous, vexatious, disruptive and unreasonable manner. Conducting the proceedings in that way showed disrespect for the process, the tribunal and the claimant. Parties should not raise serious points in proceedings, putting their opponent to considerable time and expense, and potentially putting the recoverability of thousands of pounds of service charges in issue, then make an unexplained last-minute retreat by not attending the hearing.
Mr Robert Phillips, solicitor, of Eversheds LLP, appeared for the claimant; the defendant did not appear and was not represented.
Sally Dobson, barrister
Castle Court Freehold Ltd v Richardson
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Landlord and Tenant Act 1985 – Service charge – Qualifying works – Service Charges (Consultation Requirements) (Wales) Regulations 2004 – Claimant landlord of flats engaging contractor to carry out qualifying works within section 20 of 1985 Act to which consultation requirements of 2004 Regulations applying – Claimant seeking revised estimates from contractors after receiving observations of leaseholders under consultation procedure – Whether entitled to recover proportion of cost of works from defendant leaseholder – Whether required to repeat consultation in respect of revised estimates – Claim allowedThe claimant was the freeholder and management company of a large complex of flats in Cardiff. The defendant was the leaseholder of one of the flats. In 2012, the claimant engaged a contractor to carry out extensive works to the exterior and structure of the building for a contract price of £317,943. The works were “qualifying works”, within section 20 of the Landlord and Tenant Act 1985, such that the consultation requirements of the Service Charges (Consultation Requirements) (Wales) Regulations 2004 applied. The contractor was chosen, in response to observations made by leaseholders in consultation, as offering a cheaper estimate than the contractor who the claimant had initially preferred.In February 2012, the claimant invoiced the defendant in advance for £2,794, as her due proportion of the cost of the works, under the service charge provisions in her lease. When the defendant did not pay, the claimant brought proceedings in the county court to recover that sum. Meanwhile, the works were carried out between June and December 2012. By her amended defence, the defendant contended that the claimant had failed properly to comply with the consultation requirements, with the result that its recovery was limited to £250. The issue was transferred to the leasehold valuation tribunal for its determination.The defendant’s primary contention was that, although the claimant had provided the leaseholders with three estimates for the works and invited their comments, it had subsequently awarded the contract by reference to revised estimates that had not been supplied to the leaseholders; it had also invited two new estimates, which it had discounted as being much higher than the others. The defendant contended that the claimant had been required to serve a fresh statement on the leaseholders in respect of the revised and new estimates, pursuant to para 4(5)(b) of Part 2 of Schedule 4 to the 2004 Regulations, and then to repeat the following stages of consultation. The defendant did not attend the hearing, which proceeded in her absence.Held: The claim was allowed. (1) The claimant’s decision to appoint the particular contractor it had at its revised estimate figure was a direct result of the concerns raised by leaseholders on consultation. Those concerns had led the claimant to appoint a different contractor from that which it had initially preferred, at a saving of more than £75,000, plus VAT. By that process, the claimant had clearly “had regard” to the observations made by the leaseholders as required by para 5 of Part 2 of Schedule 4 to the 2004 Regulations. It had acted on those observations and thereby saved the leaseholders a considerable amount of money. A landlord was not required to recommence the para 4(5) procedure and serve fresh statements under para 4(5)(b) at any and every stage of the contract process if there was any change, of any degree, to any of the original figures provided. Contractors might revise their prices or terms for a large number of reasons. Where the lessees had had the benefit of seeing and making observations on estimates from various contractors within a particular range of figures, the landlord was entitled to deal and negotiate with those contractors to arrive at a final figure for the works, at least within that range. A landlord was not required to repeat the expensive and time-consuming notice and observations procedure in respect of every change or “tweak” to the original estimates. Although that might be necessary where, for example, the landlord decided that all of the original estimates were unsatisfactory and went back to the drawing board with a fresh set of estimates from different contractors, that was not the case here.The contractor that the landlord had ultimately selected had been asked to revise its estimate in response to issues over accuracy that the landlord had raised in its initial statement under para 4(5)(b). The other contractors had also been asked to revisit their estimates and, by that process, the range of figures from those contractors had been narrowed. The claimant had then placed the contract at the lowest end of that range, providing a substantial saving to the leaseholders. That process of asking contractors to revisit their figures, in an effort to lower the figures and narrow their range, for the ultimate benefit of the leaseholders who would be paying for the works through the service charge, was an implicit and necessary part of the final decision over the awarding of the contract. It had not been affected by the obtaining of two additional estimates, since those figures had immediately been rejected. They had been mentioned to leaseholders only for information purposes, to reaffirm the claimant’s decision to award the contract to one of the original three contractors.(2) The defendant was also ordered to pay the maximum £500 contribution to the claimant’s costs of the proceedings, pursuant to para 10 of Schedule 12 to the Commonhold and Leasehold Reform Act 2002. By raising the consultation issue in her amended defence, leaving it hanging over the claimant and never withdrawing it, then failing, without explanation, to attend the hearing and argue the point, despite being in correspondence with the tribunal until the day before, the defendant had conducted the proceedings in a frivolous, vexatious, disruptive and unreasonable manner. Conducting the proceedings in that way showed disrespect for the process, the tribunal and the claimant. Parties should not raise serious points in proceedings, putting their opponent to considerable time and expense, and potentially putting the recoverability of thousands of pounds of service charges in issue, then make an unexplained last-minute retreat by not attending the hearing. Mr Robert Phillips, solicitor, of Eversheds LLP, appeared for the claimant; the defendant did not appear and was not represented.Sally Dobson, barrister
