Reedbase Ltd and another v Fattal and others

Landlord and tenant – Service charge – Consultation – Appellant tenants appealing against decision of county court in respect of works carried out by respondents and consultation process concerning those works – Whether way in which respondents carried out works satisfied obligation to make good damage to demised premises under terms of appellants’ underlease – Whether judge erring in holding respondents conducted sufficient consultation under Service Charges (Consultation Requirements) (England) Regulations 2003 – Appeal dismissed The appellants were tenants of two penthouses on top of a block of apartments in 14- 112, Nottingham Terrace, London NW1. The apartments had terraces around them with mature trees and shrubs which were watered by an irrigation system. The respondents were the landlord of the apartments and service charge trustee and the management company. The respondents wanted to repair an asphalt roof under the terraces adjoining the two penthouses. However, the appellants had placed tiles on top of the roof and the respondents recognised that they would have to reach an agreement with the appellants about removing the tiles. The cost of the works done to the roof were added to the service charge, to which the appellants contributed 10%. The rest was paid by the other tenants, none of whom objected to the cost involved. Before entering into the works, the respondents had to go through the statutory process of circulating their proposals, obtaining estimates and making estimates available for inspection by tenants as required by the Service Charges (Consultation Requirements) (England) Regulations 2003. The appellants subsequently objected to paying rent which included an element attributable to the cost of those works. The appellants defended an action for arrears of rent and made a substantial counterclaim for damages for breach of covenant. The judge ruled in favour of the respondents, rejecting the appellants’ contentions that the work was not done in conformity with the covenant to make good damage occasioned by repair and that there had been a breach of the Consultation Regulations. The appellants appealed. The issues for determination were: (i) whether the manner in which the respondents replaced the appellants’ terrace tiles satisfied the obligation to make good damage to the demised premises under the terms of the appellants’ underlease; and (ii) whether the judge had erred in holding that the respondents had conducted sufficient consultation with the appellants in relation to the proposal to replace the tiles previously laid by them. Held: The appeal was dismissed. (1) The appellants had failed to establish their claim for failure to make good the damage caused by removing and replacing the terrace tiles. In Bradley v Chorley Borough Council [1985] 2 EGLR 49, the Court of Appeal held that what work could reasonably be required of the landlord would depend upon the facts of each particular case. The obligation to make good did not impose an absolute standard, but an obligation so far as possible to restore property to its pre-existing condition. The condition of the demised premises before the work took place was a key consideration. The landlord might not be able to restore the premises to exactly what was there before. Here, the respondents had improved the appellants’ property by installing new and apparently superior terrace tiles. There was no question of defective work or poor quality tiles being used. There were maintenance obligations which the judge found to be reasonable and could not prevent the respondent’s actions from amounting to performance of its covenant. Further, the appellants’ contention that there was a further breach of the covenant to make good damage by not watering the plants on their terraces during the works was rejected. There was no agreement in writing to the effect alleged by the appellants, that terms was not agreed orally and no-one had suggested that it could be implied into the arrangements for doing the work: Bradley v Chorley Borough Council [1985] 2 EGLR 49 followed. McGreal v Wake [1984] 1 EGLR 42 considered. (2) The consultation procedure involved two stages. First, the landlord had to consult the tenants about their intention to carry out the works. Second, the landlord had to carry out a second consultation on estimates obtained for the works. It was sometimes necessary for a landlord to repeat stage 2 of the process. The relevant test, in the absence of any explicit statutory guidance, as to when a fresh set of estimates had to be obtained, was whether the tenants had been given sufficient information by the first set of estimates. That involved an objective comparison of the information provided about the old and the new proposals. In the present case, the difference was that the estimates produced at the second stage did not include an estimate for the additional cost of the appellants’ preferred tiles or of the pedestal system for fixing them. But that was not the only relevant factor and it would not be right to conclude that there had been a material change in the information provided on the basis of that one factor. In the light of the statutory purpose and taking into account that the other tenants did not object to the changes, the protection to be accorded to the appellants by the consultation process was not likely to be materially assisted by obtaining fresh estimates. The respondents were not seeking to ambush the appellants by doing some fundamentally different works from those originally proposed. The change in cost was relatively small in proportion to the full cost of the works. It was unrealistic to think that contractors who had estimated for the full works would be likely to tender for a small part of it. The retendering process would have led to a loss of time in completing the works which might prejudice other tenants and the appellants continued to have their protection under section 19 of the Landlord and Tenant Act 1985 against the inclusion of unreasonable costs in the service charge: Daejan Investments Ltd v Benson [2013] 2 EGLR 45; [2013] EGILR 4 followed. Daniel Dovar (instructed by Collyer Bristow LLP) appeared for the appellants; Jonathan Chew (instructed by Forsters LLP) appeared for the respondents. Eileen O’Grady, barrister Click here to read a transcript of Reedbase Ltd and another v Fattal and others