Given that my last blog on Daejan Investments Ltd v Benson [2011] EWCA Civ 38 keeps generating a significant amount of traffic, I am happy to give you more of what you want.
The case was an appeal by the landlord against the refusal by the Leasehold Valuation Tribunal and the Land Chamber (Upper Tribunal) to grant the landlord retrospective dispensation from following the section 20 consultation process in relation to major works. My last blog focused upon what I view as the main issue in the case, that of whether the prejudice suffered by the landlord from the refusal to grant dispensation is a relevant consideration for the LVT when deciding a dispensation application. The quick answer being, no!
The case also dealt with the issue which tenants of long leases tend to feel most strongly about, that of the prejudice they have suffered.
The basic legal position is that if a landlord has not followed the consultation requirements to the letter of the law, then they can only recover a maximum of £250 per leaseholder towards the cost of qualifying works or qualifying long term agreements. However, section 20 (1) (b) of the Landlord and Tenant Act 1985 gives jurisdiction to the Leasehold Valuation Tribunal to dispense with the consultation requirements. The test that the LVT will apply relates to whether the tenants have suffered any prejudice in the failure to consult.
In the Daejan case the consultation process had not been seen through to its conclusion and Daejan argued that this wasn’t important as the tenants had suffered no prejudice. The LVT had earlier refused to consider what might have happened if the consultation had been carried out when exploring the question of prejudice and simply determined that the failure to complete the process deprived the tenants of the opportunity to make further representations and have them considered as itself amounting to significant prejudice. This is not a high threshold to cross and seems to imply that the procedural failing alone generates sufficient prejudice to prevent a dispensation application from succeeding. From my own experience in the LVT this has not necessarily been the methodology adopted by the LVT when deciding claims involving residents management companies (which are subject to a less rigorous test).
The question of where the burden of proof lies in relation to establishing prejudice remains open for discussion another day. Is it for the landlord to show that there was no prejudice or for the tenant to show that there was? It was not necessary to decide that point in the Daejan case as the Court of Appeal was satisfied that if the burden of proof was on the tenants then they would have shown sufficient prejudice to block the dispensation application. However, in different circumstances the question of whether the landlord or the tenant has to show prejudice could still be an issue.
The underlying point for landlords to consider from this case is that failing to follow the procedure fully, particularly in restricting the tenants right to offer their views at the various stages is enough to block a dispensation application. However, more minor procedural failings may still be forgiven by the LVT under section 20 (1) (b).
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