The Supreme Court has handed down judgment in the long awaited Daejan Investments Ltd v Benson and others section 20 dispensation appeal and found in favour of the landlord by a majority of 3 to 2.
The case was typical of many that come before the Leasehold Valuation Tribunal in that the landlord had incurred significant major works expenses but had failed to fully comply with the consultation process. The tenants sought to limit the landlord’s recovery to £250 per leaseholder, leaving the landlord exposed to circa £280,000 of costs. The landlord sought dispensation from the LVT in order to escape the consequences of the costs cap. The Supreme Court overturned the original LVT decision and the subsequent appeals to the Upper Tribunal and Court of Appeal.
The message from the Supreme Court is that the purpose of the section 20 consultation is to prevent tenants being exposed to:
a) liability for inappropriate works; or
b) paying more than appropriate for works
The statutory scheme was not designed to allow tenants to benefit from a windfall and the essential points for the LVT to consider when granting or refusing dispensation is what is the prejudice to the tenant. The factual burden of proving prejudice rests with the tenants and once a credible case has been established then it is up to the landlord to rebut that case.
The full judgment will be available shortly and should contain more detailed guidance on the exercise of the LVT’s jurisdiction to grant or refuse dispensation.