Landlord Wins Appeal for Dispensation from Tenant Consultation Requirements

Citation: [2024] UKUT 56 (LC)
Judgment on

Introduction

The case of RM Residential Limited v Westacre Estates Limited & Anor concerns an appeal against the First-tier Tribunal’s decision to deny a dispensation from the statutory requirement to consult tenants prior to conducting major works. This appeal raises critical legal principles about the Landlord and Tenant Act 1985, particularly sections 20 and 20ZA, and the interpretation of urgency and landlord’s rights during the registration gap of property title.

Key Facts

RM Residential Limited (Appellant) purchased the freehold of a property and initiated urgent repairs without fully complying with the tenant consultation requirements outlined in section 20 of the Landlord and Tenant Act 1985. The Appellant subsequently sought a dispensation under section 20ZA from these requirements, which was refused by the First-tier Tribunal on grounds that the Appellant did not legally own the property at the time of works due to the registration gap and that the works were not urgent. The Appellant argued that as the equitable owner, they were entitled to proceed without the formal registered title and that the lack of tenant prejudice should result in a dispensation being granted.

The Primary legal principles engaged in this case were:

  1. Consultation Requirements (section 20 of the Landlord and Tenant Act 1985): This outlines procedures landlords must follow before undertaking ‘qualifying works’ exceeding a cost threshold for tenants in service charges.

  2. Dispensation from Consultation (section 20ZA of the Landlord and Tenant Act 1985): Allows landlords to apply for dispensation from consultation requirements if the tribunal is satisfied it is reasonable to dispense with the requirements.

  3. Equitable Ownership vs. Registration Gap (Land Registration Act 2002): Pertains to the rights and powers of individuals who have equitable ownership of a property but are not yet registered proprietors.

  4. Prejudice to Tenants (Daejan Investments Limited v Benson [2013] UKSC 14): The focus during an application for dispensation should be on whether tenants were prejudiced by the lack of consultation.

  5. Urgency of Works: The FTT suggested that unless works needed to be urgent, there was no ‘basic right’ to a dispensation.

  6. Conflict of Interest: The FTT’s perception that a conflict of interest affected the credibility of one of the appellant’s reports.

Outcomes

The Upper Tribunal (Lands Chamber) decided that the First-tier Tribunal erred in several respects:

  1. Misunderstanding Equitable Ownership: The FTT failed to recognize that during the registration gap, the purchaser holds equitable ownership and has the right to exercise owner’s powers per section 24 of the Land Registration Act 2002.

  2. Mistaken Precondition of Urgency: The Supreme Court in Daejan clarified that urgency is not a precondition for a dispensation to the consultation requirement. The primary issue should be whether or not tenants suffered prejudice from the lack of consultation.

  3. Overemphasis on Lack of Prejudice: While the FTT correctly identified the lack of tenant prejudice, they wrongly assumed this was not a significant factor in the decision to grant a dispensation.

  4. Findings of Fact Rejected: The Tribunal concluded that the FTT’s findings regarding the explanation of work scope and costs, satisfactory evidence of work completion, and the perceived conflict of interest in Mr Payne’s report were incorrect or irrelevant.

The Upper Tribunal, therefore, set aside the FTT’s decision, granting the appellant dispensation from the section 20 consultation requirements, basing the decision on the correct legal understanding and the uncontested finding of no tenant prejudice.

Conclusion

This case reaffirms the principles set out in section 20ZA of the Landlord and Tenant Act 1985 and clarifies that the urgency of works is not a prerequisite when assessing the need for dispensation from consultation requirements. The interpretation by the FTT of the registration gap and the concept of equitable ownership during such a gap was incorrect. The case underscores the importance of tenant prejudice as central to the considerations for dispensation and the practical rights of equitable property owners. The Upper Tribunal has rectified the FTT’s misapplication of legal principles, aligning the decision with established precedent and clarifying the application of these principles for future similar cases.

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