Landlords warned against cutting corners

 

Residential landlords are being warned against carrying out major building works or providing long term property management services without proper consultation with tenants following a number of court cases where landlords failed to recover fees from tenants.

Explains Michael Denmead, a property law expert in Barr Ellison Solicitors' commercial property team: “The High Court and the Lands Tribunal are taking a tough line over landlords who fail to comply with the statutory service charge consultation procedure to the letter. In one recent case a landlord sought to recover £270,000 from five tenants for work to their buildings but, because they hadn’t complied with the consultation requirement, they could only claim £250 from each tenant. This is obviously a landlord’s worst nightmare, but one that can be avoided.”

The consultation requirements state that a landlord must consult with its tenants before carrying out major works to its building (where any tenant’s contribution will exceed £250) or entering into a long-term agreement to provide services (eg property management) where the annual cost to each tenant will exceed £100.  This consultation is a two stage procedure, beginning with serving notice to the tenants and any recognised tenants’ association (RTA). As well as informing tenants about the work they must also be given 30 days' notice to make observations and nominate parties to carry out the work. The landlord must then obtain at least two estimates for the work (one of which they must have no connection with) and prepare a statement from these estimates giving the tenants another 30 days to make any observations.

It is only at this stage that the landlord can enter into the contract, and only then if the contractor chosen is a nominee of a tenant or RTA or the lowest estimate. Otherwise a further 21 days’ notice is required.

Where a landlord is providing services to a building a similar two-stage procedure applies if the cost to any individual tenant is more than £100. Tenants must also be consulted where qualifying works are to be carried out by a contractor who is already in place if they exceed £250 per tenant.

Adds Michael Denmead “The only occasion where the full procedures might not apply is where the work is considered urgent and a landlord may apply to the Leasehold Valuation Tribunal (LVT) for an order to dispense with the notices. But even in these cases, recent tribunal decisions suggest that a landlord has to tread very carefully if they elect to proceed without following the consultation process to the letter.”

For further information or advice, please contact Michael Denmead on 01223 417261.

 

The information given in this article is of a general nature only and should not be considered as advice applicable to any particular situation for which specific request should be made to us.

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