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Section 20 consultation and headleases

Important decision on consultation for major works where the landlord conducting the works is not the leaseholders’ “immediate landlord”.

Residential long leaseholders, landlords and their managing agents should be aware that there is a consultation procedure to be followed for items of major works where the cost to any single leaseholder exceeds £250 (“qualifying works”), this comes under Section 20 of the Landlord and Tenant Act 1985 (Section 20).

In summary, the consultation process involves the service of specific notices inviting (among other matters) observations on the proposed works. Failure to follow the required procedure or to obtain a dispensation order from the appropriate tribunal (the First-tier Tribunal in England, the Leasehold Valuation Tribunal in Wales) will limit the service charges that a leaseholder can be asked to pay for the qualifying works to only £250.

Frequently, in buildings divided into flats, there is a freeholder for the whole block, with a “head-lessee” beneath them to whom the entire building has been sub-let on a long lease. The individual flats may be held on ‘under leases’ from the head-lessee who is then the flat owners’ “immediate landlord”.

But what is the position where qualifying works are to be carried out by a freeholder in this situation? Should the freeholder only consult with the head-lessee?

On 10 August 2016 the Upper Tribunal (Lands Chamber) provided an answer in the case of Various leaseholders of Foundling Court and O’Donnell Court, Brunswick Centre, London v (1) London Borough of Camden (2) Allied London (Brunswick) Limited [2016} UKUT 0366 (LC) and others

The answer is:

  1. that the freeholder should consult with both the head-lessee and the leaseholders of the individual flats.
  2. where this is not practicable, the freeholder should obtain a dispensation order from the appropriate tribunal. The tribunal could grant dispensation on terms allowing for alternative methods of consultation such as prominently displaying a notice in the common parts of the building, so that all leaseholders can see the notice.

The takeaway:

If you are a leaseholder in this situation, where the freeholder intends to do major works, you should expect to receive the consultation notice directly from the freeholder, even if you have no direct relationship with them, unless the freeholder obtains a dispensation order from the appropriate tribunal.

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