A person holds the silhouette of a family house in their hands

Service Charges: To Consult or not to Consult, that is the question!

Stenau Properties Limited v Ms Karin Leek, Mr Klaus Reckling and Others

A recent decision by the Lands Tribunal refused landlord Stenau Properties Limited permission to dispense with service charge consultation requirements (as set out in s20 Landlord and Tenant Act 1985). As a result Stenau Properties was limited to recovering a contribution of £250 from each leaseholder.

Stenau Properties argued that they had recognised the need to consult and consulted albeit not in line with the s20 statutory procedure. The landlord had written to the leaseholders informing them of the consultation requirements and had also held a meeting with the leaseholders. They argued that failure to follow the statutory procedure had resulted in little, if any, prejudice to the leaseholders.

The Leasehold Valuation Tribunal found that the service charges were justified and reasonable. In spite of this, it was held that there had been a substantial failure to engage in consultation with the leaseholders. The leaseholders had been led to believe that they had no real choice in the decision.

It was re-iterated that the purpose of the consultation is for the decision made to be open to influence by the leaseholders. Leaseholders should have confidence in the decisions reached and should be left feeling as comfortable as possible with the service charges that result from these decisions. Failure to properly engage with them in the consultation process and allow them to voice their thoughts throughout the decision making process is likely to be seen as genuinely prejudicing them even if the end result would have been the same.

The Lands Tribunal stated that only if the breach of the procedure had been minor would it be reasonable to dispense with the need for consultation. For a substantial breach, it may be reasonable to assume that the leaseholders had been prejudiced even if it were possible to prove that further consultation would have made no difference to the end decision.

This case serves an important reminder to landlords to make sure they follow the s20 consultation process or face the risk of being left substantially out of pocket when it comes to recovering service charges from their leaseholders.