Breathing space for landlords: reclaiming service charges from residential long leaseholders

Where landlords of long residential leases carry out ‘qualifying works’ or enter ‘long-term agreements’, statute imposes requirements on them that substantially restrict their ability to recover service charge from their tenants unless certain consultation requirements are complied with or dispensed with by the Leasehold Valuation Tribunal (LVT).

In Daejan the landlord was required to consult with five tenants of a block of flats before carrying out proposed works (valued at £280,000), but failed to fully comply with the consultation requirements. It was a term of the lease that the cost of the work was recoverable as service charge from the tenants.

Daejan asked the LVT for a dispensation, so that it would be able to recover the full amount of £280,000 from the five tenants rather than £250 from each of them which it would otherwise be able to recover. The LVT initially regarded Daejan’s failure as a serious breach of the consultation requirements, which amounted to serious prejudice to the tenants. Accordingly, the LVT refused dispensation and, on appeal, the Upper Tribunal and the Court of Appeal agreed with this refusal…

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