Daejan v Benson: Section 20 Dispensation After the Supreme Court

by | Mar 7, 2013 | Contract Administration and Major Works

For landlords and managing agents running major works to blocks of flats, the section 20 consultation rules have always carried a sharp sting. Get the process wrong and, unless the tribunal grants dispensation, recovery from each leaseholder is capped at £250 for the works. On 6 March 2013, the Supreme Court gave judgment in Daejan Investments Ltd v Benson and changed how dispensation works.

What happened

The landlord had carried out major works but failed to follow the consultation requirements fully. The Leasehold Valuation Tribunal refused dispensation, and the Court of Appeal agreed. By a majority of three to two, the Supreme Court allowed the landlord’s appeal and granted dispensation on terms: a reduction of £50,000 in the leaseholders’ liability and payment of their reasonable costs.

The principles

  • The consultation rules exist to protect leaseholders from paying for inappropriate works or paying too much. Consultation is not an end in itself.
  • The key question under section 20ZA of the Landlord and Tenant Act 1985 is whether leaseholders suffered real prejudice from the failure.
  • Leaseholders must identify the prejudice they say they suffered. The landlord must then answer it.
  • Dispensation can be granted on conditions, such as reducing the amount recoverable and paying the leaseholders’ costs.

What it means in practice

For landlords and managing agents: this is not a licence to skip consultation. A failure still means a tribunal application, conditions and costs, and leaseholders who no longer trust the process. The best protection remains a clean, well documented consultation.

For leaseholders: the focus is now on what you actually lost. If the landlord’s failure meant you could not comment on the specification, nominate a contractor or challenge the price, gather evidence of what difference that would have made.

Getting it right first time

  1. Prepare a clear specification before the notice of intention, so leaseholders know what is proposed.
  2. Keep a timetable of every notice and observation period.
  3. Respond to observations in writing.
  4. Tender competitively and explain the choice of contractor.

Our Major Works service runs section 20 consultation as part of each programme. See how we delivered two mansion blocks in one programme.