Undertaking Major Work projects?

Monday, October 31, 2022

Common Scenarios faced by Landlords and Management Companies

PDC Law assisted the appellant in a recent Upper Tribunal decision of Wynee v Yates and Livingstone [2021] UKUT 0278(LC) which provides useful guidance on the common scenarios faced by landlords and management companies when undertaking ‘major works’ projects, namely where the scope of works and even the contractor itself may change during course of the works. How does the affect the landlord or management company’s compliance with the statutory consultation requirements under Section 20 of the Landlord and Tenant Act 1985?

In this instance, the landlord engaged in consultation in respect of an external redecoration project and the contractor nominated out of that process to perform the contract duly began the works; however, the contractor was ultimately not able to complete the project, forcing the landlord to engage different contractors to finish the works which included an element of roof repairs. The original nominated contractor was paid a portion of the contract price to reflect the work he undertook, but the ultimate cost of the projected ended up being higher than that quoted by him in the tender process.

The leaseholder argued that consultation should have been revisited in light of both the engagement of different contractors to finish the works, and the change in the scope of the works to accommodate repairs to the roof. The leaseholder argued that the costs of the project were unreasonable in any event, despite adducing no evidence as to the quality of the works or its cost. The landlord applied for dispensation from the consultation requirements.

The First-Tier Tribunal dismissed the application for dispensation and found that the landlord should have consulted again with the leaseholders in these circumstances; the Tribunal was satisfied that they suffered the prejudice required to refuse the landlord dispensation from the consultation requirements. The curious aspect of that decision was that it was silent as to what that prejudice suffered actually was and no reference was made to any evidence advanced by the leaseholders in this respect.

Interesting points were noted by the Upper Tribunal that would undoubtedly be of comfort to landlords and management companies.

• “compliance with the consultation requirements gives no guarantee to the tenants about the eventual price and scope of the work. The consultation process requires the presentation of estimates and a choice between them; it does not require that estimates are not exceeded, as anyone who has engaged decorators or builders knows does happen. And the consultation process does not guarantee that the contractor whose estimate is chosen will be able to finish the job”
• “The consultation requirement applies to a “set of works” (Phillips v Francis [2014] EWCA Civ 1395), and if a contractor engaged to carry out a set of works is unable to complete it there is no requirement for a fresh consultation about the same set of works, even if the price is going to go up (as it normally will if the original contractor gave the cheapest quote), and even if  the tenant’s contribution is going to rise by more than £250.” The same reasoning was applied where the anticipated works turn out to more than expected and more that the estimated price covered.
• “There will be cases where the project takes an unexpected turn so that the new work cannot be said to be part of the same “set of works”. Whether that is the case will be a matter of fact and degree. If it is, fresh consultation is required, although where new work is found to be necessary while the original project is under way then a fresh consultation will often be impracticable and there will be an application for a dispensation.”

In this instance, the description of the works in the Notice of Intended Expenditure was deemed wide enough to cover the additional works done to the roof to the extent that they were not considered a new set of works that would require fresh consultation.

Coupled with the absence of any evidence as to prejudice suffered to suggest that the leaseholders found themselves in a different position to that intended by statutory consultation, the Upper Tribunal accordingly set aside the decision not to grant dispensation.

On the question of reasonableness, the First-Tier Tribunal limited the recoverable cost of the works to what it considered to be a reasonable sum, but the Upper Tribunal pounced on the absence of evidence adduced by the leaseholders to support the reasoning for any decision for the final cost of the works to be reduced, and accordingly overturned that aspect of the decision as well.

The Upper Tribunal’s decision makes some realistic and pragmatic observations as to the practical realities of major works, namely any unexpected change in its scope and contractor(s) engaged, and the decision is no doubt of some comfort that the need for consultation is less dogmatic than leaseholders may believe. It is important to note, however, that the decision reached reflects the precise circumstances of this case and what was ultimately a poorly reasoned lower Tribunal determination that forced the landlord to seek permission to appeal; any significant change in the scope and cost of any set of works needs to be carefully considered on its own merits as to whether either fresh consultation or an application for dispensation need to be embarked upon. Ongoing open and transparent communication with leaseholders in such circumstances is also of importance.

The decision is therefore not a licence to landlords and management companies to ignore the impact of changes to a major works project on the consultation requirements, and also the reasonableness of those costs. PDC Law would therefore always recommend that advice should be sought in such circumstances.

Read full details of the Decision here