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Procedural Irregularity not Sufficient to Eliminate Liability

FlatsThe tenants held five flats on long leases from the landlord and were required to contribute to their upkeep. When the landlord wished to undertake substantial works on the flats, a consultation process was triggered, requiring the landlord to provide information about the proposed works and costs. The landlord put the contract for the work out to tender and received four tenders.

The landlord sent one of the tender responses to the tenants, which was a breach of the consultation requirements, which require at least two are sent. There were other minor irregularities in the procedure adopted by the landlord.

Later the landlord demanded £280,000 from the tenants by way of contribution to the costs. The tenants declined. The landlord went to the Tribunal to recover the sum demanded, arguing that it should be issued with a dispensation as regards the failure to comply fully with the requirements of the consultation process. The landlord also agreed to reduce the demand by £50,000.

The tenants argued that because of the landlord’s failure to follow the correct procedure, the liability should be limited to the legal maximum of £250 per flat.

The landlord appealed to the Court of Appeal, which ruled that its failure to fully comply with the consultation procedure has significantly prejudiced the tenants and that therefore the tenant did not have to pay the sum demanded.

The landlord appealed to the Supreme Court. It considered that it was difficult to see why a dispensation would not be granted where the failure to comply with the consultation process had not affected the work done or the cost of the work.

Whilst the legal burden of proof of compliance fell on the landlord, it was up to a tenant to prove that the failure to follow the procedures correctly had caused them a prejudice.

The Tribunal had, it seems, based its decision on its own view of the seriousness of the landlord’s failure to follow due process correctly rather than considering the prejudice that the failure caused the tenants.

Accordingly, the dispensation sought by the landlord was granted, subject to the £50,000 reduction previous offered.

Procedural irregularities are often seized upon by those seeking to challenge decisions. That can be a gamble, as it may – as in this case – fail. The Court may well look at the ‘big picture’ and decide that the procedural irregularity is not sufficient cause to place such a substantial financial burden on the landlord.