Hippersley: Who should bear the cost of dispensing with consultation?

In Adriatic Land 5 Limited v Leaseholders at Hippersley Point, the landlord of a higher risk building applied for dispensation from the usual obligation to consult with leaseholders on major building safety works under the Landlord and Tenant Act 1985.  The leaseholders opposed the application, even though the reason was to speed up remediation due to the fire risk posed.

At first instance, the First Tier Tribunal granted dispensation from the consultation requirements on an unconditional basis but subject to an order that the landlord could not recover the cost of the application via the service charge. On review, the First Tier Tribunal reversed the order but with the same effect: it granted dispensation from the consultation requirements conditional on the landlord not recovering costs from the leaseholders.

On appeal

On appeal, the Upper Tribunal decided the cost condition was not appropriate because the landlord was not avoiding its responsibilities and expenditure was for the benefit of leaseholders. However, the leaseholder protection provisions in schedule 8 of the Building Safety Act 2022 (BSA) meant the landlord could not recover its legal costs in relation to the application via the service charge of qualifying leases. This applies even though the costs were incurred (and in some cases paid) before the BSA came into force. The appeal granted the landlord unconditional dispensation from the obligation to consult in relation to the works but noted that costs won't be recoverable from leaseholders of qualifying leases.

Takeaway

Although the outcome appears not to have changed, it was achieved by interpretation of the BSA, which was not law when the first instance decision was made. Ultimately, in line with the intended policy of the BSA, leaseholders should be protected from picking up the bill for historic defects and the Court was keen to make sure this was the case.