Landlords take note – The case of Daejan Investments

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In March 2013, the Supreme Court handed down its judgment in the case of Daejan Investments Limited v Benson and Others [2013] UKSC 14 (“Daejan”).

The Supreme Court decision has significant implications for both leaseholders and landlords under long residential leases in relation to recovery of the cost of works carried out by landlords that fall within the ambit of the statutory procedure set out in Section 20 of the Landlord and Tenant Act 1985 (“Section 20”).

Broadly speaking, section 20 requires a landlord planning to undertake qualifying works to consult with the leaseholders in a specified form where any one leaseholder will be required to contribute over £250 towards those works. If the landlord fails to comply, the landlord can only recover a maximum contribution of £250 from each leaseholder, regardless of the total cost of the qualifying works. Ostensibly, the burden on the landlord is strict and the consequences of failing to comply can be grave.

The Daejan case serves as an important reminder of the Court’s discretion to dispense with the requirements of Section 20 on receipt of an application from the landlord to do so.

In determining whether to grant dispensation, the Court stressed that the procedure should not be regarded as an end itself, but should be considered in light of the aims of the 1985 Act, namely, to ensure that leaseholders are not required to pay for unnecessary or defective works and/or to pay more than they should for those works.

With that background, the Court concluded that the correct test on an application for dispensation is whether the leaseholders have suffered any relevant prejudice as a result of the landlord’s failure to adhere to the procedure and, if so, what prejudice has in fact been caused. The burden of identifying any prejudice falls on the leaseholders and once that burden has been satisfied, the court should then look to the landlord to rebut it.

In establishing prejudice the leaseholders will need to show what steps they would have taken if the Section 20 procedure had been adhered to and in what way their loss of opportunity to take those steps has caused prejudice.

The Court helpfully identified a number of examples of circumstances where dispensation might be granted to landlords:

  • Where the qualifying works are required of an emergency nature;
  • Where there is only one single available or realistically suitable contractor; and
  • Where the breach of the procedure is only a minor breach that causes no prejudice to the leaseholders.

The examples provided are not exhaustive and the Court made clear that none of the examples would undermine the overriding principle of the requirement to consult with leaseholders.

Finally and perhaps most significantly, the judgement in Daejan states that the court has power to grant dispensation on such terms as it thinks fit. Those terms can include making an order for dispensation, subject to a reduction in the recoverable cost of the qualifying works. The amount of that reduction could be a sum equivalent to the additional cost of the works, caused by the failure to adhere to the procedure.

While the decision in Daejan may offer some comfort to landlords in the event of failure to adhere with the Section 20 consultation procedure, it should be remembered that the grant of dispensation may still come at a significant cost (in Daejan the Court used its discretion to reduce the total amount recoverable by the landlord by £50,000).

The court is under no obligation to consider the financial consequences for a landlord if dispensation is not granted and the best advice for landlords is simply to ensure that the Section 20 procedure is complied with fully to limit leaseholders’ ability to lawfully withhold payment.

PLEASE NOTE: this briefing note contains information about current legal issues and is only intended as a general statement of the law – it does not give legal advice. No action should be taken in reliance on this note without specific legal advice.

For further information please contact:


Pieter Boodt
Solicitor, Property
Telephone: +44 20 7845 7454