It is, sadly, all too common that major works projects change once commenced or, as in the case in this Legal Update, the chosen contractor goes off job and a new contractor needs to be found to finish the job. In such circumstances do you need to re-consult? This question was considered in the Upper Tribunal decision of Wynne v Yates & Anor [2021] UKUT 278 (LC).

The facts

The property, a house in Hove, East Sussex, converted into two flats, was to be subject to external works. The landlord complied with section 20 consultation and in 2019 appointed the lowest quoting contractor, Mr R. Mr R started the works but then, due to health issues, had to leave the job after finishing only the front elevation. In January 2020 the landlord appointed new contractors who completed the works started by Mr R and undertook some necessary work to the roof. The total cost of the works was £4754 (including the monies paid to Mr R for his part of the works). This is against the original quote provided by Mr R of £2350.

A dispute arose in relation to charges generally, culminating in the leaseholders bringing an application to the FTT for a determination that the landlord should have re-consulted before changing contractors and in respect of the ‘additional’ roof works.

In response the landlord made an application under s.20ZA Landlord and Tenant Act 1985 for dispensation from the requirement to consult.

The findings in the FTT

The FTT found “without discussion” that the landlord should have re-consulted and specifically in respect of the additional roof works. It also declined the landlord’s application for dispensation considering that the landlord “could have consulted with the Applicants, even some form of informal consultation would have been expected”.

To top its ruling off, the FTT also made a section 20C order preventing the landlord from recovering any of its costs of the case through the service charge.

The landlord appealed to the Upper Tribunal.

The findings of the Upper Tribunal

The UT overturned the FTT ruling in its entirety on the above points.

On the need to re-consult on the change of a contractor and on the consequential uplift in cost, the UT said that they saw “no reason why a fresh consultation was necessary.” The UT went on to say “that 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 can be said where the work to be done turns out to be more than expected and more than the estimate covered - again, we all know that it happens.

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.”

The UT also considered the roof works undertaken by the second contractor. Here it found that those additional works “did not amount to a fresh “set of works”.” The Notice of Intended Expenditure given by the landlord in 2015 specified the work as “External redecoration, repairs to roof and associated works” and thus the works undertaken did not fall outside that description. On that basis no fresh consultation was required for those roof works.

The UT went on to rule, that even if the above is wrong it would grant dispensation in any event because the leaseholders had not shown any prejudice arising from a failure to consult. In the absence of any suggestion of prejudice there was no reason not to grant a dispensation. The UT found that the FTT’s decision on this point was irrational.

Conclusion

Whilst this is a useful decision we say that it is one to rely upon only with a large helping of caution. That is not to say that the UT decision here was incorrect as, on the facts, it is plainly correct. It is more that it may suggest to some less cautious landlords out there that just because unforeseen issues have occurred during a project of works, it does not matter that the solution results in sizeable (near 50% in this case) increase in costs of a job.

We consider that that seemingly “relaxed” approach is dangerous. We would always advise erring on the side of caution and recommend that any landlord who befalls some issue during works, such as needing to include further works or change of contractor, they should seek advice before blindly proceeding and incurring costs that may either not be recoverable or result in a costly dispute with leaseholders such as those in the above case.

The “Golden Rule” applies most squarely here - if in doubt ask before jumping.

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