We are often asked whether the consultation requirements in Section 20 of the Landlord and Tenant Act 1985 (“the 1985 Act”) apply to professional fees, such as legal costs, surveyors' and other consultants’ fees.

Of course, such costs could, in theory, trigger consultation under Section 20 as a ‘qualifying long term agreement’ (QLTA) if such costs are incurred pursuant to a service agreement exceeding 12 months and are over the statutory threshold of £100 in any accounting period (for any one leaseholder). But what about one-off professional fees or fees incurred in connection with major works projects - must a landlord, RTM company or management company consult in relation to those fees?

This is a question decided by the Upper Tribunal (“UT”) in the case of Rose -v- Bracknell Gate Properties Limited [2025] UKUT 386 (LC) just this week. Spoiler alert…the UT said the consultation requirements do not apply.

Background

The case concerned three 1930s mansion blocks in Hampstead containing 25 residential flats. Mr Rose was the long leaseholder of one of the flats, and sought to challenge the payability of a major works demand for electrical works, as well as a demand for his contribution towards a reserve fund, in the First-Tier Tribunal (“FTT”).

The lease was fairly standard and required interim service charge demands on the usual quarter days. For the 25 December 2023 date, Mr Rose was issued with three demands - one for the interim service charges, one for the reserve fund, and one in the sum of £14,406.85 for the electrical works. Whilst being issued for payment on the December quarter date, the costs for these works were not budgeted and included in the earlier demands for 2023. Payment was requested by 05 February 2024.

The total costs for the electrical works making up the demand included various professional fees, namely :-

• Carbogno Ceneda Architects Ltd, engaged in the design of the electrical works - £8,953;

• The Monalco Partnership, for drawing up the specification - £12,438; and

• Bawtrys, managing agents dealing with the consultation and tendering process - £6,620.39

Whilst there had been consultation under Section 20 for the costs for the electrical works, that consultation did not include these professional fees.

The FTT’s decision

It was accepted during the course of the FTT proceedings that the demand for the reserve fund contribution was not payable. However, the FTT determined that the demand for the electrical works was payable. The FTT did not accept Mr Rose’s arguments that the quarterly demands must be equal instalments, as the lease simply did not include this additional wording.

The FTT also rejected Mr Rose’s arguments that the costs were unreasonable and that there had been a failure to comply with the consultation requirements in Section 20 in relation to the professional fees. The FTT determined that these professional fees did not relate to “building works”, and so fell outside the consultation process for major works costs (‘qualifying works’).

Mr Rose appealed the FTT’s decision to the UT, on grounds that the FTT was wrong to decide that :-

1. On a proper construction of the lease, the demand for the electrical works was payable (“the Construction Issue”); and

2. The professional fees fell outside the consultation requirements (“the Consultation Issue”).

The UT’s decision

1. The Construction Issue

   The UT allowed the appeal on the Construction Issue, and found the demand for the electrical costs was not payable.

   The UT accepted Mr Rose’s argument that the wording of the lease was such that, in effect, only one demand was permitted for a sum on account of service charge in each financial year, payment of which was to be made by instalments on the usual quarter days.

   The UT did not accept the landlord’s argument that the lease permitted different demands to be made on the respective quarter dates. There were no words in the lease indicating that this would be the intention, and the service charge machinery was such that it clearly operated on a yearly, as opposed to quarterly, cycle. The annual sum was also the ‘common sense’ approach to the Construction Issue, one of the functions of which was to enable leaseholders themselves to budget for the year. To find otherwise, the UT said, would produce “a somewhat surprising result, certainly a deviation from the simple and conventional structure, which would require clear language to bring about”.

2. The Consultation Issue

   Whilst the FTT allowed the appeal on the Construction, the UT nonetheless went on to consider the Consultation Issue too. On this, the UT agreed with the FTT’s approach, although this was academic given that demand for the electrical works was not payable as a result of the appeal.

   Section 20ZA(2) of the 1985 Act defines “qualifying works” for which consultation under Section 20 is required, as “works on a building or any other premises”. The question for the UT was whether “works on a building” refers only to the physical works, or extends also to professional services associated with those physical works.

   This was a question considered over 20 years ago by the High Court in Marionette Limited -v- Visible Information Packaged Systems Limited [2002] EWHC 2546 (Ch), albeit in relation to an earlier form of the 1985 Act (prior to the 2003 amendments). The judge in that case had decided that professional fees for supervision of works and dealing with lessee queries during major works were not “works on a building” and so not within the consultation requirements, for the following reasons (with which the UT agreed) :-

• ‘works’ are restricted to the physical works involved in repair or maintenance and the cost of those works is the charge made by the contractor carrying out those works for doing so;

• This is supported by the fact that the ‘works’ to be described in the relevant consultation notice are the physical works; and it is only in respect of those works that estimates are required to be provided;

• Whilst this might fly in the face of the obvious policy behind the consultation requirements, to let leaseholders know how much works will cost and allow them the opportunity to object, leaseholders would readily recognise that repairs of any significant scope would require an element of supervision and, in any event, to be recoverable the fees are subject to the ‘reasonableness’ test in Section 19 of the 1985 Act.

The UT was happy to apply this analysis to the current form of Section 20, adding that :-

• If professional fees also required consultation “there would be a risk of a multiplicity of consultations in relation to a single project making the process unwieldy…It is also worth remembering that tenants will ultimately bear the costs of consultations as such costs will form part of the service charge. This approach would significantly increase that costs burden on them.”; and

• The true purpose of the consultation requirements has been clarified by the Supreme Court since the Marionette case in the leading dispensation case of Daejan Investments Limited -v- Benson [2013] UKSC 14. The true policy of the legislation was said by the Supreme Court to reinforce and give effect to Section 19 of the 1985 Act :-

  “It seems clear that sections 19 to 20ZA are directed towards ensuring tenants of flats are not required (i) to pay for unnecessary services or services which are provided to a defective standard, and (ii) to pay more than they should for services which are necessary and are provided to an acceptable standard.”

  “I do not agree with the courts below in so far as they support the proposition that sections 20 and 20ZA were included for the purpose of ‘transparency and accountability’, if by that it is intended to add anything new to the two purposes identified in section 19(1)(a) and (b)… I consider that there are no grounds for treating the obligations in sections 20 and 20ZA as doing any more than providing practical support for the two purposes identified in section 19(1).”

Conclusion

The UT’s decision was clearly the right one from a practical perspective and in line with earlier authority (albeit on a differently worded form of Section 20). Thankfully, the decision is also in line with advice this firm has always given on the question of Section 20 consultation and professional fees. It also serves as a stark reminder of the importance of complying with the strict contractual machinery of the lease when it comes to dealing with service charges and issuing demands.

Nonetheless, questions over consultation should never be taken lightly, given the severe consequences for any failure to consult or any defect in the process, and as such the ‘Golden Rule’ is always, if in doubt, speak to the lawyers. 

This Legal Update describes the position in law as at the date of this article and care should be taken to note any subsequent amendments to the position as set out above.  The Legal Update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole.