Tribunal astonished leaseholder directors agreed to unfavourable works contract that limited contractor’s liability to £166,200 on a project that cost more than £3 million
The property tribunal has criticised a landlord, South Cliff Tower (Eastbourne) Limited, and its appointed managing agent Southdown Surveyors for messing up a section 20 consultation for a £3 million repairs South Cliff Tower, in Eastbourne.
It also expressed its surprise at the unfavourable contract terms it agreed with the contractor for the works, Faithful & Gould, in a qualifying long-term agreement.
In a decision of 20 June 2022, the tribunal stated that the landlord, South Cliff Tower (Eastbourne) Limited, which is controlled by some of the leaseholders, and its managers Southdown Surveyors “seem to have regarded consultation as an exercise which would not influence their decision making but rather something to be endured”.
It ordered that £12,000 be paid to help cover the legal costs of a couple who brought an action challenging the major works consultation.
A further source of controversy among the 72 flats was over what the tribunal refers to as a “ruinously expensive refurbishment exercise which … threatened the solvency of the Respondent landlord” is that “many flats in the South Cliff Tower have been left with excessive water penetration, draughts, excessive wind noise and other defects”.
South Cliff Tower Eastbourne
South Cliff Tower Eastbourne is a 19 storey purpose-built block of flats. The building was constructed in 1965. It was decided to remove the retro fitted cladding from the west elevation and apply a new insulated render cladding system to the east, west and rear elevations.
The landlord, whose block is managed by Southdown Surveyors, employed Faithful & Gould to carry out the works, in a qualifying long term agreement, but the landlord had “agreed a contractual limit of liability to an upper limit of £166,200 … against a potential total works cost well in excess of £3 million”.
The tribunal was not happy:
“The tribunal finds it very difficult to understand how an upper limit of contractual liability for potential error on a complex project of this kind of just £166,200 … could be regarded as suitable against a possible total cost of works which at that stage were estimated to cost in excess of £3 million.
“Other terms of the Faithful & Gould agreement mirror those which are often found in “pro-supplier” type arrangements of this kind, including a restricted ability for the Applicant to terminate, despite the duration of the contract.”
In other words, the largely retired, inexperienced and non-legally qualified directors of 19-storey South Cliff Tower (Eastbourne) Limited had signed off on a very bad agreement.
“The contractual terms upon which Faithful & Gould were appointed were notably favourable to Faithful & Gould and not to the Applicant [the landlord] …
“The Applicant has failed to adduce evidence that legal or professional advice was obtained upon the terms of Faithful & Gould’s appointment; the Tribunal is satisfied that more favourable terms could have been negotiated from Faithful & Gould or if not from other construction professionals for the same or materially identical services, had compliant consultation taken place.”
And again:
“The Applicant has failed to adduce any satisfactory evidence of alternative quotations for any part of the extensive range of different professional services offered or provided by Faithful & Gould the Tribunal is satisfied that a wider range of competitive quotations, services and terms could have been obtained for each of the components of the services offered by Faithful & Gould, had a compliant consultation taken place.”
On the other hand the couple who had paid lawyers to investigate the consultation failings claim they have spent £125,000 doing so – against an estimate of legal costs of £26,000 in 2021. Their award of £12,000 was considerably lower than both sums.
The tribunal did grant retrospective dispensation to the landlord from compliance on most of the disputed consultation points provided it paid up the £12,000 to the aggrieved leaseholders within 14 days of the hearing and:
“(ii) that this dispensation shall not take effect if the Applicant’s ability to recover or enforce its estimated losses or damage sustained by reason of FG’s acts or omissions (such allegations to have reasonable prospects of success according to the Opinion of competent Counsel) is limited or restricted by the provisions of the QLTA.”
The landlord was not to pass on its legal costs and was to pay for the hearing.
The tribunal added:
“Questions relating to the reasonableness of the costs incurred in the External refurbishment works, whether the works were carried out to a reasonable standard are not addressed in this Decision. Those issues could be the subject of a separate application …”
The relevant tribunal rulings are here:
Related posts:
Phillips v Francis decision
Leaseholders defeat landlord trying to dodge consultation over a section 20 dispute in Court of Appeal
South Somerset council enters the ‘fleecehold’ racket
John Christodoulou side-steps £4m ‘dou-dou’ at Beetham Tower, where leaseholders face bills of £40,000 each as the works begin
Tower Hamlets Homes spends thousands to thwart recognised tenants’ association
When inflation linked ground rents are worse than ten-year doubling ones. That would be now …
One wonders how such a monstrosity was allowed to be built among all the period Victorian property in the local area. It`s not as if Eastbourne is highly populated or lack of available land.
Another poor planning decision of the Eastbourne town council, who have acted like amateurs for 40 years or longer.
Seems like the incompetence is rife in the area considering the Landlord and its agent decisions too.