When do Landlords need to consult?
Mark Banham, a partner in our property disputes group, considers in what circumstances landlords need to consult with leaseholders about “qualifying works” following the 2014 Court of Appeal decision in Francis v Phillips.
Section 20 of The Landlord & Tenant Act 1985 imposes a limit on the service charge contributions that are recoverable from residential tenants in respect of “qualifying works” unless the landlord has followed certain consultation requirements or those requirements have been dispensed with.
As a result, if the landlord fails to consult with tenants on things like proposed maintenance and repair works, and doesn’t apply for dispensation, it may only be able to recover a maximum of £250 per tenant.
In a surprising, and much criticised, decision in 2012, the High Court held that, when considering how to assess the qualifying works, landlords had to aggregate all qualifying works together for a given period, whether or not the works were connected. If the cost of those works would be greater than £250 per tenant, then the landlord would be required to comply with the consultation requirements in respect of all of those works.
Happily, the Court of Appeal in Francis v Phillips has overturned the ‘aggregate’ approach which was considered to be wrong, not one that Parliament could have intended, and unworkable in practice.
The Court of Appeal has confirmed that the correct approach is the ‘sets’ approach – one must identify separate sets of works to determine whether the relevant costs for each set of works in question exceeds the £250 threshold. If the costs for a set of works will be more than £250 per tenant, then the landlord will need to go through the statutory consultation process for each such set of works. The case also provides helpful guidance on what a single set of qualifying works comprises.
Common sense has therefore prevailed and the decision will be greatly welcomed by landlords.
If you would like to discuss the circumstances in which you should consult with leaseholders in more detail, please contact Mark Banham.