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Residential leasehold properties – clarification on the consultation requirements for qualifying works

Phillips v Francis [2012] EWHC 3650 (Ch)

This recent decision in the High Court updates the law on the consultation requirements for landlords on qualifying works for the purposes of Section 20 of the Landlord and Tenant Act 1985 (‘the Act’).

Prior to this decision, it was considered that Section 20 of the Act only applied to qualifying works where a lessee would be required to contribute more than £250 through their service charge. This would mean that the landlord would be required to consult with the tenants when repairs costing over £250 per tenant were necessary. The landlord would go through the full consultation procedure and would then be able to recover the full costs of the works through the service charge. However, if the qualifying works required cost less than £250 per tenant, no consultation was required.

In this case, a dispute arose between the landlords and owners of chalets at a holiday site in Cornwall. The landlords were seeking to recover service charges under the terms of the leases and the tenants disputed that the service charges were payable as they had not been consulted on them. The landlords argued that each of the various pieces of work carried out had been below the relevant £250 threshold. The Judge found in the landlords’ favour but the matter was appealed to the High Court by the tenants.

However, it was decided by the Chancellor of the High Court on Appeal that a landlord will now have to consult tenants where any tenant of any dwelling is required to contribute more than £250 to any qualifying works in any one service charge year. Essentially, the Judge decided that the £250 relates to the cumulative total of qualifying works, rather than each item.

For example, if a landlord were to carry out one set of qualifying works during a service charge year at a cost of £200 per tenant, and a further set of different qualifying works during the same year at a cost of £100 per tenant, in light of this judgment the landlord would only be able to recover £250 in total from each tenant unless he had complied with the consultation requirements for both sets of works.

The decision makes it clear that there is no scope for works to be identified as different sets of qualifying works. The cost of all qualifying works in any one year must be combined before the cap of £250 per tenant is applied. It is essential that a landlord must now consult his tenants on all qualifying works throughout the course of the year or he could be liable to pay the balance of the cost of the works carried out over the £250 limit.

It is also worth considering whether this provision relates to qualifying long term agreements (QLTAs) entered into over a financial year. If so, does a landlord have to consult on all QLTAs under the threshold of £100 in that year so as to recover the entirety of the service charge from his tenants?

This article is for information purposes only and is not legal advice. It should not be acted or relied upon and legal advice should be sought before applying any of the information in this article to any facts or circumstances.

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