to PAY–YET
CAN’TPAY, don’tHAVE
BruceMaunder Taylor looks at a
recent case that highlights the necessity of planningmaintenance ahead of time and spreading the costs
There are good reasonswhythe cost of majormaintenanceworks on blocks of flats should be spread over anumberofyears and notcollected in
onehit.Paymentswillbe spread and, thereby, annual servicecharge liabilities
areevenedout.The reservefunds will be collected fromthose lesseeswho have ownedtheir flatduringthe period of deteriorationratherthanthosewhohave bought their flat after deterioration. Quite apart fromanything else, buyers of flats typicallyask in pre-contractenquiries:when arethe nextmajorworks programmed?Is thereareserve fund andifso, howmuchis held in that fund? Whilemanyblocksofflatsdooperate
reserve funds properly and reasonably, there are otherswhich treat it more like a ‘sink bin’ fromwhichany excessannualexpenditure can be taken instead ofmaking an additional demand,whichcan be used to avoid inflationaryincreases to theordinaryservice chargeaccount, orwhichcan be neglected untilthe inevitable cannot be deferred any longer, bywhich timeit is too late. Onerecentcasehighlightsthese issuesand
should serveasawarning to landlordsand RMCs. FrognalEstatehas 54 flatswhichhad been
neglectedformany years: four lift shaftshad been boarded up, Enforcement Notices had been served by theLocalCouncil in respect of dangerousfire escapes, uninsulatedand leakingflat roofs, andinsurance coverfor waterdamagehad
beenwithdrawn.There is ahistory ofmultiple litigation anda complete breakdownof everything between thelandlord andthe residents’ association. A propertymanagerwas appointedbythe LVT in mid2009(aboutthe only thingthe parties couldagree on)pursuant to Section 24 of the Landlord and Tenant Act 1987. Thenewmanagerset aboutidentifying
thoseworkswhich, in hismind, needed to be carried outinafirstmajorworks contract (eg, lift renewals were to be temporarily deferred) and demanded £630,000 to cover thecosts. Whilesomeresidents welcomed theprospectofthe estatebeing putbackinto
Flat Living Winter 2011
repair at long last,othersprotested that they couldnot afford to pay. To enforceservice chargecollection, an LVTdetermination of reasonableness and payability was needed and obtained, but someflat owners had argued that theirinability to payinone year (rather than beingspread over five years),was an aspectofreasonablenesswhich theTribunal should take into account. TheLVT doubted that their jurisdiction extended to that and thelessees appealed to theUpper Chamber (the LandsTribunal).Its decision in Garside v RFYC: (LRX/54/2010) will have far-reaching effects. TheUpper Chamber wasnot concerned
with the particular facts of the Frognal Estate butwas concernedwiththe legal interpretation of ‘reasonableness’ in so farasit
TheLVT’s decision inGarsdie vRFYC... will have far-
reachingeffects
related to the ability of flat owners to pay. Thefirst pointestablished wasthat, by the
termsoftheManagement Order, theproperty manager had the power to raise a reserve fundwhichmany of the individual leases did notprovide for. TheUpper Chamber noted theexpenditure levels frompreviousyears andheld: “itisimportant tomake clearthat liability to payservice charges cannot be avoidedsimplyonthe groundsofhardship, even if extreme. If repair work is reasonably required at aparticulartime, carried outata reasonable cost and to a reasonable standard andthe cost of it is recoverablepursuant to therelevantlease then thelesseecannot escape liability to pay by pleading poverty… that is adifferentmatterfrom deciding whetheradecisiontocarry outworks and chargefor themin aparticularservice charge year rather than to spread thecost over
several years is a reasonable decision, thus thecostsreasonablyincurredfor thepurpose of Section 19 (1) (a) of the 1985 Act.” What we can all learn fromthis decision
is that if landlordsandRMC/ RTMCo’swant to protect themselves fromthetactics of nonpayers, they arenow goingtohaveto draw up alongtermmaintenanceterm plan,setting outareasonableestimate of the life expectation of the various parts of the building fabric and services, predicting the anticipatedcost of renewaland, fromthat information, deciding on a reasonable annual contribution to reserves. If thelease does notcontain reservefund
provisions, flat owners need to be forewarned
aboutwhattheyshouldbesaving.Maybean applicationtothe LVTshouldbeconsidered to vary the leases to include a reserve fund provisioninfuture(S.35 or S.37 of theLandlord andTenantAct 1987). Failuretotakethese stepswillexposethe
landlord orRMC/RTMcCo to therisks of flat owners relyingonthe Garsidedecisionto supporttheir refusaltopayamajor worksbill in oneparticularservice chargeyear. They will ultimately be obligedtopay butnow have theoptiontospread paymentovermonthsor even years. This leaves the landlord orRMC/ RTMcoexposed to claimsfor damage if the necessary works are delayed. Rocks and hard places cometo mind!●
BruceMaunderTaylor is a partner withMaunder Taylor
LEGAL Advice Alongterm
maintenance plan is
nowmore important than ever
MaunderTaylorarecharteredsurveyors, managingagentsandestateagentsproviding afirst-classservice for clientsincentral,
northandnorth-westLondon.Contactusat:
Tel02084460011 email
brmt@maundertaylor.co.uk Websitewww.maundertaylor.co.uk
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