Advice Flat Living at home in your block LEGAL Don’t stop tALkinG
JonathanUptonasks where leaseholders nowstand as a result of two landmark cases that change the way Section 20 consultationsmust be carried out
In the last eIghtmonths thelawon consulting tenantsaboutmajorworks has been turned on itshead. In December 2012,in hislastcasebeforeretiring, theChancellor(Sir AndrewMorritt)handeddownhis judgment in Phillips v Francis. InMarch 2013, the Supreme Court gave judgment in Daejan v Benson. It used to be the case that tenants were
only required to pay£250towards each set of qualifyingworks unless theconsultation requirements hadbeencompliedwithor dispensedwith. The£250statutory capwas understoodtobea‘triviality threshold’. Dispensation would not be granted if the tenant suffered‘significantprejudice’ and a serious failure to comply with the consultation requirements wasoften held by itself toamount to significantprejudice. In Phillips v Francis, the Chancellor held
that allqualifyingworks should be brought into theaccountfor computingthe tenant’s contribution and then applying the statutory cap. Thetenant’sservice chargecontribution towardsall qualifyingworks is capped at £250 unless theconsultationrequirementshave beencompliedwith. As a result of this judgment, it appears landlordsnow have to consulton allqualifyingworks if atenant’s contribution to the total cost of qualifyingworks in an accounting period exceeds £250. If the landlord does notconsult on allqualifyingworks howeversmall the cost of a particular project, thelessee’s contribution to thetotal cost
of qualifying works in the accounting period will be capped at £250. By example,alandlord decoratesthe
internal common parts. Such worksare qualifyingworks (withinthemeaning of Section 20ZA(2)) but each tenant’s contribution is only £150. Later in the same accounting period,the landlord fixes aleak in theroof. Such worksare again qualifying works and each tenant’s contribution is £200. The tenant’s contribution to qualifyingworks in theaccounting period is £350. Unless the landlord consults on both thedecoratingworks andthe roof work,the tenant’s contribution is capped at £250. The landlord in Philips v Francis has
permissiontoappeal
appliedfor permissiontoappealbut at the timeof writing, no decision has yet beenmade. In Daejan v Benson, the SupremeCourt
held that themain (and normally the only)questionfor theFirst-TierTribunal Property Chamber (which replaced the LVT with effect from1 July 2013) on applications for dispensation, is therealprejudicetothe tenants flowing fromthe landlord’s breach of the consultation
requirements.The financial consequences to thelandlord of notgranting adispensationare notarelevantfactor. Prejudicemeans ‘financial prejudice’ and the onus is nowon tenants to showwhat they would have said had they been consulted. TheFTT canhowever grantdispensation on terms. Alandlordmayhavetoreduce theservice chargerecoverable in order to compensate thetenants forany financial prejudicecausedbythe failuretoconsult.A
Landlordsmust nowconsult on allqualifying
works, nomatter howsmall
Flat Living issue 15 15
PhillipsvFrancis hasapplied for
thelandlordin
landlord is also very likelytohavetopay its owncostsofthe applicationfor dispensation (evenifthe leaseallowsittorecover such costs fromthetenants)and thetenants’costsof investigating prejudiceand challenging the application. In summary, as aresult of thesejudgments
the requirement to consult on qualifying worksismoreonerous butthe consequence of failing to consultislesssevere. Thecost of making an applicationfor dispensationmay, however, be significant so it is better to get it rightinthe first placeand comply with the consultation requirements.●
JonathanUptonisabarrister attanfield Chambers specialisinginproperty disputesand is theEditor of theServiceChargessectionfor PropertyLawUK.Heisamember of theChancery BarAssociation, thePropertyBarAssociationand theLondonCommonLawandCommercialBar Association.
Legal Property
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