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I am not going to dwell on the details of the case - interesting though they are - you can search them and read the full detail easily on line. It is the ruling relating to S.20ZA (2) Landlord and Tenant Act 1985 (this section defines 'relevant' works) that concern us here and in particular what activities require a S.20 consultation notice. The judgement states as follows:
As the contributions are payable on an annual basis then the limit is applied to the proportion of the qualifying works carried out in that year. Under this legislation there is no ‘triviality threshold’ in relation to qualifying works; all the qualifying works must be entered into the calculation unless the landlord is prepared to carry any excess cost himself. (my emphasis)
Thus we are advised that, for the last 27 years, we have been doing it all wrong and that the existing case law of Martin v Maryland Estates, relaied upon widely, is incorrect in separating out disparate sets of work.
It has always been a concern of the LVTs that landlords do not split up related works in order to avoid consultation. However this case appears, on the face of it, to take that requirement further in that the works do not have to be related in any way. All qualifying works are to be aggregated for the purposes of the consultation and there is no longer any separation within a service charge year of qualifying works. As such works currently regarded as falling below the 'triviality threshold' are now to be included if the aggregate total exceeds £250 pa. Of course this will effect almost every scheme, every year. It will include reactive work such as changing a light bulb or repairing a lock. It will include contingencies, overruns and contract variations.
In an attempt to stop landlords splitting related works to avoid S.20 (a perfectly honourable intent) the court has created the unintended consequence of generating notices across all qualifying works regardless of how they are to be funded and regardless of whether they are related.
Let us say that you carry out a repair to lifts that requires consultation because at least one flat will contribute more than £250. You serve notice and proceed in accordance with legislation. Later in the year you redecorate a corridor. In itself it does not require consultation since no lessee is required to pay a contribution of more than £250. However, you have already exceeded the limit elsewhere and thus, now, further consultation is required. And so on and so on.
This then applies to all qualifying works in year if you are likely to exceed the threshold. What to do? I am not sure. Can you serve a speculative notice? No, I do not think this is possible on the basis of an estimate. Perhaps take all budgets to LVT for pre approval of expenditure? This might give the landlord comfort but would quickly inundate the tribunal and cause delays. This case will increase workloads, will increase costs and will confuse leaseholders. Fact.
We can but hope that a new decision is reached that turns this judgement around or clarifies it further and that in the meanwhile the LVT takes a very loose and pragmatic approach to interpreting it. I am still reading comments and forming a view on what actions to take. I am hopeful that clarity and common sense will prevail and that news guidance will follow.
Fingers crossed everyone, because as it stands the spirit of S.20 consultation is badly broken and the consequences are significant.
Hi
ReplyDeleteAs a leaseholder and a management agent I do welcome the decision, whilst recognising the concerns about practicalities. As with all S20 decisions it is the principle that leaseholders should be consulted on how their money should be spent. Whilst this principle should not give licence to unreasonable objection by a leaseholder where there is general consensus, I have to admit to feeling very angry as a leaseholder when the two directors of my RMC decided to spend our £12,000 reserve fund on a series of decorating works and lights replacements, and yet did not give leaseholders any say in colours, choice of contractors, choice of replacement lights, type of finishes etc. They were able to do this, as they split the refurbishment project down into a series of smaller projects to bring each project below the S20 limits. As the courts have said on numerous occaisons S20 is not onerous, and if you are spending someone's elses money- even if it is to their benefit, it is a basic courtesy to ask for their views. If management agents do this they gain the support and co-operation and loyalty
of their leaseholders.
I agree with your comment and sympathise with your experience. Sadly this case does nothing to help leaseholders and muddies a perfectly clear system. I do understand that it is wrong to separate related works to avoid S20, but to aggregate all works? This is practically impossible as demonstrated by the fact that no agent has yet found a way of acting on the judgement. Still, it will be reviewed in November at appeal and let us hope that we get a practical outcome. Making it confusing and difficult only assists the rogues and those who choose to bypass it.
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