Phillips and Goddard V Francis Update

For banging your head against

I have been putting this off for some days in the hope that some expert, highly qualified professional will come to my rescue with a simple and elegant solution to the thorny problem that we all find ourselves with. Suffice to say this has not happened ( - yet, for it may do in the course of time and once other cases have revisited the issue).

So, what do we know? Well the case is not to be appealed further and stands as it is. For now there is no ability to separate qualifying works into different activities or timeframes within a service charge year. Additionally the cost of all qualifying works cannot exceed the limit per (any) flat without full consultation.

As I have said before, no one benefits from this judgement. It will involve all agents in significant additional work, head scratching and delays. The costs will be passed on to leaseholders.

I will summarise the suggestion made by ARMA and other experts below before looking at what hope there may be for the future.

In responses to ARMA it is clear that many members are playing a waiting game to see what transpires. This may be a calculated risk but it would appear from one response at least that the LVT may take the view that relevant interim costs are caught by this judgement and must be consulted upon. There is a debate currently as to whether interim costs were supposed to be included. For my part I cannot see that they were excluded, although I cannot accept that this was the intention of the Chancellor.

ARMA's excellent summary can be found here: http://www.arma.org.uk/files/Phillips_v_Francis_public_brief.pdf

Other suggestions include; a detailed published schedule of rates for all repair works - a big undertaking for any agent; a catch all style general consulation at the start of each service charge year; persuading the DCLG to raise the threshold to a level that will reduce the number of consulation excercises significantly and getting predeterminations on everything. 

My own concerns continue to be the relatively low threshold for S.20 consulation (see previous blogs) and the difficulty in making the increasingly complex statutory framework in which we operate understandable to my customers. Jonathan Upton of Tanfield Chambers has summarised the position in a comment to ARMA  most neatly:

“This decision is curious given that neither party argued that a landlord was required to consult on a distinct set of qualifying works if a lessee’s contribution to the cost of those particular works would not exceed £250: the lessees’ case was that the qualifying works were all part of the same set of works. The Chancellor felt able to depart from the Court of Appeal’s decision in Martin v Maryland Estates on the basis that the 1985 Act has since been substantially amended. While this may be correct, the decision has serious and possibly unintended consequences for landlords.

This will be an enormous burden on landlords and managing agents, both in terms of cost and time. If landlords are now required to consult on all qualifying works, however small, the cost of such consultation will ultimately be passed on to lessees. This is not in anybody’s interests. It cannot be what Parliament intended.”

Amanda Gourlay also of Tanfield Chambers, whose excellent 'Law and Lease' Blog really is well worth a read, suggests this:

One solution may be to issue a Notice of Intention at the beginning of the year, listing works which the landlord anticipates may need doing in the course of the year. The regulations only require a description of the works “in general terms”.

Whilst the tenant must respond to that notice within a specified period, so far as I am aware, the landlord is not obliged to obtain all estimates for the works at the same time, nor within a specific period. Therefore, the landlord can wait until the works need doing before continuing the consultation process by obtaining estimates and so on.

So, what hope do we have for a return to the now, comparatively, good old days of Martin v Maryland? Any change will need to arise through a revisit at Court of Appeal level. This could leave us waiting for 18 months and having changed all our processes and procedures we get to return to the old system. One might hope for a pragmatic approach form LVTs, but I sense from others that this may not be forthcoming.  Agents may decide to put as many budgets through to LVTs for pre approval as necessary and swamp the system into submission. (I dont think this will happen - we are just not militant enough!) The DCLG may decide to review the thresholds which would at least reduce the number of consultations. 

Suffice to say I do not have a practical answer as to how we should be behaving yet, but I urge caution - a comprehensive approach will best serve your clients at this time. Sadly I do not believe that leaseholders are well served by continously revisiting accepted norms in what is already a complex area. Some clarification would be welcomed and I do think that, sooner or later, this case will lead to a revisit of the whole clunky and complex S.20 requirements. That must be a good thing. 

In the meanwhile do let me know if you do have a sensible solution won't you?!