Phillips and Goddard v Francis Update 3. Errr, do nothing!

Trawl the internet for advice and you will not find much written about this case since March 2013. Simply put, no one knows what to do, and to a greater extent are doing nothing.

A date has now been set for November 18^th for the landlords appeal. The appeal was out of date but a decision has been taken to hear it anyway – perhaps letters from various professional bodies and interested groups expressing concerns had an influence on this.

Having reviewed carefully with my team the ways in which we might interpret the current position and meet the requirements at least cost to our customers we have reached the following conclusion: It is impossible in all practical terms to do so. Any solution is a fudge and does not meet the requirement, as it stands, fully. Therefore in our opinion there is no point in doing so and it would be calamitous to try. 

There are several reasons why we believe this:

1. In order to serve notice on all qualifying works in advance, a calculation on a flat by flat, expenditure line by expenditure line analysis has to be undertaken. Whilst this is onerous it is not impossible. However, unless you can predict the future, you have an issue and may at some stage have to seek dispensation where you have exceeded the budget for qualifying works. Practically then you might as well rely on either post cost dispensation or adding any qualifying works to S.20 notices when you are doing a major project. Neither of these routes is particularly practical nor will they add clarity to an already clunky procedure
2. None of the experts have been able to provide any real clear guidance. ARMA, RICS and LEASE have pointed merely to the difficulties thrown up by the judgement and have been unable to offer solutions. 
3. The option to serve notice of intention to cover generalities and future unknowns as well as planned maintenance is messy, impractical and could not in any event meet the requirements of the case in full. 
4. The RPTS have made it clear that attempting to get predeterminations on every budget will be thrown out. Patently this would break the system. 
5. Using one contractor and a fixed schedule of rates under a Long Term Qualifying Agreement – again practically impossible we believe.

 Maintaining your current position and consulting on major works in the time honoured way seems to be the only common sense way forward for now.  If a lessee challenges a service charge then the landlord can seek dispensation under S20za.  This option obviously carries a continuous risk of challenge, unless and until action is taken to overturn the judgement.

Some concerns have been raised over the principal that the Chancellor sought to achieve here because his intention is a good one for consumers. Practically, he wished to avoid the possibility of aggregating linked works – all managing agents know that this is not acceptable practice – by going one step further and including all works in a year. However, an honourable intention alone is insufficient to make a case for changing rules that have worked well to a larger extent, for those that are impracticable and unworkable. This case simply opens the door for further abuses and would increase costs for leaseholders.  

I genuinely believe that trying to apply the ruling in practice would bring all works to a standstill within a couple of years because the RPTS would be unable to cope with the number of dispensation requests (all undertaken at a cost to consumers). You would have to breach the requirements to move forward, deal with emergencies and urgent works and provide a level of practical service to your clients.

My thanks to the very astute Dan Potter at Mainstay whose assistance with article this has been significant and who I have ruthlessly plagiarised. Thanks Dan!