Phillips & Goddard V Francis Episode 5. Halloween - The search for a new case to moan about.

Excitement has been building for months now and the chatter amongst managers had reached a fever pitch of wild speculation, fantasy and urban myth. Yes, Phillips v Francis, the most exciting thing to happen in leasehold management for years, has had managing agents scratching their heads or burying them for nearly two years. But now the waiting is over and I can confirm that judgement in the appeal of Phillips and Goddard v Francis has been handed down and, in summary, the bit we didn't agree with has been overturned. So concerned were we that there was an 'Intervener' in the form of the Secretary of State for Communities and Local Government. This sounds quite threatening to me - I am imagining a black cloaked Machiavellian character, who says nothing but is there to observe the 'correct' outcome.

Nothing too scary this Halloween

Anyway, this is an excellent outcome since pretty much nobody I know has been endeavouring to comply in any event. Apart from the fact that it simply wasn't clear how it was possible to comply, doing so would have required significant additional expense for leaseholders as well as additional mire and confusion. In the current days of value for money and transparency, Phillips was never going to cut it. Once again the simple problem of some landlords failing to comply with the spirit of the law led to the sledgehammer approach affecting everyone. On this occasion common sense seems to have prevailed... Eventually.

Looking at the judgement more closely, Judge Cotter remarked:

“In my judgment a commonsense approach to
construction needs to be taken and in view of the fact that it
acts as a trigger for the protection afforded by consultation. If
the threshold were too low and all minor or non permanent
works covered, the result would be commercially
unmanageable to the detriment of both lessor and lessee. The
phrase building works use to describe significant works with a
permanent effect by way of modification of what was there
before. Whether works are indeed qualifying works, is a
question of fact having regard to the nature and extent of the
works in question.”

Martin v Maryland Estates Limited [1999] L&TR 541 is the relevant piece of case law to which the Master of the Rolls, Lord Justice Kitchin and the Chancellor of the High Court, no less, turned their not inconsiderable attention. Effectively Martin was overturned by the Chancellor in the previous appeal. Martin's common sense approach over whether works are 'qualifying works' and whether they exceed the 'triviality threshold' was the basis on which we all operated prior to Phillips and, it seems, will continue to do.

I do however remain sympathetic with the owners at Point Curlew - Disaggregating major works, to my mind, was already a clear breach of the law as it stands and there is already much case law to support this. Three years in the courts has done nothing but come to the conclusion that everyone already knew was right and proper. Furthermore, the appeal wasn't allowed on the point of management charges, hinging largely on the somewhat unclear lease in this instance. '...it is reasonable to expect that, if the parties to a lease intend that the lessor shall be entitled to receive payment from the tenant in addition to the rent, that obligation
and its extent will be clearly spelled out in the lease...' It isn't clear in this lease and the original Chancellor's decision was upheld on this point by the current Chancellor. He made the further point:

"Lack of clarity on these common issues is capable of affecting huge numbers of lessors and tenants across the country and involving them in expense and disharmony. The reported cases show that many of the disputes turn on similar or nearly similar provisions. Those who draw up or approve residential leases for their clients are plainly under a duty to take care that there is clarity and certainty in relation to those matters."

Once again I am reminded that adding further complexity only makes for more loopholes for the unscrupulous and more penalties for the innocent. Now, who fancies revisiting S.20 consultation levels?

A very happy and slightly less scary Halloween everyone. I'm off to steal sweets from kids. Bye.

Full case can be read here: http://www.irpm.org.uk/docs/public/Phillipsfinal3110.pdf