In light of the outcome of the Phillips v Francis appeal, Brady Solicitors suggest that property managers take a pragmatic approach when wrestling with the £250 consultation limit for major works projects.
Note of caution: do not read on if you want an academic assessment of the case. This article is intended for practical and commercial purposes only….
As the dust settles on the conclusion of the long-running Phillips v Francis case, property managers can breathe a collective sigh of relief as we return, essentially, to where we were before.
The December 2012 High Court judgment that all works to a block must be aggregated has been overturned, and we are back to treating works on a project-by-project basis.
(This is now known as ‘the sets approach’, which Amanda Gourlay explains in detail and with great clarity in her Law and Lease blog.)
So, if you want to carry out a set of qualifying works to your block that will cost any one individual leaseholder more than £250, you will need to either go through the statutory consultation process or obtain dispensation from the FTT.
So far, so good.
But as we flagged in our recent blog just after the ARMA Leasehold Conference, however you look at qualifying works, the £250 limit per leaseholder is still very low – and if you are managing smaller blocks you will be all too aware that the need to consult kicks in pretty quickly.
If you manage a small block (say 15 units or less) and are confident that you have a good relationship both collectively and individually with your leaseholders, then you may well be tempted to bypass the consultation process. It saves cost and time and means that works can be started quickly – benefiting both landlord and leaseholder.
Whilst it might be commercially appealing to avoid consultation, there is however a clear risk to taking this route: should you misjudge your leaseholder relationships or perhaps something happens during the works to upset one of them, you are ultimately exposed as you will have acted in contravention of Section 20.
We are currently exploring options with clients that will that allow leaseholders and the landlord to mutually agree to ‘contract out’ of their obligations under Section 20, potentially eliminating this exposure but also ensuring that the ‘spirit of Section 20’ is being followed.
Clearly this would only be a feasible option for smaller blocks, where landlord / leaseholder agreement is more likely.
As experienced property management solicitors we would always encourage our clients to follow the correct consultation procedures, particularly if you have recently taken over a block or are aware that leaseholder relations are not yet at the place you’d like them to be.
Section 20 is designed to protect leaseholders and allow them an involvement in the works carried out at their premises and how their money is spent.
It also gives you reassurance, before the works are started, that the landlord will be able to recover the cost of the works through the service charge.
For thoughtful and market-leading legal advice on planning for major works or handling the consultation process call Brady Solicitors on 0115 985 3450 or drop us an email.