Frequently Asked Questions

Whether a number of works carried out by a landlord should be treated as a single set or distinct sets of works for the purposes of consultation requirements.

Phillips and Goddard v Francis [2012] EWHC 3650 (Ch)

Summary

Case: Phillips and Goddard v Francis [2012] EWHC 3650 (Ch)—Dispute regarding the calculation and requirements for consultation in relation to service charges under the Landlord and Tenant Act, 1985. What has been pleaded to be determined in this case is whether a number of works carried out by a landlord should be treated as a single set or distinct sets of works for the purposes of consultation requirements. It also had an important implication of the way landlords and tenants approached service charges and challenged.

Facts

Mr Francis and his wife were the freeholders of a holiday park. Mr Phillips and Mr Goddard owned chalets on the park, together with other lessees, who had to pay for the service charges to maintain and improve the park Over several years, substantial works of infrastructure improvements were carried out by the freeholder along with corresponding substantial service charges on lessees.

The lessees challenged those charges on the ground that freeholders had not complied with the consultation requirements of section 20 of the Landlord and Tenant Act 1985, which provides that where the landlord is proposing to carry out qualifying works the landlord shall, if the contribution from any one tenure is to exceed a certain amount, consult with the tenants.

Issues

The essential question, therefore, was whether the various works undertaken by the freeholders should be aggregated or considered separately for the purposes of the requirements for consultation. The lessees submitted that the works should be considered collectively, and that if so considered, the threshold for consultation would be exceeded. The freeholders submitted that each set of works was separate and that no set of works exceeded the threshold for consultation.

First Instance

At first instance, an argument as to whether consultation requirements had been fulfilled was heard by the County Court. The court held that the freeholders had failed to consult appropriately under section 20. Given the interdependence of the works, they should be dealt with as one set of works and, therefore, brought them within the consultation requirement ruled the court.

This thus meant that a consequence of such a nature of breach of the need to consult as prescribed in the statute, the freeholders couldn't recover, fully, charges for services from the lessees. Indeed it is held that it was further ruled in the case to reiterate and confirm that statutory consultation processes prescribe that landlords ought to have carried out major works affecting service charges.

Decision on Appeal

The freeholders appealed to the High Court. The High Court had to consider what meaning was to be given to section 20 and whether the works were correctly treated as one set of works, or as separate, discrete sets.

It was a landmark judgment in the High Court, upholding the County Court decision that the works should be treated as one. As such, it brought to light that there is a Section 20 and which is there to protect lessees from being charged extensive service charges with no necessity to early consultation and representation, respectively.

The High Court has now confirmed that, when assessing the extent of works required to trigger the consultation threshold, all works planned or carried out within a relevant period must be aggregated. This approach avoids an attempt, by landlords, to circumvent consultation requirements by breaking up works into smaller projects.

Comments

The decision of Phillips and Goddard v Francis made various important pronouncements regarding service charge management and lessees' rights. Several key points arising from this case are as follows:

1. Consultation Requirements: This was a vital lesson in the case, that consultation requirements under Section 20 of the Landlord and Tenant Act 1985 must be followed by any landlord. Any landlord failing to consult properly will restrict him to claiming an amount he may recover by way of service charges from lessees.

2. Cumulative Works: It was further explained that different works, although carried out separately, should be considered cumulatively for the purposes of the consultation threshold. This avoids avoidance by a landlord who might seek to avoid consultation requirements merely by breaking up works into bits.

3. Protection of Lessee: The decision has huge implications on some of the protections given to the lessee under the major works affecting the service charge law. Residential property management epitomizes transparency and accountability.

4. Implication for Landlords: A landlord should responsibly consider works recorded and comply with the statutory consultation, bearing the financial and legal implications in case of laxity to do so.

5. Precedent for Further Cases: This case ought to provide a very foundational precedent with respect to the resolution of any other future cases and disputes that are somehow related to service charges or, in any way, requirements for consultation. It would quite clearly guide how courts probably will interpret and enforce these provisions in the future.

In conclusion, the judgment in Phillips and Goddard v Francis should finally rest on the fine line that ought to be struck between the owners' rights to maintain and more so enhance the property and the need to ensure protection of lessees from the burden of excessive and unexpected service charges. Most decisively, it upholds fairness, openness and adherence to the rule of law in administration relative to the service charges under residential tenancies.

Social