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Phillips v Francis - landlords breathe a sigh of relief!

Friday, 14 November 2014

It's business as usual for landlords and managing agents following the Court of Appeal decision in Phillips v Francis at the end of October. The decision was seen to be of such import and the outcome of such significant effect on residential landlords and tenants that the Secretary of State intervened in the appeal process. Thankfully and sensibly the appellate judges decided that the decision of the High Court to impose an aggregating approach on works to residential properties was incorrect.

We have been waiting since 2012 for this decision and in the meantime landlords have been in limbo with regard to consultation and major works fearful that if the Court of Appeal agreed with the High Court decision consultation requirements might so significantly affect the smaller landlord that works might never get done and the administrative costs of dealing with the process would be prohibitive for all but the largest landlords.

The High Court judgment made clear that the statutory limit must be applied to all qualifying works carried out in that year  “all the qualifying works must enter into the calculation unless the landlord is prepared to carry any excess cost himself” 

If the Court of Appeal had agreed with this decision it would have meant that there would have been no distinction between different sets of works or projects undertaken in a year. Landlords would have been forced to consult on small items of work if they brought the  spend in that year over the statutory limit.  Most landlords, managing agents and property lawyers took the view that this would be unworkable and that the Court of Appeal must surely overturn this decision and on 31st October when the decision was published it did,  it's decision and the view of all is summed up in this quote from the judgment referring to the High Court decision, 

" not a sensible approach and gives rise to serious practical problems. It cannot therefore have been intended by parliament"

One key question which the judgment raises is what is a single set of qualifying works ?

It can be hard to define especially if there are various projects undertaken in one year but this is likely to be the subject of future litigation as lessees become more and more aware of their ability to challenge costs and landlords continue to try to avoid consultation by separating out what is really a single set of works which would otherwise exceed the statutory limit and require consultation. Key questions to consider are; are those works to be done at the same time or nearly the same time, are they the subject of the same contract and are they connected with or of the same character as other works? 

For any service charge or consultation issues please contact Jane Canham  Head of Property Litigation and Enfranchisement on  020 7611 4817

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