Reader’s E-mail:
We are a development of 36 flats in three separate blocks (though blocks 2 and 3 have an adjoining wall).
Tarmac resurfacing work was carried out on the communal driveways/car parking areas at the REAR of the property in July/August 2014.
We don’t yet know the cost, as the accounts for the year ended 30th June 2015 have not yet been provided, but it is believed to have been in the region of £8,000 or £9,000 (including VAT)
No section 20 consultation was carried out.
Tarmac resurfacing work was carried out on almost all of the communal driveways/car parking areas at the FRONT of the property in November 2015.
We have had sight of the contractor’s quotation for the work, which was £9,000 (including VAT).
No section 20 consultation was carried out.
The communal driveways/car parking areas of the one development all seamlessly inter-link (though there are tighter/narrower and wider parts).
A small area covering the last part of the front exit driveway is apparently scheduled for tarmac resurfacing next year.
The combined cost so far [of ‘stages’ 1 & 2] is in the region of £17,000 to £18,000 and is thus well in excess of the consultation threshold (which is probably correctly £7,530, but £9,000 according to the managing agents).
We believe that the managing agents have deliberately split up the overall tarmac resurfacing works into artificial smaller ‘batches’ in order to evade their legal obligation to consult, by attempting to avoid breaching – for each smaller ‘part-job’ – the ‘£250 for any one flat’ threshold for section 20 consultation.
Exactly what evidence/arguments etc. would we need to obtain/make to prove that this was the case in a sufficiently convincing way (at a tribunal hearing if it eventually came to it) such that the entire tarmac resurfacing works should be regarded as one whole item and (as thus combining to be above the consultation threshold) that any amount paid by a leaseholder in excess of the £250 cap should be refunded to them.
Reply from Service Charge Dispute Guide
1. The issue we need to focus on in response to your query is how the law defines ‘qualifying works’ in respect of the section 20 consultation requirements.
2. The reason we need to focus on this issue is to determine whether the work which your landlord has carried out are in fact a single set of ‘qualifying works’ triggering the requirement for the relevant leaseholders to be consulted, or a collection of smaller sets of work, the value of which fall below the amount for which consultation is required.
3. The only statutory definition of what counts as ‘qualifying works’ is given in section 20ZA of the Landlord and Tenant Act 1985:
“qualifying works” means works on a building or any other premise
4. No definition is provided of what the term ‘works’ means in this context.
5. The Service Charges (Consultation requirements) (England) Regulations 2003 tells us no more about the meaning of the term ‘qualifying works’ other than that the ‘appropriate amount’ (the amount per leaseholder payable as a service charge which is the trigger for the requirement to consult) is set at £250.
6. We must therefore turn to the jurisprudence of the upper courts and tribunals to seek an answer to your query.
7. The Court of Appeal has considered this same issue in the case of Francis and others v Phillips and others [2014] EWCA Civ 1395. The Court of Appeal is the second most senior legal body in England and Wales and its findings on this issue set a legal precedent to be followed by the First Tier Tribunal when dealing with relevantly similar issues
8. This case was heard as an appeal against an earlier decision by the High Court ruling on a dispute relating to works carried out, with no consultation, by the owner of a chalet home park in Cornwall. The long leaseholders of the chalets had similar concerns to yours that works were carried out in small batches over a number of years in order to avoid the requirement to consult under section 20.
9. The working definition of ‘qualifying works’ which the High Court used to assess this case was that the £250 limit applied to the aggregate value of the contributions of relevant service charge payers over a 12 month period. Qualifying works was therefore (in effect) defined by the High Court in this case as being everything a landlord does within a 12 month period.
10. The Court of Appeal disagreed with the approach of the High Court.
i. One of the perceived problems with the High Court’s approach was that it would be very difficult for landlords to comply with the section 20 requirements if they related to the cumulative value of works across a 12 month period.
ii. For example, a landlord could carry out a number of smaller urgent repairs over the course of a year which came up unexpectedly.
iii. By the time a landlord realised that they were to hit the threshold for consultation (£250 per year) it would be too late for them to start consulting, as the expenditure which took the landlord close to the consultation threshold had already been incurred and the opportunity to consult had passed.
iv. This type of practical consideration is referred to in paragraph 26 of the Francis v Phillips case, and understanding its relevance to the legal debate about what constitutes ‘qualifying works’ for the purposes of section 20 is likely to be a key aspect in the future decision making of courts and tribunals when they come to decide on disputes such as the one you describe in your e-mail.
11. In place of the High Court’s definition of ‘qualifying works’, the Court of Appeal decided that the correct legal approach to deciding whether a bundle of works carried should be defined as discrete sets of work, or understood as a single set of works, is to consider the particular facts and circumstances of each case. The implication being that the same bundle of works could be defined as smaller discrete sets of work in one situation and as a single set of qualifying works in another.
12. The Court of Appeal did not go as far as providing a prescriptive methodology for determining an answer, but it did suggest (at paragraph 36) four factors which are likely to be relevant:
(i) where the items of work are to be carried out (whether they are contiguous to or physically far removed from each other);
(ii) whether they are the subject of the same contract;
(iii) whether they are to be done at more or less the same time or at different times; and
(iv) whether the items of work are different in character from, or have no connection with, each other.
13. Our reading of the decision suggests that there is another underlying, and very important, factor which the Court choose not to make explicit: whether the landlord themselves see the bundle of works which are they are carrying out as being part of a clearly defined scheme of overall works.
i. The importance of this is (in our opinion) evident in the discussion at paragraph 42 of the Judgment where the Court of Appeal considers work to strip off the plaster of an amenity centre and then re-plaster it.
ii. Under normal circumstances, it would be very plain to any reasonable observer that the two lots of works (stripping off existing plaster and then replacing it) formed a single set of works.
iii. However, in this instance the Court of Appeal decided otherwise. The landlord in this case had adopted rather an unusual approach to undertaking works on his chalet park moving from one task to another without a clear and logical plan from the outset.
iv. The Court of Appeal was content to define the two lots of work (stripping the plaster and replacing it) as being separate sets of qualifying work because as a point of fact the Court was satisfied that when the plaster was stripped away the landlord had made no decision as to whether to re-plaster the walls or do something entirely different.
14. As should be evident from the preceding discussion in this e-mail, disputes of this nature will be determined by a consideration of the facts in each individual case.
i. Your argument would be that the various tarmac jobs carried out by your landlord are part of a planned set of works, and that there was no logical reason for these works to carried out separately other than your landlord wanting to avoid the requirement to consult.
ii. Your landlord’s counter argument would be that separate contracts had been entered into with good reason (perhaps to incur the expenditure over an extended period to diminish the financial impact, or because the requirement to do all the works was not obvious from the outset) and that this was a reasonable decision which in law a landlord has the discretion to make.
iii. If the matter reached a First Tier Tribunal, and it followed the precedent set by the Francis v Phillips case, the decision it makes could go either way depending upon which side’s argument was best supported by the facts of the case.
Click on the link to read more Reader’s Questions and Answers on Consultation (Section 20)