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When does a residential landlord's duty to consult on service charge works arise? The Court of Appeal has reversed a controversial High Court decision, confirming that the High Court’s ‘aggregated’ approach to qualifying works was wrong.
The Landlord and Tenant Act 1985, s 20.provides that the service charge contributions recoverable from tenants in respect of 'qualifying works' are limited to the 'appropriate amount' (currently £250 per tenant) unless the consultation requirements have either been complied with in relation to the works or dispensation has been obtained.
Before the High Court decision in Phillips v Francis  All ER (D) 225 (Dec), the generally accepted view was that the correct approach to the meaning of 'qualifying works' was to identify separate sets of works or projects for the purpose of identifying whether the relevant costs exceeded £250 per tenant so triggering the statutory consultation process.
In the High Court, the Chancellor decided that the correct approach was to aggregate all works in any given year (aggregating approach) without division into separate sets of qualifying works (sets approach). The decision is unpopular with landlords and has been the subject of considerable criticism. The Secretary of State intervened in the appeal to the Court of Appeal because:
'...the point raises a question of statutory construction of public importance with the potential to affect a large number of residential landlords and tenants throughout the country. The Chancellor had construed the legislation in a way which is at odds with what, it seemed, had previously been the general understanding of the position'
Phillips and another v Francis and another (Secretary of State for Communities and Local Government)  EWCA Civ 1395
The Court of Appeal decided that the aggregating approach in interpreting 'qualifying works' in LTA 1985, s 20 was wrong:
The real protection afforded by LTA 1985 to residential tenants was that all service charges must be reasonable and reasonably incurred under LTA 1985, s 19. This was the sensible way to control routine works of repair and maintenance which were unlikely to be the subject of a detailed plan in advance.
The High Court's incorporation of an annual limit was also wrong. This was contrary to the language of the statute which expressly provides that the contributions are not limited by reference to the period to which the demand relates.
The Court of Appeal confirmed that what comprises a single set of qualifying works was a question of fact. It would depend on the individual circumstances. However, the court set out a non-exhaustive list of factors that were likely to be relevant:
In most cases it should be obvious whether works comprise one or more sets.
Landlords will welcome what must be seen as a common-sense outcome and the Court of Appeal's guidance on what constitutes a set of works will be useful to landlords and tenants alike.
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