Source: The Law Society Joint guidance from the National Crime Agency, Action Fraud, the National…
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When a landlord wishes to carry out works and the cost of completing them will be charged to the tenants via the service charge they pay, the law requires the landlord to carry out a consultation exercise if the cost per tenant will exceed £250. The procedure is relatively long-winded but is intended to ensure that the tenants obtain reasonable value for the work done.
When the new owners of a caravan site in Cornwall wished to upgrade the site to a ‘first-class standard’, they proposed that substantial works should be carried out. When these had been completed, the caravan owners on the site were dismayed to find that their service charges doubled as a result of the cost of the works.
The caravan owners opposed the charges. At issue was whether or not the works were ‘qualifying works’ for the purposes of the relevant law. The landlord argued that the improvements constituted a series of works, not one single programme of works. If this argument were accepted, the landlord would not have to have gone through the consultation exercise.
The court rejected the landlord’s argument. In his judgment, the judge indicated that he considered that the legislation should be seen as offering protection in the form of a limitation on charges where no consultation has taken place even for ‘sporadic works’ which relate to ‘ongoing repair and maintenance’ and that the £250 limit should be seen as an annual limit. The landlord was therefore liable for the ‘excess costs’ above £250 per tenant.
The practical issue for landlords is that much necessary and unanticipated repair work may well arise which will breach the £250 limit and create the need for a consultation process. For tenants, the consequence may be that landlords delay minor works which would otherwise be carried out.