Leasehold services charges- Consultation
- March 27, 2015
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The Leasehold Service Charge Regulations 2003 require a landlord to comply restrict consultation requirements if the costs incurred in carrying out qualifying works exceed £250 per unit. Otherwise landlords service charge are capped at £250 per unit regardless of the overall cost of the works unless a dispensation is given by the tribunal.
In 2012 the High Court caused major confusion in the residential sector by adopting a strict interpretation of which qualifying works came within the scope of the consultation regime. It decided that all works had to be consulted on failing that the maximum per tenant would be £250. Thus all costs would be aggregated.
The court of appeal has now intervened and has reversed that decision. Accordingly we are back to the pre 2012 regime so the £250 limit is applied to individual sets of works rather than aggregated works. Precisely what comprises a single set of qualifying works is to be decided on a commonsense basis taking into account the circumstances. This could include for example physically where the items of work are to be carried out, whether they are the subject of a single contract, whether they are to be done at the same or at different times and whether the items of work are different in character or have no connection with each other.
The basic rules on statutory consultation in relation to service charge are
Stage 1 notice of intention to do the works. Notice must be given to each tenant and any tenant Association describing the works saying where and when a description may be inspected stating the reasons for the work, specifying where and when observations and nominations the possible contractor should be sent and allowing at least 30 days the responses. The landlord must have regard to those observations
Stage 2 estimate the landlord must seek estimates for any of the works including from any nominee identified by any tenant of the tenant Association
Stage 3 notices about estimate. landlords must issue a statement to tenants and the tenant Association with two or more estimates, a summary of the observations and landlords responses. Any tenant nominee estimate must be included. The statement must say where and when estimates may be inspected and where and by when observations can be sent allowing at least 30 days for responses. The landlord must have regard to such observations
Stage 4 notification of reasons. Unless the chosen contractor is a tenant nominee or submitted the lowest estimate the landlord must within 21 days of contracting give a statement to each tenant and the tenant Association of its reasons specifying where and when such a statement may be inspected