Residential landlords and managing agents should consult with leaseholders in advance if total annual services charges per leaseholder from qualifying works could exceed £250. This includes where the charges arise from a number of different projects, the High Court has ruled.
Owners of a holiday camp made significant improvements to the site, spread across several projects, benefitting leaseholders of chalets on the site. Each project resulted in a service charge for leaseholders of less than £250 each, but the total service charge across all the projects for the year was more than £250 per leaseholder.
The law requires residential landlords to consult with leaseholders before carrying out qualifying works that would result in a service charge of more than £250 per leaseholder. The improvements in this case were qualifying works, but the holiday camp owner did not consult with the leaseholders first. He argued that he was not obliged to consult because each project resulted in a service charge of less than £250. He relied on previous legal rulings that the obligation did not arise if the service charge was not from ‘one set’ of works.
The High Court disagreed , ruling that the obligation to consult was triggered if the cumulative, overall spend on qualifying works in a year by a landlord will result in a service charge of more than £250 per leaseholder. It was irrelevant that the charges arose from several projects.
Landlords must ensure they work out the total likely service charge per tenant of all the qualifying works they plan to carry out in a year. If they calculate a service charge of around £250 or more per leaseholder they should consult with leaseholders first.
Case ref: Philips and Others –v- Francis  EWHC 3650
Jonathan Waters is the founder of Helix Law. Before qualifying as a Solicitor he worked in industry and in investment banking for over a decade. He was also the Partner in charge of Commercial Litigation, Employment Law and Property Litigation at Stephen Rimmer LLP. Jonathan has wide experience of helping and advising businesses to avoid or to deal with commercial disputes and in particular construction disputes.