Appeal Court clarifies definition of qualifying works

The Landlord and Tenant Act 1985 (LTA 1985) introduced limits on the recovery of service charges. The LTA 1985 has been substantially amended by subsequent Acts, most notably the Commonhold and Leasehold Reform Act 2002 (CLRA 2002).

In the LTA 1985 the limit originally placed on the service charge that could be recovered was a fixed amount (prescribed by the Secretary of State) for the cost of the qualifying works. If the landlord wishes to pass on its costs to tenants in excess of the fixed amount, he has to comply with the tenant consultation process prescribed by the LTA 1985.

The CLRA 2002 changed the limit (currently set at £250) so that it attached to the amount of the contribution sought from the tenant and not the cost of the works. A consultation process is still required.

In the recent case of Phillips v Francis and Others the High Court held that the correct approach to determine when section 20 of the Landlord and Tenant Act required a landlord to consult with tenants was to aggregate all works in a given year. The Court of Appeal recently overturned this decision and held that this clearly was not a sensibile approach and cannot have been intended by Parliament.

The approach would have required landlords to consult on any service charge items, no matter how small, once the £250 per tenant limit had been reached. Following the latest ruling it is considered landlords may identify sets of “qualifying works” for calcualting whether the £250 threshold has been reached.