Helpful Decision for Landlords/Managing Agents when calculating service charge

In the case of Philips v Francis in the Court of Appeal, it has been held that when considering whether a landlord has to consult under s.20 Landlord & Tenant Act 1985 in relation to qualifying works in excess of £250 per tenant, it is wrong to apply the “aggregating” approach.

The correct approach in identifying whether works should be grouped together is to identify whether works are part of a set of works.

The question of what a single set of qualifying works means has to be approached in a sensible way taking into account:

whether works are likely to be carried out
whether they are subject to the same contract
whether they are to be done at the same time or different times, and
whether they are different from or connected with each other.

This means that there is no longer the obligation to consult if the total contribution to works by a tenant for each year exceeds £250. It is only necessary to consult for each set of works costing over £250 per tenant.

Also in this case, the Court confirmed that a landlord cannot claim a management charge as wages through the service charge if the management charge was also claimed as a separate item under the Lease.

This is therefore a good result for landlords and managing agents, because it clarifies the fact that less consultation is required. For further information regarding this or any other property and construction matter, please contact the Edwin Coe Property team by clicking here.

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