Question 1

Impact of the decision in the Phillips v Francis case

Accepted Answer

I was concerned to read, in the Spring issue of the FPRA Newsletter, of the decision taken by the Chancellor of the High Court in the Phillips v. Francis case. In our case – 49 flats spread over two blocks – the threshold which triggers the consultation process is £12,250, and we have already reached this limit. Our accounting period is from January to December. Some of the expenditure incurred to date is in respect of works for which the orders were placed well before the date of the High Court ruling and which should have been carried out in 2012 but which were delayed because of weather conditions and, in one case, staffing problems experienced by one of the contractors. The costs will be charged to our Building Maintenance Reserve rather than to the amount (£10,000) allocated in the 2013 budget for general repairs/maintenance. I would be grateful for your advice on whether we could reasonably argue that the orders for these repairs were placed many weeks before the High Court ruling was made; that the costs should have been incurred during the 2012 financial year and the reasons why they were not were beyond our control; that there was no way in which we could have been aware when placing the orders that we might have been expected to go through the full consultation process; and that therefore it would be unreasonable for the cost of these works to have to be included in the threshold limit for 2013. The works were discussed and agreed by our in-house management committee and residents were informed of them in advance, through our quarterly Bulletin and via notices posted on all six main entrance doors. Do we really have to apply to the LVT for dispensation – and if we do, what might the cost of this be? The FPRA replies: Unfortunately it is difficult to provide you with clear and concise legal advice concerning potential success of your (good) argument, simply because the decision in Phillips v. Francis lacks clarity on many fronts, including whether it applies retrospectively or not. Given the new decision, the only risk free way forward would be to apply to the LVT for dispensation. However, there is no guarantee that the LVT would grant such an order(!), because it normally only does so in cases of real emergency (such as a leaking roof which is about to collapse, or the entering into of a new gas contract where gas prices vary daily and quick action is needed to obtain the best quote/price for the block etc). If you were to make an application to the LVT, this would involve 2 hearings (one pre-trial review and then the main hearing) and costs therefore depend on whether the freeholder would be legally represented or not. You would further need to pay the hearing/application fee and involve all leaseholders in the action. Should the leaseholders decide to obtain legal representation you face the risk of being ordered to pay those legal costs, unless the LVT dispenses of that and orders that costs are added to the service charge (usually only done in a successful application by the way). Again, the outcome may not even be the one you may hope for. A suggestion now would be to assess the risk of not taking further action in terms of costs against an application to the LVT. It may be well worth holding a meeting with tenants and obtaining their written agreement to paying the charges, but bear in mind that peoples’ opinions change and that someone may challenge the costs at a later stage.

Question 2

Impact of the decision in the Phillips v Francis case

Accepted Answer

I was concerned to read, in the Spring issue of the FPRA Newsletter, of the decision taken by the Chancellor of the High Court in the Phillips v. Francis case. In our case – 49 flats spread over two blocks – the threshold which triggers the consultation process is £12,250, and we have already reached this limit. Our accounting period is from January to December. Some of the expenditure incurred to date is in respect of works for which the orders were placed well before the date of the High Court ruling and which should have been carried out in 2012 but which were delayed because of weather conditions and, in one case, staffing problems experienced by one of the contractors. The costs will be charged to our Building Maintenance Reserve rather than to the amount (£10,000) allocated in the 2013 budget for general repairs/maintenance. I would be grateful for your advice on whether we could reasonably argue that the orders for these repairs were placed many weeks before the High Court ruling was made; that the costs should have been incurred during the 2012 financial year and the reasons why they were not were beyond our control; that there was no way in which we could have been aware when placing the orders that we might have been expected to go through the full consultation process; and that therefore it would be unreasonable for the cost of these works to have to be included in the threshold limit for 2013. The works were discussed and agreed by our in-house management committee and residents were informed of them in advance, through our quarterly Bulletin and via notices posted on all six main entrance doors. Do we really have to apply to the LVT for dispensation – and if we do, what might the cost of this be? The FPRA replies: Unfortunately it is difficult to provide you with clear and concise legal advice concerning potential success of your (good) argument, simply because the decision in Phillips v. Francis lacks clarity on many fronts, including whether it applies retrospectively or not. Given the new decision, the only risk free way forward would be to apply to the LVT for dispensation. However, there is no guarantee that the LVT would grant such an order(!), because it normally only does so in cases of real emergency (such as a leaking roof which is about to collapse, or the entering into of a new gas contract where gas prices vary daily and quick action is needed to obtain the best quote/price for the block etc). If you were to make an application to the LVT, this would involve 2 hearings (one pre-trial review and then the main hearing) and costs therefore depend on whether the freeholder would be legally represented or not. You would further need to pay the hearing/application fee and involve all leaseholders in the action. Should the leaseholders decide to obtain legal representation you face the risk of being ordered to pay those legal costs, unless the LVT dispenses of that and orders that costs are added to the service charge (usually only done in a successful application by the way). Again, the outcome may not even be the one you may hope for. A suggestion now would be to assess the risk of not taking further action in terms of costs against an application to the LVT. It may be well worth holding a meeting with tenants and obtaining their written agreement to paying the charges, but bear in mind that peoples’ opinions change and that someone may challenge the costs at a later stage.

Impact of the decision in the Phillips v Francis case

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