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PHILLIPS v FRANCIS [2012] EWHC 3650 (CH D): Meaning Of ‘Qualifiying Works’

This is an important case on the meaning of “qualifying works” in s.20 and s.20ZA of the 1985 Act. The case decides that the common approach since Martin v Maryland Estates [1999] 2 EGLR 53 of considering whether a particular set of works are “qualifying works” is wrong; there is no ‘triviality threshold’ in relation to qualifying works: all works that are “qualifying works” should be brought into the account for computing the lessee’s contribution.

As a result of this decision landlords now have to consult on all qualifying works (even if a lessee’s contribution to a distinct, identifiable set of works does not exceed £250) if a lessee’s contribution to the total cost of qualifying works in an accounting period exceeds £250. If the landlord does not consult on all qualifying works, however small the cost of a particular set of qualifying works, the lessee’s contribution to the total cost of qualifying works in the accounting period will be capped at £250.

In many cases, a landlord may not intend to carry out qualifying works to such an extent that a lessee’s contribution to qualifying works in the accounting period will exceed £250. This being the case, the landlord may not consult on qualifying works undertaken early in the accounting period. If further (perhaps unforeseen) qualifying works are carried out later in the accounting period so that the tenant’s contribution to qualifying works in the accounting period exceeds £250, the landlord will not be able to recover more than £250 for the tenant. A prudent landlord must now consult on all qualifying works (even if a lessee’s contribution to a distinct, identifiable set of works does not exceed £250) in order to fully recover his expenditure through the service charge.

This will be an enormous burden on landlords and managing agents, both in terms of cost and time. The decision is binding on all LVTs.

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