In the
case of qualifying works, the threshold for consultation
is reached if the contribution for any one leaseholder
exceeds £250. In a property with unequal service charge
contributions, the need for consultation arises if any
one leaseholder would have to pay more than £250;
consultation must then take place with all leaseholders.
Procedures for specific qualifying works
Notice
of intention to carry out qualifying works is given to
each leaseholder and any
recognised
tenants' association RTA, as defined in Section 29,
Landlord & Tenant Act 1985. The notice must describe in
general terms the proposed works, or specify a place and
hours where the description may be inspected.
The
notice must state the reasons for the works, and invite
written observations, specifying where they should be
sent, over what period (30 days from the notice), and
the end date. Further, the notice must contain an
invitation for nominations of persons from whom the
manager should obtain estimates. The landlord must have
regard to written observations received during the
consultation period.
The landlord must seek estimates:
-
from a single nominee of an RTA (whether or not any
are received from individual leaseholders);
-
from a single nominee of only one leaseholder
(whether or not one is made by an RTA);
-
if single nominations are made by more than one
leaseholder (whether or not any are made by an RTA),
the landlord must seek an estimate from the person
with most nominations, or, if there is no clear
leader but there are two or more who tie for first
place, from one of those. If the result is not even
that clear (for example, there could be five
nominees with one vote each), an estimate must be
obtained from one of them. If multiple nominations
are received from any leaseholder and more than one
from the RTA, the landlord must request an estimate
from at least one person nominated by a leaseholder
and at least one nominated by the RTA.
The
landlord then issues a statement (free of charge)
setting out the estimated cost from at least two of the
estimates and a summary of the observations received and
his responses to them. The statement is issued with a
notice. At least one of the estimates shown in the
statement must be from a person wholly unconnected with
the landlord. If any estimates were received from
leaseholders' nominees, they must be included in the
statement. (There is no need to attach copies of
estimates; indeed, the regulations state that all the
estimates must be made available for inspection. If the
landlord intends to attach copy estimates to help
leaseholders, he should also make it clear that they are
all available for inspection.)
The
regulations call this the 'paragraph b statement'.
The statement must be sent out with a notice, detailing
where and when all of the estimates may be inspected and
inviting each leaseholder and any RTA to make written
observations on any of the estimates, specifying an
address where they should be sent, the consultation
period (30 days from the notice) and the end date.
The
landlord must have regard to written observations
received this second 30-day consultation period.
Unless
the chosen contractor is a leaseholder's or RTA nominee
or submitted the lowest estimate, the landlord must give
notice within 21 days of entering into the contract to
each leaseholder and any RTA, stating his reasons for
the selection, or specifying a place and hours for
inspection of such a statement.
The
landlord must also summarise any observations made and
his responses. There is no requirement for inspection of
the summary and responses in this case.
In all
cases, where the landlord is under a duty to provide
facilities for inspection of documents, the place and
hours for inspection must be reasonable, and facilities
and copies must be available free of charge.
It is
probable that the provision of such facilities, and the
management, administrative and ancillary costs which
flow from the new consultation requirements will lead to
increased costs to the service charge, and thus to the
leaseholders in due course.
The duty to have regard
In any
case where the landlord receives written observations
during a consultation period, he has a duty to 'have
regard' to them. There is no statutory definition of
'regard'; neither is there an immediate sanction for
failure to have regard. However, the landlord is
required on several occasions to state how he had regard
to the observations received, and if he is unable to
show that he has acted within the spirit of the Act from
this point of view, it is possible that the LVT could
determine that the consultation procedure has not been
followed properly, and then disallow the recovery of the
costs of the agreement over and above the relevant
consultation threshold (£100 or £250 for any one
tenant).
Nominations from leaseholders
The
Act does not lay down the terms within which the
landlord approaches leaseholders' nominees when seeking
to obtain estimates for works or services. Most will
require certain fundamental criteria from their
contractors (for example, public liability insurance,
valid tax exemption certificate, confirmation of VAT
status, copies of health and safety policy and
confirmation of company status); furthermore, some
landlords (particularly in the social housing sector)
are bound only to employ contractors who are on an
approved list or qualify for placing on such a list. Any
nominee would have to apply to join the approved list
and meet the criteria set. The criteria will include
those mentioned above, but also may include a
requirement for an equal opportunities policy and a
declaration of any relationship with employees of the
manager. Landlords are not prevented from applying their
yardsticks as regards leaseholders' nominees, but they
will have to justify their selection procedures to the
LVT, if challenged.
If
they fail to convince the LVT in a particular case,
there is a risk that the consultation procedure could be
disallowed.
It is
suggested that landlords make their criteria part of
their requests to nominated contractors, so as to make
clear that meeting the criteria is a necessary condition
of any contract which may be awarded.
The
Act does not require that persons nominated by
leaseholders or RTAs should be wholly unconnected with
the leaseholder or RTA concerned, but no doubt the
landlord will take such factors in account when
formulating his proposals.
'Wholly unconnected'
The
categories to be considered as persons connected to the
landlord are set out in paragraphs 2(1), 12(6), 19(3),
31(3) and 38(7) of the regulations.
It is
to be assumed that there is a connection if any of the
individuals concerned is a director, manager or partner
in the business of the other contracting party, or is a
close relative of such a person. A 'close relative' is a
spouse or cohabitee, parent, parent-in-law, son or
son-in-law, daughter or daughter-in-law, brother or
brother-in-law, sister or sister-in-law, step-parent,
step-son or step-daughter.
LVT APPLICATIONS – SERVICE CHARGES
The LVT's role in dealing with service charge disputes
is to determine whether the charge is "payable" and, if
so, whether it is "reasonable". The issues may be heard
together or separately. Some disputes may be based on
both issues. In other cases it may be agreed that the
charge is payable, but a determination is sought as to
whether it is reasonable,
Either the tenant or the landlord may apply for
determinations on:
Þ
whether the service charge is payable
Þ
to whom it is payable
Þ
the amount which is payable
Þ
the date by which it is payable
Þ
the manner in which it is payable
The application may be in respect of charges which have
been levied or charges which are proposed and whether or
not the charge has been paid. Payment of the charge does
not amount to an agreement or admission by the tenant
that the charge is payable.
The LVT can interpret the terms of the lease to resolve
disputes or uncertainties as to whether the tenant is
liable to pay a service charge. Where a determination
is also sought as to the reasonableness of a service
charge, the applications may be heard together, if the
LVT thinks it appropriate, so that the LVT is able to
clarify the issues of liability to pay before addressing
the details of reasonableness. Indeed, in some cases the
issues may be settled once the initial issue as to the
liability to pay has been decided.
No application may be made where the issue has been;
agreed or admitted by the tenant, determined by a court
or referred to arbitration or determined by arbitration.
Any reference to arbitration must be with the tenant's
agreement following the dispute. Any clause in a lease
or any other agreement which appears to commit the
tenant to arbitration in advance of a dispute arising,
is deemed to be void and will not bind the tenant nor
prevent an application to the LVT.
As part of the issue of payability, either the tenant
or the landlord may apply to the LVT for a determination
of reasonableness. The application may be in respect of
charge which has been levied or a proposed charge and
whether or not the charge has been paid. Payment of the
charge does not amount to an agreement or admission by
the tenant that the charge is reasonable. Landlords
proposing to carry out works can ask for a ruling that
their proposals are reasonable before they start
spending. Service charges can include maintenance,
repair or other works to the building, improvements,
management, cleaning, porterage or insurance and other
costs incurred by the landlord and recharged to the
tenants, such as legal and other professional fees.
Determinations can be made in the following situations:
Þ
where the works have been done or the services have been or
are presently being provided:
Þ
whether the costs were reasonably incurred and/or
Þ
whether the works or services are of a reasonable standard
and/or
Þ
whether an interim charge payable before costs are incurred
is reasonable
Þ
where works or services are proposed in the future:
Þ
whether, if the proposed works or services were to be
provided, the costs would be reasonable and/or
Þ
whether services to be provided, or works proposed, to a
particular specification would be to a reasonable
standard and/or
Þ
what amount of charge payable on account before costs are
incurred would be reasonable
Þ
are, or were, the works or services necessary?
Þ
do the costs represent good value?
Þ
There is, of course, no simple definition of "reasonable"
and it is for the LVT to determine the issue according
to the evidence before them:
Þ
are (or were) the works or services necessary?
Some of the questions that might be addressed are:
Þ
Are the works or services required at all?
Þ
Is the works sufficient to remedy the perceived problem or
the service necessary?
Þ
Are the works or services adequate or over extensive?
Þ
Did any element of the work or service arise as a result of
earlier neglect or mismanagement by the landlord?
Þ
was, or is, the original specification for the works or
service adequate?
Þ
Did it include all necessary work or was the job allowed to
expand as additional repairs were revealed?
Þ
Are there genuine grounds for additional works of an urgent
nature?
Þ
what were the landlord's procedures for costing the works or
services?
Þ
Are there arrangements for competitive tendering or
obtaining competitive estimates?
Þ
Did the landlord follow the procedures where the tenants'
nominated a contractor or insurer?
Þ
Do the works or services arise from a contract already in
place?
Þ
what are the landlord's arrangements for controlling costs?
Þ
How adequate is site supervision?
Þ
What controls are there for checking and payment of invoices
etc?
Þ
What arrangements are there for checking the service
provided against that specified?
Þ
Is the standard of the works or service proposed or
completed appropriate and reasonable?
