The owners of a Cornwall chalet park are seeking to challenge a high court ruling on the service charges payable by tenants which they say defies common sense.
In December, the former Chancellor of the high court, Sir Andrew Morritt, ruled that Judge Cotter in Truro Crown Court was wrong to find that Martin and Rebekah Francis, who bought the 25–acre holiday site Point Curlew at St Merryn, Cornwall, in 2008, were entitled to recover £95,000 as their wages for managing the site.
And he found that the judge had failed to apply the Landlord and Tenant Act 1985 properly when calculating the cost of qualifying works for the 2009 service charge.
He sent the case back to the Crown Court for a recalculation of the qualifying works.
However, now lawyers representing Mr and Mrs Francis have applied for permission to appeal the decision. Though their application is made out of time, solicitors Foot Anstey LLP are hopeful that permission will be granted because the decision is of great public importance. The application is supported by leading independent bodies in the property management sector, including the RICS, the ARMA (the Association of Residential Managing Agents), the British Property Federation and Institute of Residential Property Management.
Richard Bagwell, head of Property Litigation at Foot Anstey said that the decision has been described in some quarters as both a “valedictory hand grenade” and as “defying common sense”, and added that the application will come as “welcome news to all those involved in the world of property management who have been baffled by the ruling”.
He said: “In short, the former Chancellor changed the statutory limit for consultation under section 20 of the Landlord and Tenant Act 1985 from the cost of the works to the amount of the contribution demanded from the leaseholder. As a result, the current legislation does not require the qualifying works to be identified as one or more sets of works, nor is there a triviality threshold applicable to any separate works.
“The Chancellor did not stop there, but went on to find that as service charges are paid on an annual basis, the limit is only applicable to all qualifying works carried out in a single calendar year.
“This decision has caused huge confusion because, on the face of it, all works to a building or premises will require consultation if the statutory cap of £250 per leaseholder will be exceeded for that year. This is simply unworkable for property managers and landlords and will result in confusion, an increased burden on the LVT and increased costs which, of course, will ultimately be borne by leaseholders.
“This seems to fly in the face of the protection for leaseholders that section 20 is intended to provide and it is hoped that the Chancellor’s decision will be reversed by the Court of Appeal.”
The judge said in his judgment that, after buying the 150–chalet site from St Merryn Holiday Estate Management Co Ltd, Mr and Mrs Francis informed the tenants they intended to bring the site up to a first–class standard from which they might all benefit.
He said: “Whilst the plans for the improvement of the site may have been welcomed by the lessees of the chalets, the increase in the service charges payable under their leases was not. The last service charge before the sale of the site to the lessors was £1,478 for each chalet. The first after the sale to the lessors was a demand dated 29th December 2008 for £3,117.47 for each chalet on account for the year 2009.”
The lessees took the matter to court, seeking declarations as to the true construction of the service charge provisions contained in the leases of the chalets.
Challenging Judge Cotter’s ruling, they argued that he allowed the lessors “double recovery”, by making them liable to pay management charges to an agent under paragraph 6 of the leases and charges for the same management services to the lessors under paragraph 8.
The Chancellor ruled that the lease contained a limitation to prevent double recovery limiting “fees paid” under paragraph 6 to those charged to the Lessors by professional agents.
He continued: “As such they do not include the wages of £95,000 paid to Mr and Mrs Francis in the year ended 31st December 2009 specified in the accountants’ certificate referred to in paragraph 4 above because they could not employ themselves.”
Point Curlew was created in the 1970s on part of a disused WWII Airbase.
Phillips and ors v Francis and anr
Christopher Stoner QC and Rawdon Crozier (instructed by Fursdon Knapper) for the Appellants
Jonathan Seitler QC and Jonathan Chew (instructed by Foot Anstey) for the Respondents
The owners of a Cornwall chalet park are seeking to challenge a high court ruling on the service charges payable by tenants which they say defies common sense. In December, the former Chancellor of the high court, Sir Andrew Morritt, ruled that Judge Cotter in Truro Crown Court was wrong to find that Martin and Rebekah Francis, who bought the 25–acre holiday site Point Curlew at St Merryn, Cornwall, in 2008, were entitled to recover £95,000 as their wages for managing the site.And he found that the judge had failed to apply the Landlord and Tenant Act 1985 properly when calculating the cost of qualifying works for the 2009 service charge.He sent the case back to the Crown Court for a recalculation of the qualifying works. However, now lawyers representing Mr and Mrs Francis have applied for permission to appeal the decision. Though their application is made out of time, solicitors Foot Anstey LLP are hopeful that permission will be granted because the decision is of great public importance. The application is supported by leading independent bodies in the property management sector, including the RICS, the ARMA (the Association of Residential Managing Agents), the British Property Federation and Institute of Residential Property Management. Richard Bagwell, head of Property Litigation at Foot Anstey said that the decision has been described in some quarters as both a “valedictory hand grenade” and as “defying common sense”, and added that the application will come as “welcome news to all those involved in the world of property management who have been baffled by the ruling”. He said: “In short, the former Chancellor changed the statutory limit for consultation under section 20 of the Landlord and Tenant Act 1985 from the cost of the works to the amount of the contribution demanded from the leaseholder. As a result, the current legislation does not require the qualifying works to be identified as one or more sets of works, nor is there a triviality threshold applicable to any separate works. “The Chancellor did not stop there, but went on to find that as service charges are paid on an annual basis, the limit is only applicable to all qualifying works carried out in a single calendar year. “This decision has caused huge confusion because, on the face of it, all works to a building or premises will require consultation if the statutory cap of £250 per leaseholder will be exceeded for that year. This is simply unworkable for property managers and landlords and will result in confusion, an increased burden on the LVT and increased costs which, of course, will ultimately be borne by leaseholders. “This seems to fly in the face of the protection for leaseholders that section 20 is intended to provide and it is hoped that the Chancellor’s decision will be reversed by the Court of Appeal.” The judge said in his judgment that, after buying the 150–chalet site from St Merryn Holiday Estate Management Co Ltd, Mr and Mrs Francis informed the tenants they intended to bring the site up to a first–class standard from which they might all benefit. He said: “Whilst the plans for the improvement of the site may have been welcomed by the lessees of the chalets, the increase in the service charges payable under their leases was not. The last service charge before the sale of the site to the lessors was £1,478 for each chalet. The first after the sale to the lessors was a demand dated 29th December 2008 for £3,117.47 for each chalet on account for the year 2009.”The lessees took the matter to court, seeking declarations as to the true construction of the service charge provisions contained in the leases of the chalets.Challenging Judge Cotter’s ruling, they argued that he allowed the lessors “double recovery”, by making them liable to pay management charges to an agent under paragraph 6 of the leases and charges for the same management services to the lessors under paragraph 8.The Chancellor ruled that the lease contained a limitation to prevent double recovery limiting “fees paid” under paragraph 6 to those charged to the Lessors by professional agents. He continued: “As such they do not include the wages of £95,000 paid to Mr and Mrs Francis in the year ended 31st December 2009 specified in the accountants’ certificate referred to in paragraph 4 above because they could not employ themselves.”Point Curlew was created in the 1970s on part of a disused WWII Airbase.Phillips and ors v Francis and anrChristopher Stoner QC and Rawdon Crozier (instructed by Fursdon Knapper) for the AppellantsJonathan Seitler QC and Jonathan Chew (instructed by Foot Anstey) for the Respondents