PHILIPS V FRANCIS UPDATE
Section 20 consultation – appeal in Philips v Francis adjourned until October 2014.
We last commented on this important case at the time when leave to appeal the decision to the Court of Appeal was being sought. Leave was granted and the appeal was due to be heard on 14th May 2014, but it has now been adjourned until 13th October 2014.
This means that the industry will have to wait until then at the earliest for clarification of the law relating to s.20 consultation. Until then the current situation established in Philips v Francis continues to apply – namely that if the cumulative amount of service charge that any individual lessee is required to pay in any one service charge year exceeds £250, the lessor is obliged to carry out compliant s.20 consultation or be restricted to recovering a maximum of £250 from each lessee in respect of the period in question. The uncertainty caused by this decision will clearly continue for sometime longer.
The only alternative to consultation remains for lessors to seek dispensation from compliance with s.20 consultation. Although following the Supreme Court decision in Daejan v Benson, dispensation is more likely to be granted, (the test is now would the flat owners suffer any relevant prejudice, and if so, what relevant prejudice, as a result of the landlord’s failure to comply with the consultation requirements?) it is not an inevitability and even if granted, it may only be on the basis of a reduced amount of service charge being recoverable and/or on payment of the lessees’ legal fees. An application for dispensation may not therefore be attractive.
Guidance as to how to proceed remains difficult and each situation should be looked at on its merits. As matters stand, where possible, s.20 consultation should be carried out if the cumulative amount of service charge for any lessee is likely to exceed £250 in any one year. If this is not feasible, consideration should be given to an application for dispensation if the amount of potentially unrecoverable service charge justifies the time and expense in doing so.