In what appears to be a draw, LKP is studying the consequences of this on the costs for the long suffering park home owners.
23. In a nutshell, therefore, the Chancellor decided that qualifying works are all the “works on a building or any other premises” (section 20ZA(2)) in respect of which the landlord incurs costs “in connection with the matters for which the service charge is payable” (section 18(2)). I shall call this “the aggregating approach”. He added that, as the contributions are payable in this case on an annual basis, the limit is applied to the proportion of the qualifying works carried out in the relevant year. In other words, the correct approach to whether section 20 requires a landlord to consult (or seek a dispensation) is to aggregate all works in any given year without division into separate sets of qualifying works. This was not a construction of section 20 for which Mr Stoner QC (for the lessees) contended. On this appeal, however, his primary case is that the Chancellor’s construction is correct.
24. The rival construction, for which Mr Seitler contends (supported by Mr Davey for the Secretary of State), is that Robert Walker LJ and Judge Cotter were right. What is required is what Mr Seitler calls “a sets approach” and Mr Davey calls “an individuated approach”: section 20 should be applied by reference to individual sets of works. I shall use the phrase “the sets approach”.
25. The language of the statute does not expressly provide an answer to the question of construction. Section 20ZA(2) unhelpfully defines “qualifying works” as “works on a building or any other premises”. But I am satisfied that the aggregating approach is wrong.
26. For reasons I shall explain, it is not a sensible approach and gives rise to serious practical problems. It cannot therefore have been intended by Parliament. It requires that, at the very latest, once the limit for contributions has been reached (£250 per tenant), the landlord must consult the tenants on any service charge items, however small they may be (presumably subject only to the de minimis exception). Mr Seitler illustrates the problem with the following example. Imagine a residential block of flats with 4 tenants: the annual regulatory limit is 4 x £250: £1000. Three lots of minor works on a building each costing £75 are carried out in the first half of the year. The landlord has spent £225 on service charge items. There has been no consultation. Unexpectedly, in September the outer door of the block breaks and a new door frame is required which would cost £800. A storm in November causes window damage that would cost £400 to repair. On the sets approach, the landlord would not need to consult on any of these items. They are all distinct sets of qualifying works none of which costs more than £1000. The landlord could respond immediately and repair the damage to the door and the window. The tenants are still protected because they have the after-the-event protection afforded by section 19 of the 1985 Act that the costs are only relevant costs to the extent that they are reasonably incurred and of a reasonable standard.
27. On the aggregating approach, the annual limit is exceeded by the broken door. The landlord is obliged to consult on it. This process takes time and costs money. If instead he replaces the door immediately, he has no right to recover the full amount without dispensation. Seeking dispensation has attendant legal and administrative costs as well as the risk of non-recovery and delay. But if he does not replace the door, the flats are unsafe and he is likely to have irate tenants.
55. For the reasons that I have set out above, I would allow the lessors’ appeal against the decision of the Chancellor on the Qualifying Works Issue, but dismiss their appeal on the Management Issue.
71. I agree with the Chancellor’s conclusion that the £95,000 wages paid to the appellants by the Company do not fall within paragraph 6 of schedule 3 and are not properly recoverable under the service charge provisions of the Lease. My reasoning is not, however, entirely similar.