How to weather the Major Works storm  

Although permission to appeal the High Court decision has been sought, this could take six months or more.

Meantime, there are three options for the property manager to discuss with clients: 

1) Statutory consultation
Statutory consultation, has various stages to inform leaseholders of the nature and necessity of the works, and then the estimates obtained for completing them.  Leaseholders can make observations about the works themselves and any proposed contractor, and are entitled to propose their own contractor.

It can be a time-consuming process but the legislation essentially exists to protect leaseholders, to allow them an involvement in the works carried out at their premises and, in particular, how their money is spent. It also gives reassurance, before the works are started, that the landlord can recover his costs through the service charge.

2) Obtain dispensation
This has been the subject of recent scrutiny. The Daejan ruling in the Supreme Court set a precedent by considering the degree of prejudice caused to the leaseholders by the landlord’s failure to follow the statutory consultation procedures.

For dispensation you will need to demonstrate to the LVT beyond doubt that you have caused no prejudice to the leaseholders. In practical terms this means you will need to be able to show the leaseholders have been involved with the planning process and are aware of how and where the money is being spent.

Dispensation is a practical and sensible option for managing agents with good leaseholder relations that are willing to engage in regular, open and transparent communications, and to demonstrably act at all times in the best interests of the leaseholder.

3) Do nothing
This is the riskiest route, but there may be circumstances where it is the best commercial decision.

If your expenditure calculations show there is only a marginal excess over the £250 limit, you may take the commercial view that the cost involved in consultation outweighs the sum that your client would be prevented from recovering.

Equally, if you have a settled and trusting group of leaseholders, you may take the pragmatic view that an amount in excess of the £250 limit would not be challenged and so there is no need to invest in either statutory consultation or dispensation.

If the landlord takes a commercial view, and opts to “do nothing” then you must ensure that their decision is an informed one, and that they have been provided with all relevant information.

You may need a different strategy for each block and indeed it is unlikely that any managing agent can take a ‘one size fits all’ approach.