Leasehold lawyers and professionals may have been watching developments at Atlantic Bays Holiday Park near Padstow in North Cornwall with interest.
Leaseholders at the Park are in dispute with the freeholder over the costs of major works incurred since it was acquired by a builder in 2008.
So far only five years’ charges have been agreed as reasonably incurred by the First-Tier Tribunal (Property Chamber), which deals with most leasehold disputes, and this has seen the freeholder having to reduce his bills by nearly £1 million. He still faces challenges for subsequent years.
The builder-freeholder arranged and supervised much of the work himself, but he failed to keep sufficient records and has fallen foul of the law when trying to recoup his costs through service charges.
It has not been a clean sweep for the leaseholders though: they still have to pay annual charges in advance even though they seem to have lost faith in the reliability of the freeholder to do the works!
The case also highlights some confusion in legislation that was escalated to the High Court. The Court had to determine whether or not sets of works should be considered as one job, cumulatively subject to “Section 20” consultation, or multiple discrete projects and thus not subject to consultation with leaseholders.
To remind you, if the cost of major works will exceed £250 for any one leaseholder, then the freeholder is required to consult with tenants under “Section 20” Tenants can then comment and/or nominate an alternative contractor for the freeholder to obtain an estimate.
As part of this long dispute in the West Country, the High Court has determined that individual related works carried out within a year must be rated as a set – one job – thus making it harder for freeholders to avoid reaching the £250 threshold.
The whole dispute is Byzantine in its complexity and there are two key points worthy of note for freeholders and leaseholder-owned residential management companies:
- If you want to recoup costs as a freeholder, keep clear and comprehensive records.
- Understand Section 20 consultation on major works to ensure you comply with the requirements. The Leasehold Advisory service has a useful guide at lease-advice.org.
You can see a summary of the case (so far!) at The Leasehold Advisory Service website.
Reviewed 30/03/2023 – NR
The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or the links which were active at the time of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited trading as Deacon accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein. Links in this article were active at the date of publication but may not remain active.