The importance of good record keeping

/ Blocks of flats, Freeholders, Leaseholders, News

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:

  1. If you want to recoup costs as a freeholder, keep clear and comprehensive records.
  2. 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.

 

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