The Impact of Affordability on Major Works

At first glance, it may seem that Garside (1) Anson (2) v RFYC Limited (1) Maunder Taylor (2) (“the Frognal case”) has potential to open the floodgates, enabling tenants to avoid payment of service charges by relying on grounds of affordability.

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objections from tenants on grounds of financial hardship should not arise. If Leases are silent on this, they may be amended with the agreement of all tenants.

Seek advice

2. Consider obtaining advice from a surveyor as to the urgency of works. Perhaps plan expenditure over a 5-10 year period.

Buildings insurance

The insurance policy may require the building to be kept in good repair and condition, failing which, claims under the policy might fail. Ask a surveyor to advise on repair works, taking into account the policy terms.

Evidence of hardship

Landlords/ managing agents might want to consider notifying tenants, particularly when serving Section 20 Notices, that they will be required to produce supporting evidence should they wish to plead poverty. Tenants might be reluctant to disclose their financial status!

Allegations of hardship

(i) Compare the number of tenants who object to payment as against the total number of tenants in the building.

(ii) Look at the tenants’ financial position: a tenant who has no significant income might never be able to pay service charges over any period and an argument based on hardship would be unlikely to succeed.

We await the decision of the LVT with interest but for now, we are satisfied that landlords/managing agents need not panic!

Caroline Anstis is an Associate Solicitor and David Wadsworth a Senior Associate Solicitor at Piper Smith Watton LLP

Wednesday, 21st March 2012

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