QUESTION
The Leaseholders in a block of 120 flats in Bournemouth have a serious problem with an overspend on a Major Project.
The original costings for this project was just over £1m but the overspend is currently over 40% higher (£410,000.00) and likely to rise even higher.
The Leaseholders are at their wits end not really knowing what to do and the FTT have been consulted by the Managing Agents to see if the overspend can be justified. Have you any suggestions?
ANSWER
Major works disputes like these can be complex. The specific advice I would give would depend on the exact circumstances of your situation, but I set out below a few general thoughts to help guide you.
It is not uncommon for building projects to overspend for a variety of reasons, however, with careful planning, thorough surveys, detailed specifications and conscientious management of the project, large overspends can often be avoided.
I would not generally expect a building contract cost to rise as much as you describe. If you do not know the reasons for the additional costs you should ask about them so that you understand exactly what has gone on. This will inform your next steps.
The reason for the additional expenditure is important and you need to investigate carefully to understand exactly what has gone on. The way you might approach the matter will differ depending upon on the circumstances.
Typical examples might be that work that is included within the contract on the basis of provisional quantities (such as repairs to brickwork or render) had become more extensive and so much larger quantities of specified repairs are being carried out. The approach to considering this issue might be different from a situation where completely different (or new) work has been added to the contract.
You say the landlord has “consulted” with the FTT. There is no procedure for consultation with the FTT so I am assuming some type of formal application has been made by the landlord. This is likely to be to either ask the FTT to decide that the additional works are reasonably required and that the costs that are mounting up are reasonable; or to decide that the landlord may dispense with further consultation with the leaseholders (required for works under Section 20 of the Landlord and Tenant Act 1985).
You should have been notified that an application had been made and provided with details of that application. If you do not know what the application contains you must make it your business to find out, as it is essential that you look carefully at that, take professional advice and then consider whether you wish to make representations to the Tribunal in respect of the matter.
One of the key things to carefully consider is what prejudice you believe the lessees’ may suffer as a result of the overspending on the building contract.
You may feel indignant that you are not getting the explanations that you feel you are entitled to, however, the FTT has no means of awarding costs for that. Instead, be focused in a very practical way on such issues as; is the additional work reasonably required?, is the additional work capable of being carried out more cheaply now than in the future?, should the lessees’ be consulted about the additional work and/or costs and are the lessees’ prejudiced by the works being carried out in this way?
In summary, I strongly recommend you ask very detailed questions of the landlord and the managing agents and do your own research to determine exactly at what stage their applications are at, request the information you need in order to consider the matter carefully and in detail, look carefully at all the documents submitted to the FTT by the landlord and take specialist advice in respect of them before deciding on how to progress. In all of these actions, move quickly so that time does not run out to make your submissions.
John Byers, FRICS ACIArb, Director at LBB Chartered Surveyors
